The members of the General Assembly returned to Raleigh Monday with hopes of forging an agreement on the State Budget before the week's end.  By mid-day Tuesday, it was clear that no such agreement would emerge from negotiations this week and both the House and Senate have moved to enact a temporary budget while the conference committee continues.  The temporary measure relieves the pressure of the July 1 start of a new fiscal year and allowed the General Assembly to fall into a more routine week of lawmaking.  Committees were active this week and legislation was on the move at the full House and Senate as we report below. 

Budget negotiations failed to produce an agreement this week and the Senate has initiated legislation (Senate Bill 311) to allow for continuing expenditure of state funds.  While the bill would allow for continued spending until a full State Budget is enacted, it would do so at only 85% of spending authorized by the budget adopted last year.  The bill would also prohibit automatic pay increases and authorize the spending of federal stimulus monies.  The Senate approved the bill on Tuesday and the House Appropriations Committee moved the bill to the House floor for an anticipated vote on Monday.  While the Senate version of the bill left open the time period for the spending authority, the House Committee version would limit the authority to two weeks. 

The conference committee between the House and Senate has reportedly come close to agreeing on much of the spending provisions of the State Budget.  However, divergent views on how to raise the revenue, and how much to raise, have stalled the process.  Governor Perdue has asked for an additional $1.5 billion in taxes but House and Senate leaders have set their targets closer to $990 million.  More fundamental disagreements about how to raise revenue, including new sales taxes on services, a gross premium tax on insurance policies, an increased tax on electricity, increased rates on upper income tax payers and changes to corporate taxation are all in controversy between the House and Senate.  Business advocates were hard at work this week to influence the tax plan process, but few details and little certainty has emerged from the private discussions between legislative leaders. 

Two controversial measures related to sexuality education and protecting children from bullying were hotly debated in the House and Senate this week.  House Bill 88 would require local school boards to develop and implement a broader sexuality education program that includes discussion of sexually transmitted diseases, contraception, and sexual assault, but also carries forward the current requirement of teaching the benefits of abstinence before marriage.  The latter provisions were not enough to appease opponents who derided the legislation as part of the trend toward increased sexual activity by teenagers and a promiscuous society.  Senate Bill 526 is a bill that would enact a statute that definitively states that no student shall be subjected to bullying in North Carolina.  The legislation includes several characteristics that might motivate bullying including sexual orientation.  That provision was likewise the focus of conservative lawmakers who said the legislation should protect all children, not just those that fall into one of the several identified categories.  In response to those objections, proponents added a provision that states no additional class of protected persons is created in the bill.  Both bills passed after protracted debate and are now awaiting action by Governor Perdue. 

The House approved legislation (Senate Bill 324) to remove the sunset on the exemption from prior authorization requirements under Medicaid for Hemophilia drugs.  The bill was expedited through the House this week ahead of a July 1 deadline when the original sunset statute will automatically repeal the exemption.  The bill should arrived at Governor Perdue's office before the end of the week and proponents are encouraging the Governor to promptly sign the bill into law. 

The Commissioner of Insurance will have discretion to waive the minimum policyholder position requirement for mortgage guaranty insurers under legislation (Senate Bill 981) passed by the House this week.  The bill details the circumstances that would justify the use of this discretion and had limited the waiver to a period of two years.  A floor amendment at the House session on Thursday extended that period to four years and the bill was subsequently approved by the House to go back to the Senate for consideration of those changes. 

The Senate pulled back from enactment of legislation (Senate Bill 780) that would expand coverage under the Insurance Guaranty Association to structured settlement annuities for matters involving personal injury or illness.  At issue is the maximum liability that the Association would be exposed to under the proposed statute.  The bill, scheduled for a final vote on Wednesday, was instead diverted to a conference committee between the House and Senate for negotiation on the key provisions.  Compromise seems likely and the revisions are expected to receive action next week. 

The House and Senate have agreed on a compromise version of legislation (House Bill 1508) authorizing the issuance of bonds for financing various capital projects in the State Government Complex in Raleigh and at Universities across the State.  In House Bill 1508 the total debt authorized is not to exceed $487 million, a figure that is significantly higher than was included in either the House or Senate version of the bill.  The State could forgo as much as $40 million dollars in the coming years under legislation (Senate Bill 943) that expands the tax credit offered to major movie production operations.  Senate Bill 943 passed the Senate this week and is now moving to the House for further consideration.  In other action, North Carolina would have a new Financial Literacy Council to teach young people key wealth management techniques and principles under legislation (Senate Bill 1019) approved this week.