Summer Legislative Update for NC Counties, presented by Rebecca Troutman (NCACC) at Summer 2013 NCLGBA Conference (July 12, 2013)

1. North Carolina Association of County Commissioners
Government Relations Update
N.C. Local Government Budget Association
2013 Summer Conference
July 12, 2013

2. Where Are We Now?
• 2013-2014 Legislative Session
• First Year of Biennium
• Long Session that began in January 2013
and will continue until a budget is passed
• Next year will be a short session beginning
May 2014 – mainly to address budget
issues

3. Busy Long Session
• In session since Jan. 30, after earlier
planning session
• House bill total = 1018
• Senate bill total = 726
3

4. What happens now…
• Budget by July 31, 2013 or another CR
• Tax Reform?
• Legislation that made cross-over is eligible in the
short session beginning May 2014
• Political backdrop:
– Hagan Senate seat up in 2014
– 2014 – all seats in NC legislature
– Currently – Republican veto-proof majorities in both
houses and Republican Governor
2013 Summer Attorneys’ Conference

5. State Budget Process
• 1st year biennium
– Spending authority ceased June 30
• Each biennium Senate & House trade
– Senate turn this biennium
• Governor proposes Senate proposes
House amends Senate rejects
– Conference!
5

6. State Budget Status
• S 402 – Appropriations Act
– In Conference –
• Main County Issue – 40% Language for Lottery Funds
– House Daughtry Added Language back
• $100 Million – House and Senate same
• Eliminates ADM (corporate tax) set-aside
• Drug Treatment Courts - Governor
• HAVA funds – House
• Workers’ Comp Payments for Volunteer Firefighters
– June 30 deadline for budget deal
• CR needed if they cannot reach a budget deal

7. State Budget – Senate v. House
• Spending levels similar--$20.6 billion
– Revenue growth still below recovery
• Modest revenue growth of 3.6%
• Historical above 5%
• Retail sales at 3.8%--reduced to 2.7% April
– Key differences in education
• Senate eliminates teacher assts. in grades 2-3,
funds LEA flex cut with allotment cuts
• House keeps TAs, no flex cut reduction, funds
private scholarships
7

8. Key county budget issues in
dispute
• Statutory language guaranteeing 40% of lottery funds to counties –
eliminated in Senate budget, maintained in House budget
• Unfunded mandate requiring counties to pay for non-county
employee (volunteer fire and EMS) Workers’ Compensation costs –
House provision limits exposure for counties and delays
implementation until 2016; Senate provision requires counties to
cover any shortfalls
• Extending Article 44 Hold Harmless payments – House budget
extends for one year; Senate budget eliminates
• Tax reform – Protect county revenues if any tax reform measures
are included in the state budget
8

9. Governor v. Senate v. House
9
Public Schools Governor Senate House
Keep county share of education
lottery funds at 22% v. statutory
requirement of 40%
($80 million)
Included, but new
lottery estimates put
loss at ($92 million)
Same as Senate
Permanently divert corporate tax set
aside for school construction
($75 million)
Permanently repeals
set aside
Same
Fund teacher assistant allotment for K-1
grades only
($117.1 million) ($142.3 million)
($24.6 million); 4% reduction in
allotment
Set school bus replacement at 250,000
miles
Not included ($28.4 million) ($29.8 million)
Restore LEA management flexibility Not included $376.1 million
Not included in year 1; $7.5 million
year 2
Lower classroom teacher allotment to
reflect LEA decisions on earlier cuts
Not included ($286.4 million) Not included
Provide merit pay of $500 per eligible
teacher in year 2
Not included
$10.2 million in year
2
Incentives for successful student AP
completion
Restructure Small School funding
allotment in year two
Not included Not included ($632K year 1); ($3.2 million year 2
Fund school safety initiatives Not included Not included
$16 million--$12 for SROs, $2 for
panic alarms, $4 for counselors,
psychs., social workers

10. Education Budget Provisions
House
PILOT PROGRAM TO RAISE THE HIGH
SCHOOL DROPOUT AGE FROM SIXTEEN
TO EIGHTEEN
SECTION 8.49.(a) The State Board of Education shall
authorize the Hickory Public Schools and the Newton-
Conover City Schools to establish and implement a
pilot program to increase the high school dropout age
from 16 years of age to the completion of the school
year coinciding with the calendar year in which a
student reaches 18 years of age
10

11. Governor v. Senate v. House
11
Human Services Governor Senate House
Reduce county daycare
administration funding
from 4% of daycare
allotment to 3% in
opposition to NCACC
policy ($2.6 million)
Not included;
directs all
childcare
subsidies thru
DSS
Similar as Governor
($2.5 million); rejects
Senate plan to direct
all subsidies thru DSS
Increase Pre-K slots by
5,000 slots over
biennium—NCACC goal,
but funded 2/3 by lottery
$9.1 million; $17.1
million in lottery
proceeds
Not included;
decreases pre-k
by 2,500 slots &
shifts $ to
daycare, an
NCACC goal
Similar to Governor’s;
uses $24.8 million in
lottery proceeds to
add 5,000 slots; sets
eligibility to 130% FP
Partially restore child
welfare federal funding
loss temporarily; awaiting
NCFAST $4.8 million nr Same Same

12. Governor v. Senate v. House
12
Human Services Governor Senate House
Replace lapsed federal
funding for Project
CARE—dementia care
respite $500K
Shifts $2.9
million in
HCBG funds
for statewide
implementation
Shifts $500K in
HCBG funds
Fund development and
implementation measures
for DoJ settlement $3.8 million Same Same
Fund short-term pcs
assistance for group
home transition Not included Not included $8 million nr
Increase autopsy fees Not included $1250 $1250

13. HHS Budget Provisions
Senate & House
TIERED STATE-COUNTY SPECIAL
ASSISTANCE PILOT SECTION 12D.2.(a)
• DHHS Aging and Adult Services to establish pilot program to
implement a tiered rate structure within SA for individuals
residing in group homes, in-home living arrangements, and
assisted living residences
• Purposes to (i) determine the best way to implement a block
grant for this program statewide and (ii) test the feasibility and
effectiveness of implementing a tiered rate structure to address
intensity of need,
• Department to select 4-6 counties to participate, at least 2 rural
counties and at least 2 urban counties.
13

14. HHS Budget Provisions
Senate & House Modified
DETAILED MEDICAID REFORM PROPOSAL TO
BE PREPARED BY DHHS; MEDICAID REFORM
ADVISORY GROUP ESTABLISHED; SECTION
12H.1
• DHHS in consultation with Medicaid Reform Advisory Group to
create detailed plan for, but not implement, significant reforms to
State's Medicaid Program to accomplish the following:
• (1) Create a predictable and sustainable Medicaid program
• (2) Increase administrative ease and efficiency for Medicaid
providers
• (3) Provide care for the whole person by uniting physical and
behavioral health care.
14

15. Governor v. Senate v. House
15
Justice and Public Safety Governor Senate House
Restore drug treatment
courts—NCACC goal
$3.4 million; 45
positions
Not included Same as Senate
Replace state lab equipment, enhance
state crime lab DNA testing, and
expand state crime lab toxicology
capabilities—NCACC goal
$5.4 million, most
recurring
Provides add. funding for
toxicology analysis at state
lab, outsources, & in local
hospitals $3.4 million; $1
million in lab equip in 2015
Funds toxicology in Western Crime
Lab & $500 K for local hospital
toxicology; sets expert witness fee of
$600 to support crime lab
Reinvest some savings from prison
closings to implement the Justice
Reinvestment Act; probation & parole
officers and supervisors—NCACC
goal
$7.1 million; 106
positions
$6.3 million; 75 positions;
DPS can reclassify 30
Same as Senate
Improve access to
magistrates—minimum of 4 magistrates
per county
$776 K; 16 positions $1.8 million; 39.5 positions $727K; 16 positions
Close Richmond Detention Center,
Wayne, Bladen, Duplin, and Robeson
correctional centers, and Western Youth
Institution
($20.7 million)
Included & closes
Buncombe & Orange
correctional centers &
Lenoir & Buncombe
detention centers
Closes Duplin, Robeson, Wayne, and
N. Piedmont Women’s correctional
centers and Western Youth; converts
Johnston to minimum custody; closes
Richmond, Buncombe, and Lenoir
detention ctrs.
Upgrade VIPER technology and
construct additional towers
Not included $25 million nr; Same as Senate

16. Governor v. Senate v. House
16
Natural and Economic Resources Governor Senate House
Fund 20% state match for federal
wastewater and drinking water grant
match requirements
$6.3 million nr
Included but creates new
Division for admin.
$6.2 million recurring (traditionally
NR)
Provide funding for Clean Water
Management Trust Fund
$6.75 million nr
$4 million + 25% of state share of deed
stamp receipts
Fund Natural Heritage Trust Fund
through direct appropriation
$4.2 million Eliminates NHTF
Fund Parks and Recreation Trust Fund
through direct appropriation
$15.5 million $11 million
Maintains 75% of state share of deed
stamp receipts
Fund Solid Waste Trust Fund (grants
and operations) through direct
appropriation
$2.5 million Included Keeps receipts funding in placed
Fund Scrap Tire Program (grants and
operations) through direct appropriation
$1.1 million $500K in operations Keeps receipts funding in placed
Fund shallow draft
dredging—NCACC goal
Not included Not included $3.6 million Year 2
Combines CWMTF &
NHTF; $12 million

17. Governor v. Senate v. House
17
Natural and Economic Resources Governor Senate House
Fund 20% state match for federal
wastewater and drinking water grant
match requirements
$6.3 million nr
Included but creates new
Division for admin.
$6.2 million recurring (traditionally
NR)
Provide funding for Clean Water
Management Trust Fund
$6.75 million nr
$4 million + 25% of state share of deed
stamp receipts
Fund Natural Heritage Trust Fund
through direct appropriation
$4.2 million Eliminates NHTF
Fund Parks and Recreation Trust Fund
through direct appropriation
$15.5 million $11 million
Maintains 75% of state share of deed
stamp receipts
Fund Solid Waste Trust Fund (grants
and operations) through direct
appropriation
$2.5 million Included Keeps receipts funding in placed
Fund Scrap Tire Program (grants and
operations) through direct appropriation
$1.1 million $500K in operations Keeps receipts funding in placed
Fund shallow draft
dredging—NCACC goal
Not included Not included $3.6 million Year 2
Combines CWMTF &
NHTF; $12 million

18. Governor v. Senate v. House
18
General
Government/Reserves
Governor Senate House
Provide state MOE to draw
down $4 million in federal
HAVA funds—NCACC goal
$391K, some nr Not included Included in Year 2
Reduce state aid to libraries
by 4.8%; special provision
to limit funding to small and
medium sized county
systems
($658K) Not included Not included
Eliminate funding for county
veteran services
Not included $138k total in Year 2
Funds eliminated in
Year 1
Shift volunteer safety
workers’ compensation to
insurance surcharge; assess
counties and cities for any
gap funding
Not included
($2.6 million);
unsure of direct
county impact
House amends
Senate special
provision

19. Governor v. Senate v. House
19
General
Government/Reserves
Governor Senate House
Fund 1% pay raise for
teachers and state employees
$135.7 million Not included
Grants 5 additional
vacation days; $160
million in year 2 for
compensation
increases
Fund 1% COLA for state
retirees
$35 million Not included Same as Senate
Fully fund state retirement
ARC increase
$36.1 million $36 million Same as Senate
Establish salary adjustment
reserve fund, including $1
million OSP compensation
study
$20 million
$1 million for
compensation study
$1 million for study;
$10 million for
reserve
Establish disaster relief fund $10 million Not included Same as Governor; nr

20. Budget Provisions
Senate & House
20
• GOVERNMENT EFFICIENCY AND REFORM;
SECTION 6.5.(a) The Office of State Budget and Management shall
contract for a Government Efficiency and Reform review and analysis of the
executive branch of State government, which shall be known as NC GEAR. The
purpose of the review and analysis is to evaluate the efficiency and effectiveness of
State government and to identify specific strategies for making State government
more efficient and effective.
• (1) The statutory authority, funding sources, and functions of each department,
agency, institution, or program.
• (4) State and local responsibilities for providing government services and funding
for those services, and whether these responsibilities should be reallocated.

21. Continuing Resolution H336
• State agencies to spend at 95% of current
• Any budget reductions in both versions
move forward
• Any position eliminations in both versions
move forward
• CR runs til July 31
21

22. Continuing Resolution H336
• Federal block grants at 2012-13 levels
except…
– Child Care & Development Grant at 90%
– No Women’s health and Oral health or Health
promotion
– TANF & SAS as funded in non-controversy
22

23. Tax Reform H998
• HOUSE
– Lowers corp tax
– Lowers personal
income tax
– Broadens tax base
– Leaves intact county
rate
• County impact =
+$75 million; all
winners
• SENATE
– Eliminates Local sales tax
refunds
• Earlier proposal to eliminate
Food Tax for Counties set aside
– Caps sales tax refunds for
Non-Profits
– Restructures base & applies
to warranties
• County impact = $57
million; some losers

24. H343 Court Fees
• Original version to require advancing of
court fees
• Muddled with lapsing special provision &
clerks of court not billing for fees
• Bill sponsor to extend child support
exemption in perpetuity ($3 mil+ savings)
• Counties have 45 days to pay others
• Signed June 30
• Continues RoD fees as is too
24

25. Warrant Check/Drug Test H392
• DSS to verify applicant/re-applicant is
fleeing felon or probation/parole violator
for Food Stamps or TANF
– DoJ to provide criminal history to DSS
– DSS to notify potential applicant
• DHHS to administer drug test to TANF if
drug user
– Client to pay & reimbursed if negative
25

26. County Inmate Medical Cost
Containment S321
• Provide parity with state prison medical cost
containment initiatives
– Payments to providers limited to 70% of prevailing
charges or twice Medicaid rate
– Enables counties to pay Medicaid rates for in-patient
medical care
• Counties to fund non-federal share of cost
– NCACC to organize county Medicaid
claims/payments
• Due to disagreements with Hosp. Assoc, likely
on hold until short session

27. Other County Goals
• County to have option to own and construct school
sites and facilities (S236)
• Motor vehicle property tax collection
– Implementation of new system in May
– LPA attempting fee increase (S305)
• Design/Build option for all counties (H857)
• County Omnibus (S372)

28. Regulatory Reform S112
• Limits local government ability to enact
environmental ordinances that are stricter than
fed or state
• Caveat--ordinance addresses unique
geographic, meteorological, or environmental
condition, adopted by 3/4s, county demonstrates
to environmental agency that more stringent
requirement is necessary and environmental
agency approves it within 60 days
28

29. Rev. Tech Corrections H14
• Provides manual methodology to ensure
sales tax distributions continue as TIMS
put in place
• Equal to the average of the applicable tax
proceeds allocated and distributed to it for
the same distributional period in the
preceding three fiscal years.
29

30. Require Paper Ballots H607
• Bill changed to study
• Moratorium on any equipment that does
not produce a paper ballot until August 15,
2014
• State Board of Elections may establish
program to provide for exchange of
machines between counties and exchange
or purchase of parts by and between
counties.
30

31. Funeral Laws Restructure
(H811)
• May modify DSS responsibilities for DSS
disposal of unclaimed bodies
– Includes new definition of unclaimed as those
with original family interest
• Need to understand current process
31

32. Governor Priorities
• Economic Development Restructuring
(S127)
– Hit snag in senate
• Transportation Funding Restructuring
(H817)
– In law
– 40% funds to statewide projects, 30% to newly
drawn regional districts, 30% to existing
divisions

33. NCACC County Tax Rate Survey
33
State Average Effective Tax Rate$0.6375
Rates Sales Assess Effective
Avg $0.6285 Avg increase $0.0336 105.2% $0.6375
Avg decrease ($0.0164)
High $1.0300 $0.1070 139.8% $1.1143
Low $0.2790 ($0.0360) 85.9% $0.0000
Increases = 20 Total = 70
Decreases = 10 Max = 1.40
No change = 67 Total >110% = 16
Interim = 3 Total >115% = 11
100
SA above 100%
Rate Changes
Summary of Actions

34. HHS Consolidation
34

35. NCACC Training
• Affordable Care Act
–Impacts on counties as:
• Employers
• Service Providers
• Eligibility Determination

36. Questions / Comments
Thank You!