North Carolina Legislative Update February 21, 2011

Date:	February 21, 2011
Re:	NC Weekly Legislative Update -- as presented by the Mortgage Banker's Association of the Carolinas

This past week of the North Carolina General Assembly was significant because it was the week of arrival of the long-awaited budget proposal from Governor Beverly Perdue.  As might be expected with a year of severe shortfalls, almost everyone is mad!  Partisanship is at its peak and, as always, the State employees are furious. 

Counties are looking at a cut of $200 million in school construction funds each year of the biennium by the elimination of the set-aside from corporate income taxes and a reduction of the county's share of lottery funds.

Prior to the unveiling of the proposed budget, the Governor had reduced the shortfall from $3.7 million to $2.4 million through a series of cuts, program eliminations and agency consolidations, as well as higher than expected tax collections.

Missing from the proposal is the legalization (taxing) of video poker and privatization of the ABC system.  However, the previously mentioned "temporary" sales and income tax increases from 2007 are partially extended, and teacher/teacher assistant positions are protected.  The corporate income tax rate would be reduced from 6.9% to 4.9%.  The personal and corporate income tax surcharges enacted in 2009 would expire. However, 3/4 of the one cent sales tax increase which was scheduled to sunset on June 30, would continue.  There is an unemployment tax credit for 135,000 small businesses.

Employee positions numbering 10,000 are eliminated, but only 3,000 are currently filled.  Parks will be closed for two days each week.  There will be an elimination of 1,400 jobs in the University of North Carolina system.  The System enrollment growth request was cut in half.

The previously discussed medical malpractice reform bill was heard in committee on Thursday, but no vote was taken.  One of the most controversial provisions is the $250,000 cap on non-economic damages.  Look for a compromise on the amount of the cap as the bill goes forward.

The fast track charter school cap bill was placed on a side track in the Senate when it was referred from the floor to the Finance Committee.

House Bill 138 will amend the High Risk Pool statutes, setting up a system of premium subsidies from federal grants and the Pool's own funds.  We will report more on that bill next week.  The bill to create the Joint Regulatory Reform Committee (Senate Bill 17) passed second reading in the House and appears to be on its way to passage. 

On the heels of passage is the bill to repeal the federal Patient Protection and Affordable Care Act (House Bill 2), House Bill 126 would establish the North Carolina Health Benefit Exchange, a step toward implementation of "Obama-care".  We don't think that bill will be approved by this General Assembly.

A bill with a greater chance of adoption is House Bill 129 (Senate Bill 87) "Level Playing Field/Local Government Competition".  Applicable only to cities, the bill would set up a framework for cities to compete with private telecommunications companies.  However, House Bill 101 would give counties some of the same powers as cities. 

Senate Bill 27, imposing a moratorium on involuntary municipal annexations, appears to be moving through the Senate and is likely to pass.

House Bill 135 would create consumer enhancements and incentives to encourage energy conservation and efficiency.  Senate Bill 75 would promote the use of electricity demand reduction to satisfy renewable energy portfolio standards.

House Bill 139 would limit campaign contributions from vendors to state agencies.  House Bill 95 would again establish railroad corridors, as recommended by the Railroads Study Commission.  The bill was unsuccessful during the last session. 

House Bill 117 is a bi-partisan bill to prohibit electric cities from using revenues from electric systems for purposes other than the costs of operating the system and debt service.  Other revenues must be used to reduce consumer rates.  House Bill 119 is a potential "Christmas tree" bill which includes a number of environmental provisions pertaining to landfills, storm water capture and reuse, and irrigation modifications.  Another potential "Christmas tree" bill is House Bill 122 which makes various revenue law changes.

Committee action should pick up next week as the House starts consideration of the Governor's budget proposal and continues preparation of its budget bill.

Thank you for your business,

R. Bryan Wright
NMLS 103880

Advantage Loans, Inc.