Summer 2013 County Legislative Update

North Carolina Association of County CommissionersGovernment Relations Update

N.C. Local Government Budget Association 2013 Summer Conference

July 12, 2013

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

Busy Long Session• In session since Jan. 30, after earlier

planning session• House bill total = 1018• Senate bill total = 726

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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

State Budget Process

• 1st year biennium– Spending authority ceased June 30

• Each biennium Senate & House trade– Senate turn this biennium

• Governor proposes Senate proposesHouse amends Senate rejects– Conference!

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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

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

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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

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Governor v. Senate v. House

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Public Schools Governor Senate HouseKeep 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 asideSame

Fund teacher assistant allotment for K-1 grades only

($117.1 million) ($142.3 million)($24.6 million); 4% reduction in

allotmentSet school bus replacement at 250,000 miles

Not included ($28.4 million) ($29.8 million)

Restore LEA management flexibility Not included $376.1 millionNot included in year 1; $7.5 million

year 2Lower 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

2Incentives 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

Education Budget ProvisionsHouse

PILOT PROGRAM TO RAISE THE HIGH SCHOOL DROPOUT AGE FROM SIXTEEN TO EIGHTEENSECTION 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

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Human Services Governor Senate HouseReduce 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% FPPartially restore child welfare federal funding loss temporarily; awaiting NCFAST $4.8 million nr Same Same


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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

implementationShifts $500K in

HCBG fundsFund development and implementation measures for DoJ settlement $3.8 million Same SameFund short-term pcs assistance for group home transition Not included Not included $8 million nr

Increase autopsy fees Not included $1250 $1250

HHS Budget ProvisionsSenate & 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.

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HHS Budget ProvisionsSenate & 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.

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Justice and Public Safety Governor Senate HouseRestore 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


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Natural and Economic Resources Governor Senate HouseFund 20% state match for federal wastewater and drinking water grant match requirements

$6.3 million nrIncluded 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 receiptsFund 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 millionMaintains 75% of state share of deed

stamp receiptsFund 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


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Natural and Economic Resources Governor Senate HouseFund 20% state match for federal wastewater and drinking water grant match requirements

$6.3 million nrIncluded 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 receiptsFund 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 millionMaintains 75% of state share of deed

stamp receiptsFund 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


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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 2Funds 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


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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

Budget ProvisionsSenate & House

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• 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.

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

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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

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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

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

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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

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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

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)

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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

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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.

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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.

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

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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

NCACC County Tax Rate Survey

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State Average Effective Tax Rate$0.6375

Rates Sales Assess Effective

Avg $0.6285 Avg increase $0.0336 105.2% $0.6375Avg decrease ($0.0164)

High $1.0300 $0.1070 139.8% $1.1143Low $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

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HHS Consolidation

NCACC Training

• Affordable Care Act–Impacts on counties as:

• Employers• Service Providers• Eligibility Determination

Questions / Comments

Thank You!