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MVA Monitor – November 1

With some tricks and treats of their own, the General Assembly (sort of) adjourned for the year on Halloween. However, the break won’t last long. The General Assembly will be back in less than two weeks to redraw Congressional districts after a three-judge panel found them to be unconstitutional. After that work is completed, the General Assembly intends to return to Raleigh in January to handle several issues left over from the 2019 Long Session.

Issue Updates

State and Legislative Issues

Budget

The State is now four months into the 2019-20 fiscal year without adopting a comprehensive state budget. Although the motion to override the Governor’s veto of the budget bill appeared on the Senate calendar every day this week, the week ended without any action on the bill.  However, the General Assembly has passed numerous “mini-budgets” that, if signed by the Governor, would implement many of the provisions of the budget vetoed by the Governor in late June. That process continued this week. On Thursday, the General Assembly sent three bills to the Governor that would complete the process of providing pay raises for State employees – HB 231, UNC & Comm. Coll. Pay/Retiree Bonus; HB 377, Teacher Step Act; and SB 354, Strengthening Educators’ Pay Act. In total, the effect of the three bills would be to provide pay raises for university and community college employees and public teachers consistent with provisions in the vetoed budget. However, a new provision in SB 354 proved controversial. That provision would have provided a larger pay increase for teachers, but only if the budget bill becomes law. Democrats argued that this was an attempt to coerce one or more Democratic senators to join with the Republican majority in that chamber in overriding the Governor’s veto of the budget bill and that the stand-alone bill should have provided for the additional salary increase without conditions.

The budget fight in North Carolina is over for 2019 as legislators adjourn (Charlotte Observer)

Republicans plan extra teacher raises — if Democrats help override Cooper’s budget veto (Raleigh News & Observer)

Taxes

A trio of tax bills had action this week. The General Assembly ratified two of the bills and sent them to the Governor, while the third bill advanced through a House committee.

  • The General Assembly gave final approval to SB 557, Various Finance Law Changes, on Thursday. The bill mostly included tax provisions that were identical or nearly identical to provisions included in the budget. The provisions include an increase in the standard deduction for personal income taxes, a new requirement that marketplace facilitators (like Amazon and eBay) collect sales tax on behalf of vendors on their platforms, and a change in the way income is sourced for corporate tax purposes. The bill became unexpectedly controversial earlier in the week when an amendment passed in the House Finance Committee that would have changed the way in which vaping products are taxed. That amendment was removed later in the day in the House Rules Committee.
  • Also on Thursday, the General Assembly gave final approval to SB 578, Reduce Franchise Tax/Expand Film Grants. That bill includes provisions to reduce the corporate franchise tax (similar to what was included in the budget) and provisions to make the State’s film grant program more generous. The bill passed both chamber largely along party lines, with only a handful of Democrats in both chambers voting for it and only two Republicans in the House voting against it. The franchise tax provisions have been one of the Governor’s biggest talking points in support of his veto of the budget bill, so this bill is widely expected to be vetoed as well.
  • Finally, the House Finance Committee gave approval to SB 105, Tax Rebate/Roanoke Rapids, on Thursday. In an interesting turn of events, it took the bill two meetings on Thursday to make it out of the Committee. The bill initially failed to win approval in a morning meeting, but was back on the agenda in a re-convened meeting a few hours later where it did receive approval. The bill would provide tax rebates to individual income tax filers of up to $250. In addition, the bill would appropriate $7.5 million to the City of Roanoke Rapids to help with debt repayment on the troubled Roanoke Rapids Theatre. The bill did not come up for a vote in the full House.

House leadership undoes vaping tax proposal, resurrects business tax cut (WRAL)

Roanoke Rapids Theatre bailout attached to taxpayer refund bill (WRAL)

Redistricting

On Monday, a three-judge panel ruled that North Carolina’s Congressional districts were unconstitutional as a partisan gerrymander. Earlier this year, the US Supreme Court ruled in a case involving the same districts that the partisan gerrymandering was not an issue that the federal courts could address, but left the door open to review of the practice by state courts based on state constitutional provisions or statutes. The General Assembly will return to Raleigh in two weeks to work on redrawing the Congressional districts.

State court blocks current House districts in North Carolina for 2020 elections (Washington Post)

Delay in new congressional maps could lead to extra 2020 election, GOP lawmakers warn (Charlotte Observer)

News Roundup