It was a session like no other in recent memory. Dominated by concerns about a pandemic, government-imposed economic shutdowns and looming revenue shortfalls, the 2020 legislative Short Session completed most of its work last week and is expected to return for a couple very brief sessions targeted on the budget and coronavirus relief.
The shared challenge of facing a pandemic fostered a strange – and welcome — bipartisanship on major coronavirus funding bills. But the cooperation did not last. Republicans still control both chambers, but – since November 2018 – with less than veto-proof majorities. Republicans challenged the scope of Gov. Cooper’s shutdown orders and passed bills (H536 and H 594) directed at reopening bars, gyms and other venues shutdown by the governor’s orders. Cooper vetoed both bills.
BUDGET & TAXES: OVERVIEW
Because Gov. Cooper vetoed last year’s legislatively approved budget, there is no biennial budget plan to adjust, which is usually the major task of the legislature in the second year of the biennium. Without a budget, state spending proceeds on a continuation basis based on the last passed budget bill. Last session, the legislature approved several “mini-budget” bills to ensure increased spending amounts for certain priorities. This year’s session continued the trend.
The financial fallout from the coronavirus shutdown cast a long shadow over all the legislature’s business. Addressing a revenue shortfall and how to spend federal Covid relief money were the concerns on most legislator’s minds.
In late May, the General Assembly’s Fiscal Research Division provided their revenue forecast, which predicted a shortfall of $1.6 billion for the remainder of the current fiscal year (FY 2019-20), and $2.6 billion for the fiscal year that starts July 1.
In the nearly four months since his shutdown order, however, Gov. Cooper has done next to nothing to proactively cut spending in order to help ensure the budget balances.
His only action was for his budget office to issue a memo “requesting” state agencies “reduce unnecessary General Fund expenditures for the rest of this fiscal year.” A directive which makes one ask: If the expenditures are unnecessary, why are they in the budget in the first place?
Bills Approved by General Assembly and Signed by Governor
To provide relief to states and businesses challenged by the coronavirus, the federal government passed the CARES Act in late March. Among other things, this act provided hundreds of billions of dollars to state governments, with the caveat that the funding be spent on new programs or activities designed specifically to respond to the coronavirus outbreak. North Carolina’s share of the CARES Act was $3.5 billion. The major state legislation to address coronavirus include:
SB 704-S.L.2020-3 Bill outlined needed policy changes to keep government running in light of coronavirus.
HB 1043-S.L. 2020-4 Appropriated $1.2 billion in Covid relief funds. Funding in HB 1043 covered a wide array of expenditures; including money for public schools to continue delivering lunches to children at home, to funding for the Department of Transportation (DOT) to compensate for falling gas tax revenue, to vaccine research and rural hospitals.
Lawmakers did not allocate all Covid relief funds in hopes that Congress would amend the CARES Act and allow states to use some of the money to backfill revenue shortfalls.
Absent an actual budget bill, state spending levels revert to the last passed budget on a continuation basis. For several items, however, the legislature passed piecemeal bills to ensure funding increases.
These bills include:
- Pay raises and bonuses for teachers (SB 818, signed by Gov. 6/26)
- Funding for enrollment growth for:
- Additional funds for increased Medicaid expenses (SB 808, approved & signed by the Gov. 7/3)
- Funding for state military installations (SB 801, signed by gov 6/19)
- Funding for several UNC building projects (SB 813, approved & signed by the Gov. 7/1)
- Funding for the NC Promise Tuition plan (SB 814, signed by gov 6/26)
Corporate Welfare Program Extended
HB -1080-S.L 2020-58 Tucked away in this largely innocuous bill is a provision to extend the Job Development Investment Grant (JDIG) program to 2030.
JDIG is North Carolina’s largest corporate welfare program. The program dispenses tens of millions of taxpayer dollars to politically favored corporations every year. Worse yet, this program creates a completely unfair business climate in which some businesses are taxed to pay for handouts to others.
JDIG was set to expire at the end of the calendar year. Legislators simply had to do nothing, and this crony program would have expired. Instead, they chose to extend JDIG’s extension until 2030. The fiscal note attached to the bill estimates this extension will cost taxpayers between $329 and $843 million over the next decade.
Bills Approved by General Assembly and Became Law Without Governor’s Signature
House Bill 77 A State Auditor’s report found the North Carolina Department of Transportation (NCDOT) exceeded its annual budget by $742 million in 2019. The legislation provides stronger transparency measures, firm management oversight, and a restructured board with legislative appointees. It also directs annual NCDOT audits by the State Auditor. The bill became law on July 6 without Gov. Cooper’s signature.
Bills That Failed
$3.1 Billion in new debt approved by House, stalls in Senate
House Bill 1225: Education and Transportation Bond Act of 2020 . Bill proposed $3.1 billion in new debt to finance education and transportation infrastructure. Provides $1.05 billion in bond funding for K-12 public schools, $600 million for the University of North Carolina system, $300 million for the State’s community colleges, and $1.15 billion for the North Carolina Department of Transportation. The bill was passed by the House but stalled in the Senate.
Gov. Cooper Vetoes Multiple attempts to reopen bars, gyms, and other venues
(H536 and H 594). Perhaps the most contentious issue of the short session was the dispute between legislative leaders and the governor regarding the state’s shutdown and reopening plans. After Gov. Cooper reneged on fully transitioning to Phase 2 of his reopening plan in early June, he decided in late June to keep the state in Phase 2 for three additional weeks. Suffering businesses were desperate for a lifeline. Legislators passed several bills allowing for safe reopening of several types of businesses like bars, gyms and bowling alleys using strict precautions. All those initiatives were vetoed by Cooper. An override attempt to partially reopen bars and gyms passed the Senate but failed in the House.
Coronavirus and the realities of the Short Session prevented the passage of major legislation impacting agriculture. However, two Covid-related bills were approved by the General Assembly and signed by the governor. These include:
Covid Relief: Animal Disposal
HB 1043 SL 2020-4 Provisions in Covid Relief funding bill provide up to $15M for the disposal of animals due to the lack of and slowing of processing in NC, although at this point it doesn’t look like any of that money will be drawn down.
Small Meat Processors Assistance
H.B. 1023 S.L.2020-80 – Provision is part of a larger Covid relief funding bill. Bill allocates $10 million to Department of Agriculture Trade and Consumer Services (DACS) to provide funding for expanded capacity, workforce education, and planning relating to independent meat processing facilities.
Although attention needs to be given to small producers and processors, Civitas believes this is the wrong solution to the right problem. Many of the problems of those operating — or looking to open a facility — face, concern overregulation. Rather than looking simply to the taxpayer for more money, steps should be taken at both the federal and state level to explore ways to open markets and remove restrictions on North Carolina processors.
Part II of our Legislative Re-Cap will discuss legislative developments in the areas of education, voting and elections and healthcare