The Legislative Bulletin is published weekly by NCCBI exclusively for its members

Other top stories this week:Push begins for state’s new economic development initiative... House committee approves air permit bill... New districts attract more challengers for General Assembly seats... Two state environmental agencies issue record fines... Congressional delegation splits 8-4 against TPA in final House vote... Salisbury business leader testifies to Congress on export policy... Concerns in D.C. increase over expanding mental health parity law... Weyerhaeuser, Progress Energy executives named to NCCBI board.

House leaders covet yearend reserves
as quick way to close final budget gap
Having cut spending and raised taxes as much as they think they can, House leaders were stumped about how to close a $140 million revenue gap in the budget for the current fiscal year. And then they noticed that Gov. Mike Easley was holding $125 million left over from the $1.7 billion in funds he impounded months ago to make sure the state didn’t end last fiscal year in the red. The House wants that money but Easley says he won’t turn it over because it should go into the state's Rainy Day fund and for Hurricane Floyd relief projects.

That’s where things stood in Raleigh more than a month into the state’s new fiscal year and no revised budget in place. There was one notable development this week when the House, as expected, gave final approval Monday to the $322 million tax package we described in some detail in last week’s newsletter. The bipartisan 82-32 vote for the revenue measure culminated weeks of debate and political posturing in the House over raising taxes. But the Senate on Tuesday rejected the measure on grounds that it doesn’t completely close the hole in the budget. The Senate appointed conferees and left town until the House produced a complete, balanced budget document.
The main differences between the House and Senate revenue bills are the timing of the repeal of a half-cent of state sales tax. The House's plan would allow local government to levy the new sales tax starting Jan. 1. At the same time, the state sales tax would drop a half-penny. Under the Senate revenue plan there would be a six-month overlap in the higher state and local sales taxes, for a total of a 7 percent sales tax rate, until July 1. The chambers also disagree on the amount of reimbursements local governments would get in the current fiscal year. Significantly, the House plan also proposes to raise three business taxes to generate $98 million in new revenue, actions not contemplated in the Senate revenue package.

President Pro Tem Marc Basnight said the Senate will hold only ceremonial session every three days, led by members from the Raleigh area who won’t have to drive far. Before going home, senators agreed to stop taking their $104 daily expense allowance until Basnight calls them back. Senate conferees for the revenue bill (S. 1292) appointed by Basnight are co-chairs John Kerr (D-Wayne) and David Hoyle (D-Gaston), members Tony Rand (D-Cumberland), Frank Ballance (D-Warren), Dan Clodfelter (D-Mecklenburg), Aaron Plyler (D-Union), Howard Lee (D-Orange), Fountain Odom (D-Mecklenburg), Scott Thomas (D-Craven), Allen Wellons (D-Johnston), R.C. Soles (D-Columbus), Kay Hagan (D-Guilford) and Linda Garrou (D-Forsyth). House conferees appointed by Speaker Jim Black are Rep. Paul Luebke (D-Durham), Chair; and Reps. Gordon Allen (D-Person), Monroe Buchanan (R-Mitchell), William Wainwright (D-Craven), vice-chairs; members, Reps. Martha Alexander (D-Mecklenburg), Phil Baddour (D-Wayne), Bill Culpepper (D-Chowan), Pete Cunningham (D-Mecklenburg), Joe Hackney (D-Orange), Jim Gulley (R-Mecklenburg), Ed McMahan (R-Mecklenburg), Wilma Sherrill (R-Buncombe), Alex Warner (D-Cumberland), Jennifer Weiss (D-Wake), and Larry Womble (D-Forsyth).
Push begins for new economic development initiative
With legislative leaders and state Commerce Department officials flanked behind him, Gov. Mike Easley on Wednesday launched his campaign for a new industrial development policy in which North Carolina would move away from tax credits to attract new business in favor of cash grants to targeted industries. The proposals, which we wrote about extensively in the July 19 issue of the Legislative Bulletin, are outlined in H. 1734 N.C. Economic Recovery and Competitiveness Act. The bill was taken up Thursday in the House Finance Committee, amended and favorably reported.

NCCBI Vice President of Governmental Affairs Leslie Bevacqua told the committee that it is imperative for North Carolina to build its competitive edge in industrial recruitment. “This bill gives North Carolina the opportunity to continue to strengthen economic development in the state,” Bevacqua said. “It will give the Department of Commerce and the governor the opportunity to negotiate and to be competitive when recruiting industry. NCCBI supports this bill because we believe it will help bring jobs to North Carolina.”

Also speaking in support of the bill were Secretary of Commerce Jim Fain and Natalie English, vice president of public policy with the Charlotte Chamber of Commerce. English pointed out that Mecklenburg County and other counties near the state line are in constant competition with South Carolina. She encouraged the committee to support this bill as a way to help recruit new jobs to our state, instead of watching them locate across the state border.

The centerpiece of the legislation is creation of a Job Development Investment Grant Program under which the state would attempt to attract specific new industries by repaying the company up to 80 percent of the income taxes paid by workers who got the new jobs for up to 15 years. In addition, the legislation scales back many of the Bill Lee Act tax credits for companies locating or expanding in the state’s wealthier counties and proposed other measures to make poorer counties more attractive as industrial sites.
Under the bill, a three-member committee composed of the secretaries of Commerce and Revenue, and the state budget director would decide which companies receives the job development investment grants. Commerce officials believe the grants would total between $6 million and $7 million the first year but increase over time. Although the new grants would mainly be used to attract new industries, Commerce Secretary Jim Fain says they could also be used to persuade existing employers not to leave the state.
Several amendments were discussed by the House Finance Committee. Among those that passed were amendments to limit the number of grants awarded by the state to 25 per year and to add additional criteria to be included in the annual report provided to the public on the impact of the Job Development Investment Grant Program.

House committee approves air permit bill
The House Environment and Natural Resources Committee on Tuesday voted 13-8 to approve a measure, S. 1037 No Air Permit/Facility Operational (David Hoyle), ), a bill strongly supported by NCCBI. The bill, which was passed by the Senate last fall, has been worked on since last session with input from the Department of Environment and Natural Resources, the business community and representatives from the environmental community. The bill as proposed in the House is a fair and balanced bill that will assist companies in beginning construction of facilities or expanding current facilities. The bill should speed up the construction process but it will not change any standard for permit review or air quality protection, nor will it make it easier to obtain a permit from the Division of Air Quality. The legislation next heads to the House Finance Committee for review.

Legislative Actions
. . . The House on Thursday concurred with a Senate Committee substitute for H. 1308 Extend Low Sulfur Gas Implementation (Pryor Gibson), the NCCBI-backed measure that extends until January 2006 the date by which only low-sulfur gasoline may be sold in the state. In 1999. North Carolina imposed a low-sulfur standard, to take effect in 2004. Since that time the federal EPA has adopted a similar standard that would take effect nationwide in 2006. Without this bill, North Carolina would be out of compliance with the rest of the nation, and the state would be endanger of fuel shortages and price spikes.

. . . The Senate on Tuesday gave unanimous final approval to S. 1420 Shakedown Prevention (Wib Gulley), a bill that beefs up penalties for state employees who try to coerce a subordinate into contributing to a political campaign or supporting a political candidate. The bill now goes to the House.
. . . The House on Wednesday concurred with Senate amendments to H. 1546 Level 2 Graduated Drivers License Restriction (Debbie Clary) and the measure was enrolled. Gov. Mike Easley is expected to sign the bill into law. The measure restricts that teenagers who have a Level 2 graduated driver license not have more than one passenger in the car who is under 21. The bill exempts family members. The bill would take effect Dec. 1.
. . . The Senate on Tuesday accepted House amendments to S. 1135 U.S. Highway 601 Contracts (Aaron Plyler) and the measure was enrolled. Gov. Mike Easley is expected to sign the bill into law. The bill allows the state DOT to use the “design-build" method of widening to four lanes an 11-mile stretch of U.S. 601 South from U.S. 74 in Monroe to the S.C. line. The process speeds construction and saves money by designing and building the road at the same time. Usually, construction doesn't begin until design work is complete. Residents in the area has long called for safety improvements on the road, which many use to reach the South Carolina beaches.

Special Report
New districts attract more challengers for General Assembly seats
Forty-four incumbent legislators have no opposition for re-election under new court-ordered district maps, far fewer than the 77 who were unopposed under the plan adopted by the General Assembly last summer which was ruled unconstitutional. The decline in cakewalk-incumbents seems to confirm the Republican Party’s contention that more people would run for the legislature if district lines generally followed county lines. With the filing period now closed under the new maps, that hypothesis has been proven in most areas of the state, with some notable exceptions. Here’s a report on where things stand in the run-up to the Sept. 10 party primaries and the Nov. 5 general election:
Six incumbent senators attracted no opposition for re-election compared with 22 under the old maps. Unopposed are Democrats Daniel Clodfelter of Charlotte, Charlie Dannelly of Charlotte, Linda Garrou of Winston-Salem, Jeanne Lucas of Durham and David Weinstein of Lumberton and Republican Hamilton Horton of Winston-Salem.
Thirty-eight House members – 19 Republicans and 19 Democrats -- will coast to another term compared with 47 under the plan the Democrats pushed through last year. Republicans running unopposed are Cary Allred of Burlington, Joanne Bowie of Greensboro, Harold Brubaker of Asheboro, Russell Capps of Raleigh, Billy Creech of Clayton, Leo Daughtry of Smithfield, Jerry Dockham of Denton, Rick Eddins of Raleigh, George Holmes of Hamptonville, Larry Justus of Hendersonville, Danny McComas of Wilmington, Gene McCombs of Faith, Richard Morgan of Eagle Springs, John Rayfield of Belmont, Mitchell Setzer of Catawba, Wayne Sexton of Eden, Trudi Walend of Brevard, Connie Wilson of Charlotte and Roger West of Marble. Democrats running unopposed are Alma Adams of Greensboro, Martha Alexander of Charlotte, Larry Bell of Clinton, Donald Bonner of Rowland, Nelson Cole of Reidsville, Pete Cunningham of Charlotte, Beverly Earle of Charlotte, Stan Fox of Oxford, Joe Hackney of Chapel Hill, Dewey Hill of Lake Waccamaw, Howard Hunter of Conway, Verla Insko of Chapel Hill, Marvin Lucas of Spring Lake, Paul Luebke of Durham, Mickey Michaux of Durham, Paul Miller of Durham, Bill Owens of Elizabeth City, Drew Saunders of Huntersville and William Wainwright of Havelock.
At least 15 Senate seats will turn over as a result of retirements and the fact that eight incumbents are pitted against each other – Republicans Bob Shaw of Greensboro and Phillip Berger of Eden in the new 26th District and Virginia Foxx of Banner Elk and Ken Moore of Lenoir in the new 45th District. Democrats Howard Lee of Chapel Hill and Ellie Kinnaird of Carrboro, who used to serve together in a two-member district, now are facing each other in a primary for the one-seat 23rd District. Also, Democrat Dan Robinson and Republican Bob Carpenter -- are facing off in the 50th District. In the House, there is no incumbent running in 27 districts and in three others incumbents are pitted against each other.

Some veteran legislators have attracted primary opponents, including Republican Reps. Ed McMahan of Charlotte and Debbie Clary of Cherryville. Senate Minority Leader Patrick Ballantine of Wilmington has a Republican primary opponent as do fellow Republicans John Carrington of Raleigh, John Garwood of North Wilkesboro, Stan Bingham of Denton and Jim Forrester of Stanley. Senate Democrats facing primary challenges include Tony Rand of Fayetteville, Charlie Albertson of Beulaville and Larry Shaw of Fayetteville.

There are three House-Senate matchups to watch. In Gastonia, Democratic Sen. David Hoyle is opposed by Republican Rep. Michael Harrington. In Goldsboro, Democratic Sen. John Kerr of Goldsboro is opposed by Republican Rep. Carolyn Russell. In the 46th Senate District in Cleveland and Rutherford counties, incumbent Democrat Sen. Walter Dalton of Rutherford is facing incumbent Rep. John Weatherly of Kings Mountain.