Budget, Highways, Medicaid Highlight 2015 Session | Eastern North Carolina Now

    Publisher's note: The author of this post is Barry Smith, who is an associate editor for the Carolina Journal, John Hood Publisher.

Further tax reform, employee raises may have to wait


    RALEIGH     North Carolina lawmakers will return to the state capital later in January with a lengthy agenda, including taking another crack at Medicaid reform, considering a $1 billion highway bond, and tackling what recent projections reveal to be a $190 million revenue shortfall.

    Rep. Tim Moore, R-Cleveland, nominated by his caucus to be the next House speaker, said lawmakers also may tweak the tax reform law passed in 2013 and take a look at further regulatory reform.

    "I think the most important thing we can do is to enact policies that will protect the jobs we have and bring more jobs to North Carolina," Moore said.

    Rep. Nelson Dollar, R-Wake, senior chair of the House Appropriations Committee, said the $190 million budget gap could change as the fiscal year progresses.

    "We still have sales tax numbers that need to come in for the holiday season to see where we are," Dollar said. "And refund numbers on the income tax side will be working in through February, March, and April."

    Dollar noted that income tax refunds to taxpayers could be less in 2015 because efforts have been made to make withholdings more accurate.

    "As we move into April 15 and we have a better handle on the numbers, I think that we will see that we will be within tolerable ranges where we can make adjustments," Dollar said.

    Dollar even put a glass-half-full spin on the revenue shortfall. "The positive side is these are funds that are being retained by our taxpayers," Dollar said. "The money is certainly in the system and working in the private-sector economy."

Medicaid expansion

    Lawmakers also could be faced with revisiting an action they took two years ago when they decided not to expand Medicaid under the federal Affordable Care Act, aka Obamacare.

    Republican Gov. Pat McCrory has indicated he is reconsidering whether the state should expand the health insurance system for the poor and disabled. If he does, it could set up a battle between McCrory and Republican legislators.

    "I just don't think that there's any support on the Senate side in our caucus to expand Medicaid at this point," said Sen. Harry Brown, R-Onslow, the Senate's majority leader. "We can't control cost as it is."

    Brown said the state should reform the Medicaid system before any conversation takes place on Medicaid expansion.

    While both House and Senate leaders say they want to see Medicaid reform, they haven't come to a consensus on how to do that.

    Senate leaders want to pull Medicaid out from under the Department of Health and Human Services and place it in a standalone department. They also want to see a managed-care model put in place. House members favor leaving Medicaid under the supervision of the Department of Health and Human Services and maintaining the current fee-for-service system.

    "Ultimately, all of the proposals have the same goal, which is to ensure the delivery of the health care services to the population while at the same time doing so efficiently and eliminating the fraud and abuse that tends to be present in the system," Moore said.

Transportation bond

    McCrory is expected to propose a $1 billion transportation bond referendum. During a December announcement of the state's new highway plan, McCrory said he planned to offer more details on the bond referendum sometime in January.

    "I certainly think it's something that we should look at," Moore said, adding that both urban and rural areas have unmet transportation needs. He said addressing the concerns of some of the rural areas could help ease transportation problems in urban settings.

    Legislative leaders say there could be some tweaking of tax laws during the 2015 session, such as expanding the sales tax base to cover more services. Brown said he'd like to see the local sales tax distribution formula changed so that more money goes to counties based on their population rather than the location where the tax was collected.

League's contrary agenda

    The N.C. League of Municipalities has an ambitious agenda of its own, though many of its goals conflict with those of legislative leaders. The league is supporting legislation restoring film incentives and historic preservation tax credits. The tax credits for the film industry and historic preservation expired in December, and despite appeals from Gov. McCrory, Cultural Resources Secretary Susan Kluttz, and outgoing Commerce Secretary Sharon Decker to extend the special tax treatment, House and Senate leaders prefer to give the newly reformed tax code — focusing on a flat rate with few exemptions — a chance to settle in.

    Brown said that the General Assembly may revisit economic incentives in general during the session. If so, he said, the Senate probably would wait for the House to pass a package before the upper chamber moved.

    The league also wants the General Assembly to put on the ballot a constitutional amendment establishing home rule, which would give cities and towns more authority to enact laws without first getting permission from the legislature. The league is seeking more revenue options to replace the local privilege taxes that are set to expire later this year. In addition, it wants to allow municipalities the option of using electronic legal public notices instead of being required to publish them in a newspaper.
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