North Carolina’s 2013 Legislative Session Recap: Landmark Gains For Conservatism

As the dust settles on the landmark 2013 North Carolina legislative session, conservatives can look upon the accomplishments of the state legislature and find much to celebrate. A catalog of policies that conservatives have for years been advocating for finally became reality. The number of reforms and improvements implemented in just one session may be unprecedented for any state government in the modern era. Even consistently “red” states typically take years to accomplish what North Carolina did in the span of six months.

With Republican majorities in both legislative chambers combined with a Republican Governor for the first time in roughly 150 years, the time was right to begin unraveling generations of big-government, liberal policies that had become the norm in the Tar Heel State.

Conservative policies spanning taxation, education, health care, elections and criminal justice were passed this year, much to the chagrin of liberal elites that now see their stranglehold on power slipping away. While left-wing extremist protesters and liberal media outlets like the New York Times and MSNBC cry out that North Carolina moved “backwards,” it is indeed those liberals who wanted to preserve the failed policies of the past.

Following is a list of policy victories in 2013 that conservatives in North Carolina should be proud of.

Tax Reform                                       

North Carolina took a major step toward making itself more economically competitive by reforming its tax code. Personal and corporate income tax rates were significantly reduced, several sales tax loopholes were closed and the state’s economy will benefit from what is projected to be a net tax cut of $2.4 billion over the next five years compared to the old tax code.

The Tax Foundation stated the reform would vault North Carolina from the 7^th worst business tax climate in the nation to the 17^th best. Highlights of the tax reform plan include:

• Personal income tax rate is reduced from a progressive rate topping out at 7.75 percent to a flat rate of 5.75 percent by 2015
• A larger standard deduction of $7,500 of income for singles and $15,000 for married filers is created
• The $50,000 income deduction for small businesses is eliminated in 2014
• Social Security income will still be fully exempt
• Taxpayers will still be allowed to take the greater of the standard deduction or itemized deductions, with itemized deductions limited to unlimited charitable contributions plus mortgage interest deductions and property taxes capped at $20,000
• Repeals the state estate tax (aka the death tax)
• Reduces corporate income tax rate to 5 percent from the current 6.9 percent by 2015
• If certain revenue targets are met, the corporate rate would decrease to 4 percent in 2016 and 3 percent in 2015
• State sales tax rate of 4.75 percent and local rate of 2 percent remain unchanged; keeping combined rate at 6.75 percent for most counties
• Adds service contracts on tangible goods to the sales tax base, along with most attractions (like movies, fairs) for which admission is charged to the sales tax base
• Places a cap of $45 million on the sales tax refund nonprofit entities (including most large hospitals) can claim. This cap would not impact any nonprofit organizations at the current time

 

 

State Budget

The FY 2013-14 state budget spends a total of $20.6 billion for this fiscal year, up about 2.5 percent from last year’s $20.18 billion budget, and marks a 39 percent increase in the state budget over 10 years. The 2.5 percent increase can almost entirely be attributed to Medicaid cost overruns and projected Medicaid cost increases beyond the legislature’s control. Without the additional Medicaid expenses, year-over-year spending could very well have remained flat or even experienced a slight decline.

Highlights from the state budget include:

• Total state spending on public (K-12) education comes to $7.9 billion – up nearly $400 million over last year’s appropriation
• Implementation of opportunity scholarships in the second year of the biennium, providing vouchers of up to $4,200 for low-income families to use toward private school tuition.
• A provision allowing for the state’s executive branch to develop a reform plan for the state’s Medicaid program
• $12.4 million in lottery money to fund an additional 2,500 slots in the NC Pre-K (formerly More at Four) program
• An additional $434 million to pay for increasing Medicaid costs. This is in addition to the $308 million already set aside in the current budget year to cover Medicaid cost overruns
• Capping of the state gas tax at 37.5 cents per gallon until July 30, 2015, estimated to save motorists $2.4 million this year
• No pay raise for state employees, but the addition of five more paid days off
• $1 million for the implementation of the Voter Information and Verification Act (voter ID)
• Creation of a fund to compensate verified victims of the state’s former eugenics program at a cost of $10 million

 

Education

The just-completed legislative session produced a number of significant education victories for conservatives.  Lawmakers enacted major legislation to reform public schools and also to expand educational opportunity.  Some of the major highlights include:

• Budget: Provides $7.86 billion to run North Carolina public schools. The 2013-14 education appropriations represent an increase of $361 million over the previous year. Money for K-12 public schools represents about 38 percent of the state budget.
• Tenure Reform:  Eliminates “career” status for teachers.  Allows school districts to offer teachers  contracts of one to four years in length based on years of experience. School districts will have the option to renew the contracts based on performance measures.
• Opportunity Scholarship Act: Sets aside $10 million in 2014-15 for vouchers of up to $4,200 to families who qualify for federal free and reduced cost lunch program. Recipients must be currently enrolled in a public school and can use the money for tuition or other educational expenses at a private school.
• Special Needs Vouchers: Provides grants of $3,000 per semester and $6,000 annually for parents of special needs children to attend private school.  Legislature appropriates $3 million for vouchers in 2013-14.
• Common Core: Requires State Board of Education to get legislative approval before purchasing or implementing a new assessment instrument to assess student achievement on Common Core Standards.
• School Report Cards:  Requires State Board of Education to issue school achievement, growth and performance grades to North Carolina public schools.

 

 

Medicaid Reform

The 2013-14 state budget includes a provision enabling the governor’s office to craft a plan to reform the state’s Medicaid program. Titled “The Partnership for a Healthy North Carolina,” McCrory’s plan would alter the current Medicaid system into a more patient-centered, fiscally responsible program.

Rather than a one-size-fits all program that reimburses providers at one specific set rate for each specific procedure they perform for patients, the Partnership would allow patients to pick from a variety of coverage plans that best suit their needs. Insurance companies would compete to be included in the program, and would be reimbursed by the Medicaid program on a per enrollee basis, thus assuming the risk and incentive to control costs.

 

Election Reform

It took nearly three months for the State Senate to take up the Voter Photo ID bill the House passed in April, but it was worth the wait. House Bill 589, the Voter Information Verification Act (VIVA), will begin to bring North Carolina’s election process into the 21st century.

The State Senate took a weak and confusing attempt at voter photo identification and made it into a photo ID requirement that is strong enough to begin to restore confidence in our electoral system.

But the Senate didn’t stop with voter photo ID, they also eliminated Same-Day Registration so that everyone will be required to register at least 25 days before Election Day. This will give the local boards more time to verify a registrant’s address, thus detect fraud. Also, the early voting period was shortened from 17 days to 10. This change will standardize early voting and make the voting sites and times uniform among counties.

The landmark legislation also eliminates straight party voting, an antiquated practice that was made even worse when the Democrats in the 1970’s worried that North Carolinians who had a penchant for voting for Republican Presidential candidates would begin to push the straight-party lever so they removed the presidential race from the straight-party vote.

 

No longer will 16 & 17 year olds be allowed to register to vote. This law was promoted by liberal organizations who pushed this legislation through the legislature in 2009 in order to obtain personal information of teenagers that they couldn’t get anywhere else. VIVA also discontinues the practice of paid voter registration drives and the practice of voting out of precinct on Election Day using a provisional ballot.

The bill also includes the first change in contribution limits in more than 10 years. The campaign contribution limit will be increased from $4,000 per election to $5,000. The inflation adjustment will aid candidates who don’t fund their campaigns with their own money.

 

There are several other provisions in North Carolina’s new election reform law, including:

• Prohibition of online voter registration
• Elimination of taxpayer-financed campaigns (see section below)
• Limitations  on who can assist a voter adjudicated to be incompetent by court
• Moving the presidential primary to the first Tuesday after South Carolina’s
• Requiring all voting systems to produce a paper ballot
• Changing the order of candidates on a General Election ballot. Now the party whose nominee for Governor received the most votes in the most recent gubernatorial election will have their candidates listed first

VIVA is the first comprehensive updating of our election laws in several decades. North Carolina’s election system has become a jumble of complex and sometimes contradictory laws and administrative decisions. The process is confusing and dysfunctional, with no built-in security to protect the integrity of a person’s vote. This bill will start to restore sanity to the election and voting process.

 

Fiscal Restraint and Transparency

Legislation was passed placing restrictions on state debt that can be incurred without voter approval. “Special indebtedness,” in particular Certificates of Participation, have been utilized exclusively in North Carolina since 2000. Such debt does not require voter approval. Due to this trend, a significant portion of outstanding state debt was never subject to a vote of citizens. The new legislation places a cap on the percentage of state debt that can be special indebtedness. Given the parameters of this new law, any new state debt legislators wish to issue will be required to first garner voter approval for several years to come. As the amount of special indebtedness as a share of total state debt shrinks, however, there will be opportunities in the future to once again issue COPs and other forms of debt not requiring voter approval.

Other debt-related legislation will increase the transparency of local debt. HB 248 will inform local voters about the interest being charged on local bond referendums. The new law requires an estimate of the total amount of interest payments that will be required on the debt in the bond order published by the local government clerk. It will also mandate language on the bond ballot itself informing voters that not only the principal but also interest will be required to pay down the debt they are voting for, and that new taxes may be required to pay down the additional debt. Previously, voters have only been informed about the principal amount of the debt.  This legislation is a major step toward increasing transparency about the true cost of government debt.

 

Elimination of Taxpayer-Funded Campaigns

In 2004 North Carolina instituted a program by which candidates for the state Supreme Court and Court of Appeals positions could use taxpayer dollars to fund their campaigns. A similar program for Council of State races was created in 2008. In essence, taxpayer dollars paid in to the state’s General Fund were made available for political candidates to fund their campaigns, forcing taxpayers to finance political speech they may well abhor.

A section of the Voter ID bill eliminates these programs.

Regulatory Reform

Arguably the most meaningful advancement toward eliminating cumbersome regulations in decades was passed this year. The Regulatory Reform Act of 2013 incorporated several regulatory reforms into one omnibus bill.  Most significant among those reforms is a requirement that state agencies designate their rules as either unneeded, needed but not controversial, or needed but controversial. Based upon these classifications, rules and regulations would be removed from the books. Agency rules will be reviewed every 10 years, any rules not reviewed in that time frame will automatically expire. The bill also loosens restrictions on landfills – a provision that concerned Gov. Pat McCrory. As of this writing, the bill still sits on McCrory’s desk awaiting his signature.

 

Racial Justice Act Repeal/Ending Death Penalty Moratorium

North Carolina passed the “Racial Justice Act”’ (RJA) in 2009. The Act allowed convicted murderers to appeal their death penalty sentence by using questionable statistical analysis to show racial bias in their sentencing. If the appeal was successful, the sentence would be commuted to life without parole. North Carolina remains the only state in the nation to pass such a law. Critics of RJA said the statistics allowed in the appeals process were often irrelevant to the specific case being appealed.

Largely because of the vagueness and overly generous nature of allowable statistics in the appeals process, 162 of 168 death row inmates filed for an appeal in the first year following RJA’s passage.

Senate Bill 306, signed into law this session, repealed RJA completely.

The bill also codifies a Supreme Court ruling stating that any licensed medical professional assisting with an execution cannot be punished by any medical boards. Over the last several years, there has been a de facto moratorium on the death penalty largely as a result of The North Carolina Medical Board’s 2007 statement prohibiting doctors from assisting in executions – even though state law requires a doctor be present. The combination of these provisions in SB 306 should pave the way for the state to once again begin executing convicted murderers.

 

Opportunities for 2014

While much was accomplished in 2013, there is still more to be done. Following are some action items Civitas would like to see addressed in 2014:

Tax Reform

The 2013 tax reform bill was a major step forward for North Carolina’s economy, but should not be the final step. Further tax reform issues that should be addressed include: eliminating franchise and privilege taxes, expanding the sales tax base, closing more loopholes and working toward income tax elimination.

 

TABOR

While the sluggish economy and the accompanying low rate of revenue growth currently provides a check on state spending growth, that may not always be the case in future years. The time is right to enact a sensible restraint on the growth rate of state spending, one that can rein in spending regardless of who is charge. A Taxpayer Bill of Rights (TABOR) would serve as such a restraint. A TABOR would create an annual cap on the growth rate of the state budget tied to a combination of inflation plus population growth. In order for the TABOR to be most effective, it would be best as an amendment to the state constitution.

 

Corporate Welfare

Disappointingly, the legislature did not act to curb or eliminate taxpayer handouts to politically- connected corporations. Programs like the One North Carolina Fund and the Job Development Investment Grant continue to receive tens of millions of taxpayer dollars. Such crony capitalist schemes should be terminated and the savings used to drive down tax rates. State government should not be in the business of granting financial favors to a select few companies at the expense of everyone else.

 

Voter Approval Over All State Debt

Legislation passed in 2013 will no doubt severely limit the state’s ability to incur debt without voter approval. Civitas recommends, however, still more strict limitations to ensure the voice of voters can no longer be ignored on matters of state debt. The clause in the state constitution allowing for legislators to skirt voter approval should be amended in order to guarantee all future state debt be subject to voter approval.

 

Teacher Salary Schedule

North Carolina’s teacher salary schedule needs to be rewritten to tie salary to educational performance and to provide local officials with the resources and flexibility to address the needs of local teachers.

 

Common Core Assessments 

Student scores on state assessments will dominate much of the discussion on public education. The results should provide an opportunity to either revamp, renew or reject Common Core Standards.

 

Election Reforms

• Pass legislation to require proof of citizenship before a person can register to vote. It is imperative that only qualified citizens are allowed to vote. Now that voter photo ID has been signed into law, it’s time to take the next logical step and require verification of citizenship.
• Make judicial races partisan again. The people of North Carolina deserve to know this very important piece of information about all the candidates on their ballot.
• Require verification mailings to be mailed to voter’s residence. While the North Carolina election law alludes to this requirement, it has been accepted procedure for the verification mailings to be mailed to Post Office Boxes and out-of-state addresses. When the National Voter Registration Act was implemented in 1995, allowing voters to register to vote by mail and through government offices, the practice of verifying voter’s addresses was a compromise to ensure that voters lived at the physical address they entered on a voter registration form.

Simplify campaign finance requirements and reporting. North Carolina campaign finance laws are complex and confusing. We need to simplify the campaign finance laws so that every candidate can complete their own campaign finance reports with confidence and without fear of tripping over confusing laws and rules and without the need to hire a lawyer.