Presentation for Winter 2014 NCACC Legislative Update, presented during Winter 2014 NCLGBA Conference on December 10, 2014.

1. REBECCA TROUTMAN
NCACC IGR DIRECTOR
Legislative and Statewide
County Issues Update

2. Final State Budget, Finally!
County Impacts:
• $100 million lottery funds for county school capital
– Can’t pledge for future debt service
• $13.7 million for county child welfare
enhancements & increased state oversight
• What was left out?
– NO non-emergency Medicaid transport outsourcing
– NO workers’ comp & tort claims shifts
– NO forestry services increase
– NO tier-1 limitation on state-funded school nurses

3. Final State Budget, Finally!
County Impacts:
• Phase out of Medicaid $500,000 benefit
– Not Medicaid hold harmless
• All misdemeanants to county jails under
voluntary Statewide Misdemeanant
Confinement Fund

4. Final State Budget, Finally!
Statewide Impacts:
• 7% avg. teacher salary increase; $500 non-
certified & central admin.
– TAs largely intact
– Tenure going forward eliminated in last year’s budget
• $1,000 to state & community college employees
– 1% state retiree COLA
• Medicaid provider cuts but little change in
Medicaid services or eligibility
– Medicaid reform postponed until next session

5. Final State Budget, Finally!
Statewide Impacts:
• $2.2 million for mental health community-based
crisis services
• $10 million for film industry grant program
– Allows sunsets of film & historic rehab tax credits
• $20 million for Job Catalyst program
– Spending authority embedded in local sales tax bill
• SBI transfer to DPS
– Crime lab remains with Justice

6. End of Session Surprise Fails
H1224—Senate PCS, Local Sales Tax For Educ./Econ. Dev.
• Original pcs eliminates ¼ cent general purpose & replaces with ½
cent educ. and/or transit in ¼ cent increments
– Cap combined county sales taxes at 2.5%
• Grandfather in Durham & Orange at 2.75%
• Mecklenburg unable to move forward with Nov. ¼ cent
• Senate adopted version keeps general purpose & increases to ½
cent, offers new ed. option at ½ cent & increases transit to ½ cent—
either or in ¼ cent increments
– Cap combined sales taxes at 2.5%
– Companion H189 permits Mecklenburg & Wake until 2016 to keep 2.75%
• Senate ties econ. development, teachers’ asst. tech fix to measure
• House fails to concur

7. NCACC County Goals Checklist
 Support farmland preservation
– $1M for military buffers
 Monitor & protect counties in natural resource
extraction
– Limit on property taxes turned back
– Study of mineral valuation for property taxes
 *Ensure mental health funding
– $2.2M in community crisis services
 Retain NEMT
– House budget provision rejected
 Preserve county HHS fed. funds
– No service cuts
– Add. funds for CPS
 Increase childcare subsidies & Pre-K
– Add. funding for slots & rate increases
– Tightening of eligibility requirements
 *Oppose transportation shifts
– No legislation introduced
 Allow county participation in state health plan
– Montgomery County added
 Support full funding of JRA
– Creates facilities to house probation violators
 Provide state crime lab funding
– Initiates Western Crime Lab & forensic DNA
 Remove pop. threshold for detention space
limitations
– S463 enacted
 *Reinstate lottery funds
– H1107 introduced with 70 house members
– Maintained at current levels
 Maintain state responsibility for school buses
& tort claims
– Gov. proposal to shift tort claims rejected
 Support community college workforce pgm
– $15.1M recurring for health & tech ed pgms
 *Oppose unfunded mandates & cost shifts
– No new mandates or cost shifts
 *Preserve existing tax base
– No loss in revenue base
 Centralize appraisal of wireless & cable
facilities
– H1050 shifts wireless appraisals to DoR

8. Other Legislation Impacting Counties
H1195 - Pension Spiking, Collins & Ross
• LRC House Committee on Retirement
– NCACC & NCLM crafted with Retirement Div. & NCCCMA retirement
committee
– Goal to preserve pension fund fiscal integrity w/out impacting valid salary
increases or promotions
• Sets contribution-based benefit cap triggered by excessive salary
increase & imminent retirement
– Only applies to state & local employees >$100,000 retiring Jan 2015 or later
• Salary does not trigger cap; excessive salary MAY trigger cap
– Retirement Div. to report names who MAY trigger cap if retire w/in year
• Notice contains estimated liability owed if cap trigger
• Consequences if cap triggered?
– Reduced pension; New employee pays liability; Gov’t entity to pay for existing employee (can be
shared locally with employee)
• Bill also provides for non-vested contribution returns with interest &
resets TSERS vesting to 5 years

9. Other Legislation Impacting Counties
H1043 - P&C Prequalification, Arp
• P&C study committee from NCACC-sponsored Design Build
legislative goal
– Wake County Commissioner Paul Coble county rep
• H1043 requires lgs to adopt prequal policy & prequal assessment
tool & limits for construction at risk, design-build, PPP
• Establishes Blue Ribbon Comm. to Study Building & Infrastructure
Needs of State
– Includes water & sewer, community colleges and schools
– Study infrastructure needs thru 2025, priority process for needs, feasibility of
fund with dedicated revenue & funding options until 2025

10. Other Legislation Impacting Counties
S403 Omnibus Elections Clarifications
• House floor amendment to limit special
elections, e.g. for sales tax or bond referenda,
to elections having all precincts open, e.g.
non-municipal, odd-years

11. Other Legislation Impacting Counties
H292 – Moratorium on Lawsuits for School
Funds PCS
• Prohibits schools for suing over sufficiency for
2 years
– Applies only to Union, Gaston & Nash
Update—Union County appeal heard in Court of
Appeals 12/2
NCACC files amicus brief

12. Other Legislation Impacting Counties
H369 – Criminal Law Changes
• Clarifies that local government assurance of E-
Verify contractor/subcontractor compliance
only applies to formal bid threshold for
purchases & construction
– Aligns county & city requirements with all state &
public agencies

13. Other Legislation Impacting Counties
H1050 Tax Reform
• Tweaks tax simplification act of last summer
• Major impact is to cities—privilege licenses
– Reinstates inadvertent repeal
– Limits application in 2014-15 to physical presence
– Repeals in entirety in 2015-16 without replacement
revenue
• Sets LPA fees at $1.06 & makes increase
retroactive to March
• Authorizes DoR to centrally appraise wireless
facilities & towers (NCACC goal)

14. Other Legislation Impacting Counties
H1031 – Econ. Development Partnership
• Permits Commerce to outsource certain econ
develop. functions
– Recruitment, retention, business development,
international trade, marketing & travel & tourism
• Does not distribute incentives
• Establishes 8 regional prosperity
zones to house reps of state
agencies for better collaboration
& coordination

15. Statewide Environmental Issues
S734—Reg. Reform
• Rejects House’s plans to limit county or city zoning
authority for design controls or to amend misconduct,
negligent definition of code officials to include
enforcement of more stringent building code
• Includes enforcing county floodplain ordinance in ETJ
• Repeals moratorium on local environmental ordinances
• Enables permit applicant to choose version of rule or
ordinance during permit application period if rule or
ordinance changes
• Standardizes local well permitting & inspection forms

16. Statewide Environmental Issues
S786--Energy Modernization Act
• Repeals prohibition on permit issuance for fracking & allows issuance 61
days after all rules adopted—July 1, 2015
• Extends deadline for rule adoption to Jan. 1, 2015
• Establishes Oil & Gas Commission to oversee oil & gas exploration
• Makes confidential trade secret info but requires immediately disclose to
first responders
• Sets responsibility for well contamination at ½ mile (was 5000 feet)
• Preempts local ordinances that would prohibit or cause to prohibit oil &
gas exploration
• Establishes state severance tax on energy minerals & prohibits local taxes,
excluding property taxes
• NCDoR charged with studying other states’ practices on valuing energy materials for property taxes
• JLOC Energy Policy to study how industry development impacts property tax revenues

17. Statewide Environmental Issues
S729--Coal Ash Management
• Sets clean-up/remediation/closure requirements by dates
certain for state’s 33 coal ash ponds, based on DENR evaulation
of severity
– High-priority to have materials removed by 8/1/19 include facilities in
Rockingham, Gaston, Buncombe, & New Hanover
– Other high risk ponds may convert to industrial landfills but remediation
must occur by 12/31/19
– Intermediate by 12/31/24
– Low by 12/31/29
• Prohibits new or expanded ponds & requires groundwater
monitoring
• Preempts local regulation of coal ash management

18. What Was Left? - Medicaid Reform
• Structure of service delivery?
– Senate favors MCOs regionally competing with ACOs
• All clients under full risk capitation by July 2018
– House, Gov., & medical community only support ACOs
• Most clients under increasing risk capitation by July 2020
• Structure of oversight?
– Senate favors new dept. with board of directors
• Senate wants study of eligibility determination options
– House & Gov. keep within NC-DHHS
• House wants director approved by legislature
• HHS subcommittee (in split vote) endorses outsourcing risk within 3
years w/ preference to provider-led organization—full committee
rejects
• PED subcommittee favors independent board administratively w/in
NC-DHHS

19. Looking Forward
2015-16 County Legislative Agenda
In Development
19

20. NCACC Legislative Goals Process
October
Goals
Referred
to Steering
Committee
Steering
Comms.
Consider &
Recommend
Goals
Referred to
Legislative
Goals
Comm.
Legis. Goals
Comm.
Considers &
Recommends
Goals Referred to Board of Directors
Board
Considers
& Approves
Goals
Goals Referred
to Member
County Boards
New Boards
Take Office,
Consider &
Select Delegates
Delegates
Approve
Goals at
Legis Goals
Conference
Nov 19-20
December January 15-16, 2015
July - Sept
December 10
Commissioners
& Boards
Submit
Proposed Goals

21. 358 Total Goals Submitted
44 to be voted on at Legislative Goals Conference

22. Committee Consideration
• Economic development front & center; 22 of 55
goals in Tax & Finance
– Uncertainty with new economic development
structure
– Concern by rural counties
– Focus on expiring incentives, infrastructure
• Concern with tax base erosion
– Study of non-profit property tax exemptions
22

23. Top T&F Goals Thus Far
23
1. Oppose unfunded mandates and shifts of state responsibilities to counties.
2. Grow North Carolina’s statewide economy through sound state investments,
including public infrastructure funding, competitive incentives, and
coordinated efforts with county economic development services.
• Adopt new approaches to economic development incentives to include
rural counties.
• Restore the film and historic preservation tax credits.
• Provide increased grant funding for rural infrastructure projects.
3. Preserve the existing local revenue base.
4. Authorize local option revenue sources already given to any other
jurisdiction.
5. Expand local option sales tax by allowing for Board of Commissioners
resolution or public referendum.

24. Other County Priorities
• Oppose roads, Medicaid cost shift, encourage
broadband
• Increase state funding for lottery, libraries,
environment & ag programs
• Increase e911 fee flexibility
• Support Medicaid expansion & keep mental
health public
24

25. Looking Forward
Key Statewide Issues
25

26. Pension Fund
LGERS Fund Stabilizing
• New financial reporting shows net assets
• Employer contribution to fall
• Investment gains support small COLA
• Retirement division/actuary recommend
setting 5-year ARC (annual retirement
contribution)

28. NCACC Board Adopts
NCCCMA Recommendations
Managers’ assoc. retirement committee
recommends:
• Set ARC at levels to support future 5-year rate
• Support COLA commensurate with investment
gains
• Request staff to define 1,000 rule

29. State of the State
(Barry Boardman)
• 2013-14 = $450 million shortfall
– Personal Income tax collections the key reason
• 2014-15 ytd = General Fund revenue $145
million under target (down 2.2%)
– Sales Tax collections were $59 million above target
• 5.7% baseline growth
– Personal Income collections were down $178
million
– Total Tax revenue down $131 million

30. Little Change In State Forecast

31. Sales Taxes Improving….but
Local distribution
ytd = 8.9%

32. Legislative Session 1/28
• Governor’s 2-year budget due late Feb.
– Requires consensus revenue forecast with NCGA
– Focus on infrastructure?
– Offer up Medicaid expansion?
– New budget director
• Lee Roberts, former banker, Cokie Roberts’ son
• State tax revenues?
– Unknown until April 15

33. Legislative Session 1/28
(Organization Session 1/14)
• New House leadership
– Committee chairs unknown
Rep. Tim Moore
(Cleveland)
Speaker of the House
Rep. David Lewis
(Harnett)
Rules Chair
Rep. Mike Hager
(Rutherford)
Majority Leader

34. Key Legislative Issues?
• Tax Reform 2.0?
– Shift in local sales tax allocation?
– Expansion of sales tax to services?
– Replacement for municipal privilege license taxes?
• Medicaid Reform & Expansion?
– House/Senate differences remain

35. Questions?
Comments?