Counties continue to push for relief

Medicaid battle escalates during legislative session

By Jim Blackburn
General Counsel

The North Carolina General Assembly adjourned its 2005 long session on Friday, Sept. 2, with just under 3,000 bills introduced and approximately 520 approved. As always, because of the pivotal position occupied by counties in the state’s service delivery system, a great number of these proposals are of importance and interest to county officials.

Priority goals

Medicaid relief remained the No. 1 goal for counties. During the 2005 session, a number of bills were introduced to implement either all or part of the goal, which sought a gradual phaseout of county costs, a freeze at 2004-05 levels and additional relief for counties most heavily affected by Medicaid (measured by the proportion of citizens determined to be Medicaid eligible in each county). Many of these bills had widespread, bi-partisan support, but none of the bills ever made it out of committee.

The House’s budget proposal did include $15 million to provide some relief, but these funds were deleted from the final budget by the Conference Committee. Currently, the Association is negotiating with the General Assembly to establish a study commission to examine ways to eliminate the county share of Medicaid.

Rep. Mickey Michaux (Durham) introduced H1142, which would have allowed local referenda on sales taxes, impact taxes, meals taxes, occupancy taxes, income taxes and land transfer taxes. The bill was referred to the House Finance Committee but was never discussed.

During the last week of the session, however, the House approved and sent to the Senate four different bills authorizing local half-cent sales taxes with proceeds to be used for school construction (H756, affecting Chatham, Lee, Franklin and Vance counties) or construction of both school and community college facilities (H876 affecting Haywood County, H1050 affecting 12 counties and H947 affecting 30 counties). The Senate took no action on these bills, but because they passed the House, the bills will be eligible for consideration during the 2006 short session.

The Association did achieve its other priority goal – state bonds for school construction – but not quite in the manner specified in the goal. With the state’s inadequate debt capacity making a statewide bond issue impossible, school and county officials looked to other sources for funds to deal with a need for school facilities exacerbated by enrollment growth and mandated class size reductions in the lower grades.

The Senate passed the education lottery in the session’s final days. The lottery, when it becomes operational, will distribute 40 percent of the net lottery proceeds to counties for school construction. Of the 40 percent, 65 percent will be allocated on the basis of average daily membership (ADM) and 35 percent allocated by ADM to counties whose effective tax rates are above the state average. The lottery is expected to generate more than $160 million annually for counties once it is fully implemented.

The best offense is a good defense

Each year, the Association’s lobbyists spend a lot of energy and effort to defeat legislation designed to limit or usurp county authority, or restrict county revenues – sometimes both. This year was no exception.

A major target this year was the funding of the E-911 Emergency Telephone Services and the use of fees collected for these services. While the Association was advocating for increased flexibility in the use of funds collected pursuant to the Public Safety Telephone Act (Article 1 of Chapter 62A of the General Statutes), other interests tried to eliminate 911 charges imposed on telephone subscribers and collected by telephone companies (H1638, introduced by Reps. Drew Saunders of Mecklenburg County and Harold Brubaker of Randolph County).

The Association expressed strong opposition to H1638. These efforts eventually led to the legislation being rewritten to provide for a study of the issue. The study will likely be undertaken by the Joint Legislative Utility Review Committee.

An effort by telephone companies to eliminate local governments’ ability to franchise those providing cable services through a last-minute amendment to a “technical amendments” bill was defeated during the last week of the session.

As special interest groups continue to pour money into the campaign coffers of state politicians, more and more bills are being introduced to benefit those groups at the expense of local governments. The General Assembly was presented with the usual batch of bills proposing to give property tax relief to specific institutions or interest groups in 2005. Most significant were identical bills introduced in the House and Senate to give tax relief to homebuilders. S508, introduced by Sen. Walter Dalton of Rutherford County, and H648, introduced by Rep. Tim Moore of Cleveland County, would have exempted from taxation the increase in value attributable to improvements in property prior to sale.

The Association vigorously opposed these bills as extremely costly to local governments and likely to set a dangerous precedent inconsistent with North Carolina’s tradition of taxing residential property at fair market value. Both bills remained in committee as the session ended, but both are eligible for consideration in the 2006 session.

Another bill that drew the Association’s opposition was S951, introduced by Sen. David Hoyle of Gaston County. This bill would require local governments to provide extended notice to companies providing solid waste collection services (haulers) before awarding franchises to other haulers or canceling franchises. The effect of the bill would be to make it more costly to change solid waste haulers and would greatly limit local governments’ ability to provide the best services possible for their citizens. The bill has been approved by the Senate and has been referred to the House Commerce Committee.

Goals accomplished

During the session, the Association helped ensure passage of many bills that were adopted as legislative goals by the membership in January, including:

H1779, which provides for a phased-in system to enhance collection of property taxes on motor vehicles by combining tax collection with vehicle registration. This legislation will eventually lead to counties collecting as much as $55 million a year in unpaid property taxes on motor vehicles. For more information on this legislation, please see the article on page 4.

H1332, which raised from $5,000 to $30,000 the threshold, contained in G.S. 143-131(a), at which counties and other governmental bodies are authorized to let contracts on informal bids, and H819, which allows councils of government to acquire property.

H399, which authorizes a “unified government” in a county with no incorporated municipality, allowing the board of county commissioners to assume functions normally reserved to municipalities.

H607, which allows for the creation of enhanced voluntary agricultural districts with added benefits in the form of tax exemptions and waiver of utility assessments applying to land in such districts. It also creates the Agricultural Development and Farmland Preservation Trust Fund Advisory Committee, which will include the executive director of the NCACC – or his designee – to advise the commissioner of agriculture on distribution of monies from the trust fund.

Other legislation of interest

While most bills passed by the General Assembly have either a direct or indirect impact on county governments, several bills are particularly noteworthy, including:

S737, which authorizes a board of county commissioners to require “that any applicant for employment be subject to a criminal history record check of State and National Repositories of Criminal Histories conducted by the Department of Justice,” and to consider the results of these criminal history record checks in its hiring decisions. It also authorizes the Department of Justice to provide these criminal history records to counties and to charge a fee to offset the cost of conducting the criminal record check.

H635, which amends statutes relating to county boards of commissioners, boards of education and municipalities to require public comment periods. Governing boards are authorized to adopt reasonable rules governing the conduct of the public comment period.

S223, which required the State Board of Elections to “ … ensure that all voting systems generate either a paper ballot or a paper record by which voters may verify their votes before casting them and which provides a backup means of counting the vote that the voter casts,” among other changes. Whether funds will be available to purchase new or more expensive voting equipment and to train election officials who must administer the system remains a question. The act makes clear that grants available to counties through the HAVA (Help America Vote Act) Election Fund can be used to implement the Federal Act as well as for purposes permitted by HAVA to comply with state law. For more information on how this act impacts counties, visit www.ncacc.org/elections-s223grant.html, or see the articles in the October issue of CountyLines.