Legislative Summary 2003

The 2003 Session of the North Carolina General Assembly will be remembered more for what did not happen than what did, and because of this must be considered a success, particularly from the perspective of counties and other local governments.

Legislators arrived in Raleigh on Wednesday, January 29, under a multi-layered cloud of uncertainty. The Senate was more evenly divided than in recent sessions, and the House was characterized by a 60-60 partisan split. Both bodies included a number of new members and had lost a number of senior leaders.

Most ominously, recurring budget problems were intensifying in a stagnant economy, with steadily increasing estimates of a shortfall for the 2003-04 fiscal year budget. The situation appeared to grow even darker when the House deadlocked on the choice of speaker until February 5, when a co-speaker arrangement was approved.

Rep. Richard Morgan (R-Moore) and Rep. Jim Black (D-Mecklenburg) were elected to preside over the House, an arrangement many observers believed would eventually come apart. Everyone settled in for what promised to be an endless session characterized by acrimony and gridlock.

For counties, fears were intensified by the threat to local revenues created when Governor Mike Easley’s budget proposed elimination of funds for school construction (while also proposing added services to pre-schoolers and reduced class sizes in lower elementary grades) and the elimination of “Hold Harmless” funds.

These funds were designed to compensate counties and cities for whom revenues from the local option sales tax authorized in 2002 was insufficient to equal reimbursements for previously repealed local revenues.

IT DID NOT HAPPEN

A grassroots effort involving county officials and others from across the state and coordinated by the North Carolina Association of County Commissioners and the North Carolina League of Municipalities persuaded legislators to look elsewhere for revenue savings to balance the state budget.

“ADM funds” for school construction and “Hold Harmless funds” were appropriated for both years of the biennium that began July 1, 2003.

BUDGET AGREEMENT

Moreover, the anticipated gridlock was avoided through an unprecedented degree of cooperation. New appropriations leaders on both sides were able to agree on a budget that was signed by the Governor on June 30. The action avoided possible “sunset” of a state half-cent sales tax enacted in 2001 as well as income taxes levied on higher income taxpayers: these revenues were needed to balance the state budget.

Yet another problem was solved when a cut-off of local E-911 “Wireless” funds was avoided by adoption of language to enable the Wireless Board to use funds already in the Wireless Fund to replace revenues diverted in the budget.

The budget enacted by the General Assembly reflected the reductions necessary to meet the constitutional requirement that it be balanced.

In addition to appropriating “Hold Harmless” funds and “ADM” (school construction) funds, the Legislature worked hard to make cuts that had the least possible effect on direct services, particularly in the education and human services areas.

With the budget adopted before the start of the fiscal year, legislators turned their attention to resolving or displacing remaining issues so as to avoid the struggles that kept the General Assembly in session into October 2002 and December 2001.

In the end, disagreements about major projects resulted in adjournment without enactment of the traditional technical corrections legislation and without action on a proposed compendium of studies to be undertaken in the interim period between sessions

Another proposal to add to the “did not happen” list is the lottery, despite strong lobbying by the Governor.

For county officials, the Association’s top legislative priority also did not happen. The General Assembly took no action to relieve counties of their share of the Medicaid burden during the 2003-2005 biennium.

Considering the state’s budget problems, it was clear early in the session that immediate Medicaid relief was unlikely.

Association representatives and county officials took pains to assure that the Medicaid issue remained in the forefront and that legislators better understood the importance of this issue and how much Medicaid obligations disrupt county budgets.

A legislative study of these issues in expected to be conducted between now and the 2004 session.

The “budget crunch” had similar effects on a number of spending-related goals and issues of importance to counties.

The General Assembly did authorize a 2004 referendum on economic development financing, a system permitting bonds to finance economic development in a given geographic area, with the bonds paid off with tax revenues generated by the project.

Several other Association initiatives await action in 2004, including proposals to ban video poker, to improve the system for settling budget disputes between school boards and county commissioners, to compensate counties where land in condemned by other state or local governments and to increase fees for service of process.

FALL SESSION

One other “did not happen:” Redistricting. A North Carolina Supreme Court decision announced at the end of the legislative session means that legislators will gather again to redraw House and Senate maps.

The decision was expected and has been since the Court heard the case and allowed the maps used for the 2002 election to stand.

The redistricting session is expected to convene some time this fall.

In the final analysis the positive aspects of what did not happen during the 2003 session outweighed the negative. County officials can take pride in making sure that efforts to retain and divert local revenues did not happen. In addition, we can all be grateful that the gridlock anticipated in January did not happen.