Lottery Funding for School Capital Continues to Grow, Other Revenue Options Stall
The NCACC made further progress on its number one priority goal of the 2017 and 2018 sessions – to increase revenue for school capital needs – getting closer to the restoration of the original 40 percent of lottery proceeds for school construction the General Assembly dedicated when the lottery was created. The Association saw an increase of lottery funds for public school
construction to $217 million dollars, up from just $100 million in 2016. The $217 million dollars for school construction is split between two funds: $100 million going to the Public School Building Capital Fund and $117 million to the Needs-Based Public School Capital Fund, which is awarded to Tier 1 counties through a competitive grant process. That fund was established last
legislative session and was projected to receive $75 million dollars in 2018 per last year’s budget. The $42 million dollar increase in that fund helps bring the total amount of lottery proceeds going toward public school construction to 29 percent.

Although lottery revenue going toward public school construction increased, legislation to expand local revenue options – also NCACC’s top Tax & Finance goal – and direct some of the funds to school capital and other education needs failed to gain final approval in the General Assembly this session. House Bill 333, sponsored by Reps. Susan Martin, Howard Hunter, Sam
Watford and Jason Saine, authorized counties to use the Article 43 local option sales tax for several educational needs, and to increase Article 46 from ¼ to ½ cent for general purposes. It passed the House last year and was eligible for consideration during this short session, but the Senate did not take any action. Legislation to put a $1.9 billion bond referendum for school capital on the 2018 ballot (H866/S542) received active support from Rep. Linda Johnson and Sen. Jerry Tillman, the lead sponsors in each chamber. Despite strong efforts by NCACC, and a grassroots campaign by our members and other stakeholder groups to get the legislation moving in the General Assembly, ultimately the legislation did not receive a hearing in either the House or the Senate this session.

Expansion of Present Use Value Classification Introduced and Passed in One Day
In one day late in session, the General Assembly unveiled and passed a large expansion of the present use value designation. The Senate turned House Bill 320 into legislation expanding the PUV classification for property taxes to include land used to breed or raise animals for hunting, fishing, shooting, and wildlife recreation activities. Existing PUV categories have 100-acre maximum eligibility caps; this new category has a cap of 800 acres. The new designation goes into effect for property taxes beginning July 1, 2019 and any land must be inspected every five years by a wildlife biologist to ensure it meets certain qualifications under the law. The NCACC is concerned about the size of the impact from this change, and requests members send feedback and analysis to the Association and speak to legislators in the interim about your concerns.

Further Clarifications to System Development Fees
Last session saw a major victory for local governments with the enactment of a new law to clarify system development fee authority for all counties and cities going forward. The NCACC collaborated with cities and industry stakeholders to continue working on the issue this session, including clarification of the time for collecting fees and clarification that system development fee revenues can pay for bonds. Under the new law as amended by House Bill 826 this session, the timing for collection of system development fees must follow these parameters:
• for new development involving land subdivision, fees will be collected the later of plat recordation, or when water or sewer service is committed by the county;
• for all other new development, fees will be collected the earlier of application for connection of the individual unit of development to the service or facilities, or when water or sewer service is committed by the county.

The NCACC understands that “committed” is ambiguous and will continue working in the interim with stakeholders and our members to clarify the new system development fee law for water and sewer systems across our state.

Legislature Focuses on School Safety Measures
Making public schools more secure was a major focus of the General Assembly during the 2018 legislative session. The legislature’s work on the issue began in March when the House convened the House Select Committee on School Safety. That committee released its finding and recommendations just prior to the commencement of the legislative session with many of those recommendations finding their way into the enacted 2018-2019 budget or introduced as stand-alone legislation. The committee will likely continue its work in the interim and make further changes during next year’s long session. This year’s budget appropriates an additional $35 million to address school safety issues as follows:
• $10 million grants for school mental and behavioral health positions;
• $3 million for training school-based mental health professionals;
• $5 million in funding for a statewide student anonymous tip mobile
application;
• $12 million in funding for School Resource Officers;
• $3 million for equipment and capital facility improvements;
• $2 million for community partners to assist students in crisis.

In addition to the school safety provisions in the budget, three stand-alone bills related to school safety were filed and approved in the House, but did not receive consideration in the Senate and did not become law this session. House Bill 934 would have established the Center for Safer Schools in statute and codified its responsibilities, including serving as a resource and referral center on school safety concerns, providing training for public school personnel, and collecting, analyzing, and disseminating school safety data. The center was later codified in Senate Bill 335. The bill also requires all public schools have threat assessment teams to assess and intervene with individuals whose behavior may pose a threat to the safety of school students or staff, as well as requiring peer-to-peer counseling programs in all middle and high schools.

House Bill 938 would require charter, regional, and laboratory schools to develop a school risk management plan, hold school safety exercises, and provide school safety information to local law enforcement. These provisions are currently only applicable to traditional public schools. The bill also requires peer-to-peer counseling programs in all middle and high schools, defines “school resource officer” (SRO), establishes SRO training requirements, requires an annual report on SROs by each local school board, and requires an annual facility vulnerability assessment for each public school building.

House Bill 933 was aimed at making it easier for school districts to hire out of state school psychologists to help fill the more than 75 vacancies across the state. The bill required the State Board of Education to issue a school psychologist license to any individual who holds the Nationally Certified School Psychologist credential issued by the National Association of School
Psychologists, thus allowing the school psychologist to be licensed in North Carolina without any further testing or coursework.

Transportation Bond to Provide Increased Funding, Expedite Projects
Senate Bill 758 Build NC Bond Act of 2018 authorizes the state to issue up to $3 billion in “special indebtedness” to fund transportation projects statewide over the next 10 years, furthering counties’ goal to increase transportation construction funding. This type of debt would rely solely on the Highway Trust Fund to repay the debt and, unlike general obligation bonds, would not require a public vote. The Department of Transportation described the bond as a tool to expedite projects already in the Strategic
Transportation Investments pipeline, especially those in rural areas. It would not change the priority order of the projects. Senate Bill 758 passed both chambers with very strong bipartisan support.

Authority for School Boards to Sue Counties Over School Operations Funding Repealed
Repealing the statutory authority that allows a local school board to file suit against a county board of commissioners over county appropriations for education has been one of NCACC’s top legislative priorities in recent years. This year the General Assembly approved legislation altering the method by which education funding disputes between boards of county commissioners and local boards of education are handled.

House Bill 1031 provides for a default funding mechanism for county operations expenses once a funding dispute is initiated and a joint meeting and formal mediation between the county and school board have been unsuccessful in resolving the dispute. Under the default funding mechanism, local appropriations for current expense made by the county would follow this course:
• For the first disputed budget year, appropriations would be the previous year’s expenditures for operating expenses adjusted by changes in the projected average daily membership in the school district and changes in an employment cost index of salaries and wages for school personnel.
• An unresolved dispute during the second consecutive budget year would result in the same default funding mechanism described for the first disputed budget year.
• If a funding dispute cannot be resolved during a third consecutive budget year, the default funding mechanism adds an additional three percent growth rate to the mechanism used during the previous two years.

Early versions of the legislation included capital outlay appropriations in the funding formula. NCACC discussed counties’ continued concerns regarding how capital funding was treated under the legislation with bill sponsor Rep. Craig Horn, and all stakeholders agreed to remove capital from the funding formula. Although the removal of capital from the funding formula means
the dispute resolution process for school board and county disputes over capital remains unchanged, the legislation directs a working group to study a formula or other means to resolve disputes related to capital outlay as alternatives to litigation.

The Local Government Commission and the UNC School of Government will convene the working group which will include representatives of the NCACC, the NC School Boards Association, and the NC Association of School Business Officers. It will report its findings, recommendations, and any proposed legislation to the Joint Legislative Education Oversight Committee by March 30, 2019.

The NCACC thanks Sen. Tommy Tucker, sponsor of the original bill last year, and Rep. Horn for their persistence on this priority issue for counties.

Omnibus Regulatory Reform Bill Passes with Some Positives for Counties 

The annual omnibus regulatory reform bill became law late in session after the legislature overrode Governor Roy Cooper’s veto. House Bill 374, the Regulatory Reform Act of 2018, makes a number of changes to the state’s business, environment, and local government regulatory laws. Of note to county health departments, the law expands the engineered option for septic systems as well as a previous grandfather provision for septic systems that were permitted but not installed between 2000 and 2015, adding that site developments performed to meet local health permit requirements are not substantive changes to the property that would require additional permitting.

In a positive move for counties, the law expands exemptions to last year’s solid waste flow control laws with which the NCACC had concerns throughout the long session and the subsequent reconvened sessions. The law further clarifies a local government’s authority over landfills following the expiration of a life-of-site permit. House Bill 374 also repeals a provision from an earlier bill that had already become law and required schools to reimburse cities for certain road construction projects at a significant cost to counties. In one session, this policy changed three times ultimately ending up positively for counties with the final provision enacted in H374.

Final Building Inspections Regulatory Bill Addresses County Concerns
House Bill 948, Building Code Regulatory Reform, originally allowed engineers to design parts of a residential home and inspect the installation or construction of the design without allowing the county to inspect either. The NCACC expressed concern with unintended consequences from this change, and the final version allows for engineer inspections of certain individual parts of a residential construction, but not entire systems of a building, and puts additional liability protections in the law for counties.

The law also sets up a process to help with inspection backlogs through a recently-created pool of inspectors in the Department of Insurance. Under the law, a county can request an inspector from the pool to help with the county department’s workload. A builder can also request an inspector from the pool if the county fails to inspect the building within two days of the inspection request. At NCACC’s request, the final version of the legislation includes exceptions, notice requirements, and information sharing for builder-requested pool inspectors. The law also directs a number of reports on inspection fees and activities.

General Assembly Grants New Ability for Cities to Use Property Tax Revenue to Fund Public Schools
Signaling a major shift in public policy concerning public school funding, the 2018 budget contains a provision granting cities a new power to levy and use their property tax revenue to supplement education funding. The provision allows charter schools, UNC laboratory schools, innovative schools, regional schools, and traditional schools under the control of the local board
of education to request appropriations directly from a city. Cities and towns could earmark any funds allocated for specific uses or specific schools.

Closely related to this budget provision is precedent-setting legislation granting four towns the ability to open charter schools. House Bill 514 authorizes the Mecklenburg County towns of Matthews, Mint Hill, Huntersville, and Cornelius to apply to open charter schools and grant priority enrollment to residents of those towns.

Legislature Considers Ways to Address Mental Health and Substance Abuse Issues
Multiple items affecting behavioral health policy moved throughout the session, including some budget provisions and a major change to the state’s involuntary commitment laws designed to improve outcomes for patients as well as processes for local governments and local law enforcement agencies. The largest change to state behavioral health policy came in the latest
Medicaid reform legislation that sets out policy for LME/MCOs under the state’s transformation of all Medicaid to a hybrid managed care model.

• Medicaid Transformation
  As the NC Department of Health and Human Services works to meet state and federal requirements to transform all Medicaid services into a managed care model, the legislature debated bills to define regulations for the private prepaid health plan insurers competing under managed care (House Bill 156) and roles for private insurers versus current behavioral health LME/MCOs (House Bill 403). Of most interest to counties, House Bill 403 will preserve the current Medicaid model for behavioral health coverage for four years beginning one year after physical health managed care contracts begin. Under this plan, LME/MCOs would manage physical and behavioral health coverage for a specific, higher risk population under specialized “tailored plans.” Following the expiration of contracts with LME/MCOs after four years, the populations under tailored plans could roll into other prepaid health plans, or LME/MCOs could bid and continue managing them. During debate on House Bill 403, bill sponsors stressed the importance of maintaining the system of public managed care for mental health in North Carolina. The NCACC has been working closely with NCDHHS leadership to ensure the county
  voice is heard as the state transitions to a managed coverage model for behavioral and physical health care.
• Behavioral Health Adjustments in the Budget
  In continuing efforts on a long-term goal for counties, the budget expands last year’s study of Medicaid coverage for county ambulance transports to alternative care locations. The study will now include whether this coverage should be part of
  Medicaid transformation contracts. This is a significant step toward helping county EMTs get reimbursement to cost-saving alternative care locations instead of the emergency room. The budget also continues cuts to the single-stream funding from the state to LME/MCOs. This funding is reduced by an additional $438,041 recurring and approximately $16.6 million non-recurring. The total reductions in year two are now approximately $36.4 million recurring and $71.2 million non-recurring. Additional budget resources for behavioral health were targeted at school safety initiatives.
• Involuntary Commitment Legislation
  Legislation designed to improve involuntary commitment (IVC) processes passed this year after significant debate over the biennium. In addition to other changes to examination, commitment and discharge process on the medical side of the issue,
  Senate Bill 630 addresses the role of LME/MCOs and local governments on the community side of the stakeholders, a community crisis services plan to facilitate screening, training and transportation. Effective October 1, 2019, the enacted version of Senate Bill 630 requires counties to develop plans for involuntary commitment transportation in coordination with hospitals, law enforcement agencies, and area behavioral health authorities.
• Opioid Epidemic Legislation
  Building on legislation passed last year to address the opioid crisis, the General Assembly passed the Heroin & Opioid Prevention & Enforcement (HOPE) Act to further address prescription opioid abuse. The HOPE Act, Senate Bill 616, increases criminal penalties for misuse of prescribed opioids and puts additional opioid chemicals on the list of controlled substances to help limit trafficking and abuse. The law also allows trained and certified law enforcement called “certified diversion investigators” to obtain prescription records and Controlled Substances Reporting System (CSRS) records in conjunction with investigations into drug abuse. The HOPE Act states it is the intent of the General Assembly to appropriate more than $11 million next year for community treatment, opioid antagonists, prescription drop programs, and an SBI agent to help with drug investigations.

Election Laws Change Equipment, Security, and Early Voting Requirements
The General Assembly enacted a number of changes to elections laws that will impact counties. Senate Bill 486 includes an extension on the decertification of certain voting equipment to December 1, 2019. The legislation would extend the deadline for counties to comply with voting equipment requirements established in 2017, before the current State Board of Elections and Ethics Enforcement (SBEEE) was appointed.

The law also includes provisions for elections security as recommended by the SBEEE. One provision would require criminal background checks for all state board employees as well as certain county board of elections employees with access to SBEEE records and the ability to modify them. The Department of Public Safety will conduct the background checks and may charge a fee to offset its costs. The legislation was vetoed by the Governor but ultimately passed and is effective August 1, 2018.

Two bills will affect early voting schedules. Senate Bill 325 Uniform and Expanded Early Voting Hours Act made the following changes:
• eliminates the last Saturday of early voting
• requires all one-stop sites in a county to be open during the entire early voting period
• requires that every one-stop site in a county have uniform hours on the days they are open
• on Monday through Friday, all sites must be open from 7 A.M. to 7 P.M.
• on Saturdays and Sundays, county boards of elections are able to set hours, but they must be uniform weekend hours across all one-stop sites.

However, on the last day of session, the legislature passed House Bill 335, Restore Last Saturday Early One-Stop. For the 2018 election only the law:
• requires early one-stop voting sites to open from 8 A.M. to 1 P.M. on the last Saturday before the election
• allows counties the option to open one stop voting sites from 1 P.M. to 5 P.M. on the last Saturday before the election
• grants flexibility to county boards of elections in establishing one stop hours in counties with an inhabited barrier island that is only accessible by boat.

Farm Act Changes Nuisance Lawsuit and Equipment Valuation Laws
This year’s Farm Act, Senate Bill 711, passed this session despite a veto from the Governor. One section would change laws regarding farm nuisances. The law removes a provision that would allow a farm to be classified as a nuisance because of negligent or improper operations and states that a farm could not legally be considered a nuisance unless the party filing the lawsuit shows that the farm is not using generally accepted and routinely utilized practices.

Additionally, the Farm Act would require counties to include a notice in land records that a tract of land is located within one-half mile of a poultry, swine or dairy farm or within a voluntary agriculture district or within 600 feet of any other type of qualifying farm. Counties with computerized land records are already authorized to do so; the provision would require it of all counties. This provision would only apply to counties with Voluntary Agricultural Districts.

The law also addresses an issue that surfaced earlier this year related to the valuation of certain farm equipment. The Agriculture and Forestry Awareness Study Commission studied valuation of aging farm equipment, impact of property tax exemption for such equipment, and options for consistency in valuation. Effective July 1, 2019, the law permits counties to use any appraisal
methods previously allowed in statute but also requires the Department of Revenue to publish a depreciation schedule on its website. If counties use the cost approach method in valuing farm equipment, they must adhere to the DOR schedule’s values. The law also directs the commission to study whether to require holders of unused rights-of-way and utility easements to offer
those easements to property owners at fair market value, and also whether to exclude property enrolled in PUV taxation from rural fire protection district and county service district taxes.

Bill Establishing a Work Group to Study Criminal Code Includes Requirements for Counties
House Bill 379, Recodification Working Group, is based on a recommendation from the Joint Legislative Administrative Procedure Oversight Committee and the Joint Legislative Oversight Committee on Justice and Public Safety. The legislation is part of a long-term project to reorganize North Carolina’s Criminal Code and would, among other things, require local governments to create a list of ordinances that are subject to criminal punishment pursuant to G.S. 14-4(a) and submit the list by December 1, 2018.