 |
|
MAY
14, 2004 |
ISSUE
No. 2
|
2004
SHORT SESSION
|
Published
every Friday during legislative sessions exclusively
for NCCBI members
|
 Tax
talk dominates
Legislative Conference
The General Assembly won’t raise any taxes this year
but it isn’t likely to cut many, either, legislative leaders
told about 300 business leaders at NCCBI’s annual
Legislative Conference on May 12. However, it was apparent
from the legislators’ remarks that there is support for Gov.
Mike Easley’s proposal to give small businesses a break on
corporate income taxes.
”We’re not going to be raising taxes this year,” House
Democratic Speaker Jim Black said flatly. Republican House
Speaker Richard Morgan repeated that assertion: “No tax
increases.” That
threw cold water on calls by Senate President Pro Tem Marc
Basnight’s for a sharp increase in cigarette taxes.
Black and others sought to dampen the enthusiastic response to
news that, for the first time in four years, the state will
end its year in the black. “The worst thing that has
happened to us is those newspaper headlines saying the state
has this huge surplus. I would say there has been about $2
billion in spending requests for various good causes and
we’re supposed to pay for all that out of this $190 million
surplus.”
There just isn’t enough revenue to meet the financial needs
of a growing state and enact a one percent cut in the
state’s corporate income tax rate, a chorus of conference
speakers said. Reducing the state’s 6.9 percent corporate
income tax rate, the third highest in the Southeast, is a
major objective of NCCBI.
“We have about $600 to $700 million in real needs
that go beyond the supposed $190 million surplus” the state
expects to realize at yearend, Black said.
David Crotts, senior analyst in the General Assembly’s
Fiscal Research Division, said it may require as much as $800
million in additional state spending next fiscal year to pay
for the basic needs of a growing state, mostly in education
and Medicaid.
The governor’s proposed budget for the fiscal year beginning
July 1, which he submitted to the General Assembly on the
opening day of its short session, provided the backdrop to
many of the comments at the conference. Most speakers said
they would give serious consideration to Easley’s proposal
to exempt the first $20,000 of a corporation's income tax by
2005, which theoretically would save small businesses about
$33 million in revenue. However, only S corporations could
take advantage of the tax break, not C corporations and LLCs.
Easley's $15.86 billion budget plan calls for giving state
employees a 2 percent pay hike, plus a $250 bonus. Teachers
would receive an average raise of 2.5 percent. Easley also
would increase money for industrial recruitment and
biotechnology development, and spend $50 million to reduce
class size in the third grade. About $104 million would go to
pay for enrollment increases in the public schools,
universities and community colleges.
Some speakers complained that the governor would pay those
recurring expenses mostly by using money the state isn’t
sure it will realize in the future. Sen. David Hoyle
(D-Gastonia), co-chair of the Senate Finance Committee, said,
“There is almost $1 billion of non-recurring revenue
earmarked for continuing needs” in Easley’s budget. That
point was echoed by Senate Appropriations Committee Co-Chair
Linda Garrou (D-Guilford).
A surprising degree of agreement was heard about the move to
require local schools to open closer to Labor Day, a change
sought by travel and tourism interests. “It would be a huge
help for our economy if we had that two to three weeks” of
additional summer vacation, Black said. "I believe you
have to do that because there are administrators in this state
who will start school the day after Memorial Day if you let
them," Basnight said. He said he believes the 220-day
work schedule for teachers is too long and could be reduced by
trimming the number of teacher workdays, currently at 20. A
bill recommended by a legislative committee would mandate that
local school systems may not begin classes before Aug. 25 and
must end by June 10.
The Senate’s new Republican leader, Sen. Jim Forrester of
Stanley, made his debut speech at the NCCBI conference, having
been elected to the post two days before. The seven-term
Senate veteran, a family physician, made many of the same
political points but gave less-strident remarks than were
heard in the past from Forrester’s predecessor, Patrick
Ballantine. “The change in our caucus leadership does not
mean there’s any change in our basic philosophy,”
Forrester said.
Other comments from speakers at the conference:
 Rep. Jim
Crawford (D-Granville), co-chair of the House Appropriations
Committee: “The governor made some cuts in his budget, and
we’re going to have to make some more.” He said the House
hopes to have a budget bill on the floor by May 31.
Watts
Carr, chair of NCCBI’s Economic Development Committee and a
member of the state Economic development Board: “I think our
input (on strengthening the state’s economic development
policies) is falling on receptive ears in the General
Assembly. I think we will see numerous enhancements in our
business climate.”
Martin Lancaster, president of the state community colleges:
The governor’s proposed funding increases for community
colleges “is the best starting point for the community
colleges in several years.”
Bill
Pully, president of the N.C. Hospital Association: “The
governor’s budget proposes to reduce hospital (Medicaid and
Medicare) payments by $40 million a year. We simply can’t
afford to absorb that. We’ll have to pass it along to our
paying customers. This cost shift is a hidden business tax.”
Governor
gets budget ball rolling with $15.9 billion plan
Governor
Mike Easley’s recommended General Fund budget for the fiscal
year that begins July is $15,861.2 million, which represents a
5.5 percent increase over 2003-04 (excluding federal operating
and capital funds). Easley’s plan includes nearly $350 million in
spending cuts, increases the state’s reserves by over $100
million and stays within the spending cap he proposed last
year. See highlights of the governor’s budget above and
on page 10.
''This
budget maintains the fiscal discipline of the past three years
while making critical investments in education and providing
resources to stimulate the economy and create jobs,'' said
Easley. ''Our economic development strategy in North Carolina
is simple. We are building the highest skilled workforce while
at the same time providing the lowest possible cost of doing
business. This strategy has earned us a number one ranked
business climate for three years in a row, and this budget
will help ensure that we remain the most competitive state in
the country and the world.'' Here are highlights of the budget proposal, which
Easley presented Tuesday during a joint meeting of the House
and Senate appropriations committees:
Economic development: The governor proposes an
emergency appropriation to the One North Carolina Fund of $20
million and $4.1 million to the to the New and Expanding
Industry Program in the Commerce Department. Those key
economic development programs currently are out of money. The
plan also provides over $45 million in tax relief to encourage
job creation and investment including an exemption from
taxation of the first $20,000 of corporate income by tax year
2005. This exemption will reduce revenues by $32.9 million in
2004-05 and will eliminate the entire corporate income tax
liability for a majority of corporations that currently pay
the tax.
The
governor's plan will reforms R & D tax credit to allow all
companies that perform R & D to take advantage of the
credit and to target the benefit to North Carolina activity,
especially for small companies, companies in rural areas, or
companies cooperating with North Carolina universities. The
governor's plan also increases the cap on qualified business
venture tax credits from $6 to $9 million in the 2004 tax
year. In addition, Easley recommends conforming to federal tax
changes to benefit military families and small businesses that
are creating health savings accounts.
The
governor's budget appropriates an additional $1.6 million for
the Small Business Technology Development Centers (SBTDCs) to
provide technical support and develop accelerator capacity.
North Carolina State University's Manufacturing Extension
Partnership, which has been devastated by federal budget cuts,
will receive support for engineers to serve small and
mid-sized manufacturers across the state. Community college
worker training programs will receive $5.6 million in
increased funding. The Biotechnology Center will receive an
additional $5 million to support operations across the state,
invest in start-up companies, and carry out other
recommendations of the recent biotechnology report.
Education: The governor's
budget adjustments include $19.4 million for funding for
public school enrollment growth, $64.7 million for UNC System
enrollment growth, $20 million for enrollment growth at
community colleges and $2.6 million for growth at private
colleges and universities.
He earmarks $50.5 million to hire additional teachers
to reduce class size in the third grade from one teacher per
22 students to one teacher per 18 pupils, and $9.1 million to
support an additional 2,000 slots for at-risk four-year-old
children in the More at Four Program.
The budget also provides $62.2 million in funds for the
annual step increase for public school teachers, plus an
additional 0.5 percent, and $108 million for ABC bonuses
earned in the 2003-04 school year.
Health and Human Services: The
budget recommends $9.1 million in additional funding for
Health Choice ($9.1 million), which will allow all eligible
children to receive health care insurance. In addition, $12
million in expansion funds are recommended for child care
subsidies that will prevent termination of services for
children currently receiving service, $5 million in additional
money for the Mental Health Trust Fund to facilitate the
progress toward mental health reform, and $4.2 million for the
HIV AIDS Drug Assistance Program to reduce the backlog of
individuals qualifying for assistance. The budget contains $5
million to hire an additional 100 public school nurses and
another $5 million to assist counties in finding permanent
homes for children.
Courts and Public Safety: Easley’s budget provides
$5.8 million to hire additional deputy clerk positions due to
increased court system workload, to pay for court-ordered
interpreter services, and to replace outdated trial court
equipment. It contains $13 million to reduce the backlog of
payments for private lawyers who represent indigent criminal
defendants
Capital Improvements: The budget includes $22.9
million to match federal and local funds for water resources
development projects, $15 million to support the development
of the North Carolina Motor Sports Testing and Research
Complex, $4.7 million to construct electronic intrusion
systems at several prison facilities, $2.0 million to replace
the crane rail system at the Port of Wilmington, $3.5 million
to match federal funds related to clean water projects, $1.0
million to replace the Caldwell County armory, and $0.3
million to expand the cemetery for veterans in Jacksonville.
Rainy Day Fund: The governor's budget earmarks $105
million from General Fund availability in
2004-05 to the Savings Reserve Account, bringing the total to
$255 million.
State Employees: The governor's budget provides over
$235 million in 2004-05 to support employee benefit programs.
It authorizes a 2.0 percent recurring pay increase, as well as
an additional $250 one-time compensation bonus, for state
employees not included on the teacher salary schedule. Easley
also recommends an additional 2.0 percent recurring increase
for Community College System faculty and professional staff.
The budget also provides $15 million to repay funds withheld
from the Retirement System in 2000-01 due to the budget
crisis. Finally, the governor's budget recommends a 2.0
percent cost-of-living adjustment for state government
retirees.
Bills of
interest filed this week
H
1384 State Employees/Teachers Pay Increases
(Hackney and 40 others). Appropriates funds to provide for 5
percent pay raises for all state employees from the governor
on down and established a “minimum living wage for
state-funded employees of $18,500 a year. Referred to
Rules.
H 1387 Expand the
Teaching Fellows Program (Glazier). Appropriates $205,000
to the State Board of Education to fund 25 additional such
scholarships. Referred to Rules.
H
1388 Appropriate Funds for ABC Bonuses
(Glazier). Appropriates $145 million to fund bonuses for
teaches whose schools exceed projected levels of student
academic achievement in the 2004-04 school year. Referred
to Rules.
H
1400 One NC
Fund Appropriations/Codification
(Daughtridge). Appropriates $10 million to the One North
Carolina Fund and codifies provisions relating to the fund. Referred
to Rules.
H
1404 Community College Faculty/Professional Staff Salaries
(Tolson). Proposes a plan for moving faculty and professional
staff salaries in the North Carolina Community College system
to the national average. Referred to Rules.
H
1413 Tax Credit for Long-Term Care Insurance
(Nye). Repeals the 2004 sunset on the long-term care insurance
tax credit. Referred to Rules. =S 1068
(Purcell).
H
1415 Alternative R&D Tax Credit
(Daughtridge). Generally broadens application of the tax
credit for companies that work through North Carolina
companies and universities. Referred to Rules.
H
1416 Extend and Expand J-DIG (Daughtridge) Extends the
sunset on the Jobs Development and Investment Grant Act to
2009, increases the maximum number of grants available in any
one year from 15 to 25 and increases the maximum total amount
of grants in one year from $10 million to $18 million. Referred
to Rules. = S 1062 (Hartsell).
H
1417 Modify Bill Lee Tiers (Daughtridge). Changes from
three months to one year the prior period on which will be
based a country’s average unemployment rates, average per
capita income and population growth. Referred to Rules. = S
1061 (Hartsell).
H
1418 Eliminate IRB Wage Standard
(Daughtridge). Eliminates the requirement that users of
industrial revenue bonds meet minimum employee wage standards.
Referred to Rules. =S 1063 (Hartsell).
H
1432 Film Industry Development Account
(Daughtridge) Appropriates $5 million to the Department of
Commerce’s Division of Tourism, Film, and Sports Development
to provide annual grants as incentives to production companies
that engage in production activities in the state, and
requires local government matching of such grants. Referred
to Rules.
H
1436 Small Business Health Insurance Credit
(Goodwin). Provides a tax credit worth $700 for small
businesses and pay at least half of the cost of employee
health insurance premiums. Referred to Rules. = S
1059 (Rand).
H
1442 Reduce Corporate Income Taxes
(LaRoque). Addresses corporate income tax reductions for small
businesses.
H
1444 JDIG - Encourage Use of NC Small Businesses
(LaRoque). As title indicates, requires Job Development
Investment Grant program agreements to contain a provision
encouraging the use of small businesses headquartered in NC.
H
1445 Corporate Income Tax Exemption
(Daughtridge). Exempt small businesses from the first $10,000
in income from corporate income taxes.
H
1446 Economic Infrastructure Program at Rural Center (Daughtridge).
Appropriates $15 million to the N.C. Rural Center to create an
N.C. Economic Infrastructure Program.
H
1464 School Calendar Changes (Wilson, C.)
Provides that public schools shall not open before Aug. 25 and
close not after June 10 and reduces teacher workdays from 8 to
5.
S
1053 Cardiovascular Diseases Institute (Moore).
Appropriates $60 million to the Board of Governors of the UNC
System to construct the NC Cardiovascular Diseases Institute
at East Carolina University. Referred to Appropriations
Base Budget.
S 1054
Increase Methamphetamine Penalties (Dalton). Provides that
the unlawful distribution of methamphetamine is second-degree
murder, and makes it an aggravating factor to manufacture
methamphetamine in a location that endangers a child. Referred
to Judiciary II.
S 1056
Monetary Compensation - Outdoor Advertising (Dalton).
Requires local governments to pay monetary compensation for
removal of lawfully erected off-premises outdoor advertising
signs and to authorize local governments to enter into
relocation and reconstruction agreements with owners of
nonconforming off-premises outdoors advertising signs.
S 1060 Town
of Franklin Occupancy Tax (Carpenter). Authorizes the town
of Franklin to levy a 3 percent room occupancy and tourism
development tax.
S 1064
Finance Parks and Heritage (Kerr). Authorizes the issuance
of special indebtedness for capital improvements and land
acquisition for parks, recreation and the preservation of
natural heritage.
S
1074 Low-Wealth School Supplemental Funding (Rand)
Appropriates $77.8 million for the 2004-05 school year in
supplemental funding for low wealth school systems.
S
1099 Reduce Personal Income Taxes (Hoyle) Relating to an
act to reduce personal income taxes.
S
1100 Express Review Program
(Hoyle) Relating to an act to make permanent the Express
Review Program.
S
1101 Reduce Corporate Income Taxes
(Hoyle) Relating to an act to reduce corporate income taxes.
S
1102 J-DIG – Encourage Use of Small NC Businesses
(Hoyle) Relating to an act requiring job development
investment grant (JDIG) program agreements to contain a
provision encouraging the use of small businesses
headquartered in NC.
State Government News
Statistics
paint conflicting pictures of air quality
 The
EPA’s recent determination that ozone levels are
unacceptably high in North Carolina’s three metro areas –
and in some rural counties as well – again raises the
question of whether it’s OK to breathe the Tar Heel air. Who
wouldn’t heave a confused sigh after reading, in the space
of one week, that the American Lung Association had rated
Charlotte, the Triangle and the Triad as among the 25
smoggiest places in America even as the state was receiving a
federal Clean Air Excellence Award for reducing emissions from
coal-fired power plants.
The
EPA itself seems to be adding to the confusion. Its press
release announcing that ozone levels in 26 counties in North
Carolina and parts of six others now violate the Clean Air Act
came with extensive background materials. One was a briefing
paper revealing that Charlotte had only four days of unhealthy
air in 2003 compared to 39 in 1980, a 90 percent improvement,
and that the Triad had only two days of unhealthy air in 2003
compared to 14 in 1980, an 86 percent improvement.
Amid these conflicting signals, the fact remains that large
companies building or expanding in the counties now deemed to
violate ozone rules (see
chart above) may be required to install state-of-the-art
emission control equipment to comply with stricter controls
being formulated by state and local authorities. While EPA officials insist that none of the regions that violate the
new ozone rules will be required to curb business growth or
lose federal highway funds, state and local officials
say the bad-air label is a perceptual black eye that will make
it more difficult to keep existing businesses and attract new
ones.
The
perplexing gulf between the differing assessments of our air
quality can only be explained in light of British statesman
Benjamin Disraeli’s observation that there are three kinds
of lies: lies, damned lies and statistics. When it comes to
assessing air quality, it seems, everyone cites their own
statistics. The important thing is to pay attention to what,
when and especially how the numbers were crunched.
What’s being measured influences the result: Charlotte --
despite its 90 percent fewer bad air days than a generation
ago -- does violates the Clean Air Act today because the feds
have dramatically tightened their standards. Air quality is
determined by monitoring stations positioned around the state
that “sniff” the air to measure ozone, the principal cause
of smog, and other pollutants. Until recently, the standard
for ozone was less than 0.12 parts per million detected during
a one-hour-long “sniff” of the air. Beginning this year,
the monitoring stations began sniffing the air for eight-hour
stretches at a time and set off alarm bells if they record as
little as 0.08 parts per million of ozone during that time.
When statistics are taken can be important. In concluding that
more than half of all North Carolinians breathe dirty air, the
American Long Association relied on statistics from the summer
of 2002 when the state was suffering through an historic
drought. The drought produced stale, stagnant air masses that
trapped high ozone levels over the state for weeks at a time.
The drought of 2002 was followed by the unusually wet summer
of 2003. Frequent rains tend to wash ozone out of the air,
which explains why the EPA recorded only four bad-air days in
Charlotte that year and two in the Triad.
How the data is compiled can be confusing. Is the air dirtier
in North Carolina than in other states, or do we just more
aggressive in looking for it? The state Department of
Environment and Natural Resources maintains 128 air quality
monitoring station in more than 30 counties, far more than
most other states. Most are in urban areas but some are
located in surprisingly out-of-the-way locates, such as the
one in Leggett, a town of 75 residents between Rocky Mount and
Tarboro. Because the Leggett station recorded one instance of
high ozone last year, Edgecombe and Nash counties now must
comply with EPA’s new ozone rules even though the ozone
recorded by the Leggett station probably blew in from Raleigh.
Then there’s the curious case of the air monitoring station
on South Salisbury Street in Lexington, which for the past
three years has been recording unusually high levels of fine
airborne pollutants. It was data from this one station that
caused Davidson County to be listed among the counties with
bad air. Local officials retained Raleigh environmental law
specialist Alan McConnell to fight the designation, and he
reached a novel conclusion: The station’s “nose” was
being confused by the aroma wafting from the town’s 23
barbecue restaurants.
NCCBI News
Please
welcome these new members
Companies that joined or rejoined
NCCBI during March and April, along with the name of the key
executive at each company include: ADA
Computer Supplies, Jerry Fox, Greensboro; Bryan
Pontiac Cadillac Honda, David
C. Bryan, Fayetteville; Capitol
Advantage Associates Inc., Theresa Kostrzewa, Raleigh; Capitol Communications Inc., Paul A. Shumaker Jr., Granite Falls; Carolina Legal Staffing LLC, John Lassiter, Charlotte; Carter
Worthy Commercial, M. Carter Worthy, Raleigh; Charlotte Bobcats, Chris
Weiller, Charlotte; Charlotte
Mecklenburg Board of Education, Dr. James L. Pughsley,
Charlotte; Chatham
County United Chamber of Commerce, Jane J. Wrenn, Siler
City; Docusource of
North Carolina LLC, Adele
C. Fine, Morrisville; First
American Hotels Inc., Sanjay
Mundra, Cary; First
Horizon Corporate Financial Services, John
Fox, Winston-Salem; Fleishman
Hillard Inc., Britton
W. Carter, Durham; Full
Circle Solutions Inc., Robert
Waldrop, Woodstock, GA; Hayes,
Seay, Mattern & Mattern Inc., Ladson
Brearley, Charlotte; Heath
Investment Group Inc., Duffy
Heath, Raleigh; Hinrichs Flanagan Financial, Timothy C. Flanagan Jr., Charlotte; Jackson County Economic Development Commission, Thomas
McClure, Sylva; Keith E. Green & Associates, Keith Greene, Greensboro; Kennedy
Office Supply, Mary Catherine K. Sigmon, Raleigh; McGee Brothers Co. Inc., Sam McGee, Monroe; N.C.
Motorcoach Association, Linda
Morris, Randleman; NC
Association of School Administrators, Dr. James F. Causby,
Raleigh; Newcomb and Company, Robert
Newcomb, Raleigh; Office
of Gerald Quinn, Gerald H. Quinn, Warsaw; Olmsted
Village Co., Marty
McKenzie, Pinehurst; Paladin
and Associates, Bill Warner, Wake Forest; Parkway
Services, Edward
Evans, Greensboro; Pro
Sports Security Consultants Inc., Brian
Yarborough, Colfax; Project
Resources, Randall
Bell, Charlotte; Redding and Associates Advertising, Don Redding, High Point; Reidsville
Chamber of Commerce, James
G. Eastridge, Reidsville; Run
For Your Life, Tim
Rhodes, Charlotte; Shumaker,
Loop & Kendrick, LLP, Steven
Meckler, Charlotte; Springboard
Telecom LLC, Rich
Brashear, Charlotte; Targacept
Inc., Alan Musso,
Winston-Salem; The
Tapestry Group, Sharon A. Decker, Rutherfordton; The
VTA Group, Rob
Gerlach, Wilmington; URS
Corp., Randall Taylor, Morrisville; and Wells, Jenkins, Lucas & Jenkins, R. Michael Wells, Winston-Salem.
Mark Your Calendar
Eveland
sets schedule for 20 membership meetings
NCCBI Chair Barry Eveland will lead the staff on a tour of 20
cities across the state starting Sept. 1 during the
association’s annual fall area meetings. About 1,500 members
usually attend the events. Eveland asks each member to mark
their calendars for the date of the meeting in their town and
to make plans to attend. Registration forms will be mailed to
members in a few weeks.
| Schedule
of Fall Area Meetings |
|
Wednesday, Sept. 1
|
Wilson/Rocky
Mount
|
Luncheon at Benvenue Country Club
|
|
Thursday, Sept. 2
|
Fayetteville
|
Luncheon at Holiday Inn –
Bordeaux
|
|
Thursday, Sept. 2
|
S. Pines/Pinehurst
|
Reception at Pine Needles
|
|
Thursday, Sept.
9
|
Triangle
|
Luncheon at the Angus Barn
|
|
Thursday, Sept. 9
|
Goldsboro
|
Reception at Walnut Creek Country
Club
|
|
Monday, Sept. 20
|
Asheville
|
Reception at UNC-Asheville Reuter
Center
|
|
Tuesday, Sept. 21
|
Boone
|
Luncheon at Broyhill Conference
Center
|
|
Tuesday,
Sept. 21
|
Shelby/Gastonia
|
Reception
at Cleveland Country Club
|
|
Wednesday, Sept. 22
|
Hickory
|
Luncheon
at Holiday Inn - Select
|
|
Wednesday, Sept. 22
|
Charlotte
|
Reception at Bank of America
Stadium
|
|
Friday, Oct. 15
|
Elon
|
Luncheon at Moseley Center,
McKinnon Hall
|
|
Wednesday, Oct. 20
|
Elizabeth City
|
Luncheon at Pine Lakes Country
Club
|
|
Wednesday, Oct. 20
|
Greenville
|
Reception at Greenville Hilton
|
|
Thursday, Oct. 21
|
New Bern
|
Luncheon at New Bern Convention
Center
|
|
Thursday, Oct. 21
|
Wrightsville Beach
|
Reception at Blockade Runner
|
|
Tuesday, Oct. 26
|
High Point
|
Breakfast at String &
Splinter Club
|
|
Tuesday, Oct. 26
|
Greensboro
|
Luncheon at Grandover Resort
|
|
Tuesday, Oct. 26
|
Winston-Salem
|
Reception at Womble Carlyle
Piedmont Room
|
|
Wednesday, Oct. 27
|
Statesville
|
Luncheon at Statesville Civic
Center
|
|
Wednesday, Oct. 27
|
Salisbury
|
Reception at Salisbury Country
Club.
|
|
Breakfasts begin at 7:30 a.m., luncheons at 11:45
a.m. and receptions at 5:30 p.m.
|
Highlights
of Governor Easley’s proposed budget
|
