Budget impasse coming down to the wire
 
With the start of the new fiscal year just two weeks away, Senate budget conferees trotted out a compromise spending plan that balances the budget on the backs of smokers and drinkers. It would hike the tax on a pack of cigarettes by 25 cents – 50 cents on the off-brands. It raises the tax on a liter of wine 13 cents, 60 cents on a $10 bottle of liquor, and 30 cents on a six pack of beer.

Smokers and drinkers would have to pay about $330 million more in taxes next year, which -- matched with $510 million in money from Washington -- would be enough to offset declining tax revenue overall and balance the budget.

Floated Wednesday, the Senate offer avoids further cuts to health care, education, economic development and the environment. With the Senate’s offer on the table, the chambers now are about $80 million apart in spending for the first year of the budget. The Senate offer pulls spending below the $15 billion mark, a line the House wouldn’t cross.

House leaders weren’t impressed and repeated prior assertions that there just aren’t 61 votes for any tax increase in their chamber.

If the legislature doesn’t reach a budget compromise by July 1, the revenue problem will explode by another $437 million – the amount of the taxes generated by continuing the additional half-cent sales tax and maintaining the top income tax bracket. Those taxes automatically sunset on July 1, a trigger that gets pulled if there isn’t a new budget in place to postpone the sunset.

Gov. Mike Easley complained the Senate plan is built on unrealistically high estimates of economic growth over the biennium -- 3.5 percent for the coming fiscal year and 5.5 percent for the following year. The governor said he sees weaker growth -- 3 percent in ’03-04 and 4 percent in ’04-05.

House Republican Speaker Richard Morgan said there’s really no reason to raises taxes – at least in the first year of the cycle – because the Senate budget assumes a $394 million surplus, about $60 million more than the sin tax hikes would bring in. Senate leaders responded by saying the surplus is necessary to cover an assumed shortfall in the second year of the budget.

The complete text of the Senate plan is reprinted at the end of this newsletter.

The Senate budget offer came two days after hearings at which top leaders of all levels of education in the state forcefully testified that there’s no more fat left on the education budget bone. Deeper cuts would have long-term detrimental effects, they said. Members of the anti-tax group Citizens for a Sound Economy spoke against tax hikes and a lottery.


Deficit in current-year budget swells to $170 million
Tax revenues came in about $50 million below budget in May, a poor showing that swelled the shortfall for the 11 months year to date to about $170 million. The gap is expected to widen in June, the last months of the year. Individual income taxes in May were $308 million, about $40 million less than expected. After 11 months, individual income taxes are about $147 million below budget expectation. Corporate income taxes in May were $16 million higher than budget and about $22 million above budget for 11 months. A chart below details General Fund accounts.

Through 11 months of the year, spending is down in most areas of state government compared to the comparable period a year ago. But overall spending is up $187million, mostly because of growth in education ($102 million) and health and human services ($132 million), as shown in the chart below. Data is from the state Controller’s Office.

Governor vetoes education bill over teacher licensure powers
Gov. Mike Easley on Monday vetoed S. 931 No Portfolio Required for Teacher Certification over a section of the bill that he said strips the State Board of Education of its authority to set teacher licensure requirements and gives that power to the legislature. The legislation bars the State Board of Education from requiring second-year teachers to compile a work portfolio before becoming certified. Few noticed the section of the bill dealing with teacher licensure requirements.  “I doubt that most legislators were aware that the bill stripped the standard-setting authority from the State Board,” Easley said, adding, “If this provision is removed, I would accept the bill.”  Sen. Fern Shubert (R-Union), the bill’s prime sponsor, reacted angrily to the veto and accused the governor of misleading the public. She said the provision he cited is necessary to ensure portfolios aren't revived under another name. This was only the second bill vetoed by Easley. The issue apparently became moot Wednesday when the state Board of Education, meeting in emergency session, agreed to eliminate teacher portfolios from state licensure policies. The board voted 8-0 to remove the requirement.

House panel approves tourism investment grant program
The House Finance Committee on Thursday favorably reported H. 1316 N.C. Travel And Tourism Investment Act, legislation creating a grant program that would help finance publicly owned sports arenas, convention centers and other projects designed to increase tourism. The grants would come from rebates of as much as 40 percent of the sales and business privilege taxes generated by the new facilities. The program ultimately could hand out up to $60 million annually in the form of rebates on taxes the projects are estimated to generate. Local government could apply for grants for tourism projects in which they own a minimum of 25 percent or 50 percent, depending on where the project is located. Qualifying investments for the program would be at least $500,000 in the state's poorest counties. The committee lowered the minimum for projects in the wealthiest counties from $10 million to $4 million before approving it on a voice vote with several no votes. A committee would approve no more than 15 projects and $20 million in grants in any fiscal year. The program would expire in 2006, but the grants could continue for a 10-year period.


House OKs adding two bible colleges to tuition subsidy program
The House voted 66-47 on Wednesday to extend the Legislative Tuition Grant program that subsidizes tuition for N.C. residents attending private colleges to also include two religious schools. H. 150 (Owens and Stam) Establish State Education Grants would benefit about 250 students at Roanoke Bible College in Elizabeth City and Southeastern College in Wake Forest, colleges that currently are barred from receiving state tuition grants because they are exclusively religious. Including them would cost the state an additional $450,000. The bill now goes to the Senate.

 
Legislative Actions

 The House on Tuesday gave unanimous approval to Senate amendments to H. 842 (Michaux and Stam) Help America Vote Act Compliance, the measure that brings North Carolina into compliance with new federal laws on voter registration and ballot access adopted in the wake of the 2000 presidential election. The bill now goes to Gov. Mike Easley for his signature. Principally, the measure requires the state to abolish punch-card ballots and lever voting machines by 2006 and to improve polling place access for the handicapped. By complying with the federal mandates, the state will get $37 million from Washington to replace punch card machines at 280 precincts statewide, with another $31 million coming for computer enhancements.

 The House Appropriations Committee on Monday favorably reported H. 684 Psychiatric Hospital Financing, a measure that identifies Butner, in Granville County, as the site of the state’s new $110 million psychiatric hospital. Several locations were proposed for the facility, which will replace Dorothea Dix Hospital in Raleigh and John Umstead Hospital in Butner. The bill now goes to the House floor.

 The House gave final approval Wednesday to a consumer protection bill for mobile home buyers. H. 1006 (Hunter and Barnhart) Manufactured Housing toughens standards for mobile home sales and financing records. The bill now goes to the Senate.

 The House on Monday gave third-reading approval to a measure that would allow unincorporated townships to hold referendums on mixed drink sales. S.19 (Albertson) Township ABC Elections was approved by a 67-43 vote and was sent to Gov. Mike Easley to be signed into law. Under current law, only counties or incorporated cities can hold referendums on beer, wine, liquor or mixed drink sales. The bill would allow townships to hold votes on any combination of the sales. The change would affect counties where alcohol sales are prohibited or limited in unincorporated areas. County commissioners would have to agree to hold the referendum, and at least 25 percent of a township's residents would have to sign a petition asking for the vote.

 The Senate on Monday concurred with House amendments to S. 439 (Clodfelter) Omnibus ESC Changes and the measure was enrolled. The vote was 46-1. Among other changes, the bill specifies that an unemployed individual shall not be disqualified for eligibility for unemployment compensation benefits solely on the basis that the individual is only available for part-time work.

 The House Environment and Natural Resources Committee on Tuesday favorably reported S. 593 Extend Swine Moratoria, which extends the current moratorium on large hog farms for another four years. The moratorium, first put in place in 1997, is set to expire Sept. 1. The bill now goes to the House floor.

 The House voted 116-0 on Tuesday to accept Senate amendments to H. 483 (Adams and Jones) Change Offensive Place-Names, the bill that sets up a process for changing several geographic place names across the state that include racial slurs or are otherwise considered offensive. The bill now goes to Gov. Mike Easley for his signature. The bill originally identified seven mountains or bodies of water in Currituck, Clay, Madison, Union, Jackson and Haywood counties that included a racial slur. Under the legislation, leaders in the counties with names containing that same slur would be given 90 days to suggest a replacement name to a state geographic council seeking the changes.

 The Senate gave second- and third-reading approval Tuesday to H. 824 (Allred) Department of Transportation Bridge Encroachments, a measure that would allow private bridges to be built across public roadways, and returned the bill to the House for concurrence in amendments. The bill was requested by Twin Lakes Retirement Center in Elon so it could build a pedestrian and two-lane bridge across a proposed bypass. But the legislation would allow such bridges at any location if they are deemed by the DOT to be necessary, appropriate and do not obstruct the public use of the highway.

 The Senate on Tuesday gave second- and third-reading approval to H. 1221 (Decker) Return Overpayments of State Funds and returned the bill to the House for concurrence in amendments. Obviously aimed at last year’s payment of performance bonuses to some teachers who didn’t merit them under the state’s ABCs of Education law, the measure states that any overpayment to a state employee, whether in the form of salary or otherwise, shall be recouped by the entity that made the overpayment and, to the extent allowed by law, the amount of the overpayment may be offset against the net wages of the person receiving the overpayment. Further, the measure says no state department, agency, or institution, or other state-funded entity may forgive repayment of an overpayment of state funds, but shall have a duty to pursue the repayment of state funds by all lawful means available, including the filing of a civil action in the General Court of Justice.

The House on Wednesday:
 Concurred with Senate amendments to two of its bills and they were enrolled: H. 892 (Saunders and McComas) Workers Compensation/Interstate Carrier Drivers, and H. 1151 (Nesbitt, C. Wilson And Culpepper) Improve Rule-Making Process.
 Gave third-reading approval to S. 1021 (Soles) Confirm Jo Anne Sanford Utilities Commission and the bill was enrolled. Similarly, S. 622 (Reeves) Promote E-Commerce & E-Government was enrolled. S. 652 (Metcalf) Airport Financing And Leases/Dam Assessments passed and was returned to the Senate for concurrence in amendments.

The Senate on Wednesday
Concurred with House amendments and these bills were enrolled:
 S. 424 (Hartsell) Tuition Waiver Technical Correction
 S. 437 (Hoyle) Gen. Contrs. Board/Est. Temp. Rules/Bidding
 S. 549 (Hagan) Uniform Principal and Income Act
 S. 627 (Albertson) Extend CHPP Adoption Deadline
 S. 706 (Ballantine) UNC-W Athletic Facilities Exemption

Adopted a conference report on:
 S. 384 (Gulley) Durham Northern Loop Corridor.

Gave final reading approval and returned to the House for concurrence:
 H. 1135 (Preston) Education Instead of Long-Term Suspension
 H. 1171 (Dickson) Amend Hazing Laws
 H. 408 (Hackney) Amend Secret Peeping Law
 H. 786 (Culpepper) Civil Parking/Red Light Prima Facie Rule
 H. 807 (Culpepper) Elective Share Amendments
 H. 926 (Dickson) Assault in the Presence of Child
 H. 1037 (Luebke) Amend Juvenile Law
 H. 1120 (Alexander) High School Students as Pollworkers

State Government
Progress Energy unveils plans to upgrade Asheville plant
Progress Energy announced Monday that the utility’s coal-fired Asheville Plant will be the first in North Carolina to install controls to meet requirements for sulfur dioxide reduction specified in last year’s landmark Clean Smokestacks legislation. The announcement was made in Asheville at a meeting attended by Gov. Mike Easley, executives of Progress Energy Carolinas, and local government officials. Progress Energy Carolinas will invest an additional $175 million over the next six years at the Asheville Plant. By the fall of 2005, the company will install the state's first flue-gas desulfurization unit, commonly referred to as a scrubber, to remove sulfur dioxide from the emissions of unit 1. Preliminary work is already under way. The scrubber on unit 2 is scheduled to be in operation in the spring of 2007. A scrubber removes sulfur dioxide by injecting a mixture of limestone and water into the flue gas after it leaves the boiler. In addition to the two units at Asheville, Progress Energy will be installing sulfur dioxide scrubbers on nine other coal-fired units in North Carolina. Upon completion, the company will have invested more than $813 million in clean air technologies at six North Carolina coal-fired power plants in support of the sweeping state legislation. That investment is in addition to the $440 million the company has invested in other clean air improvements.

 Progress Energy Carolinas filed for an increase in the fuel rate charged to its North Carolina electricity customers. The increase is needed to meet the company's increased cost of fuel used in the generation of electricity. Progress Energy Carolinas is asking the N.C. Utilities Commission to approve a $53.6 million, or 2.2 percent, increase in overall revenues to recover a fuel cost shortfall for the period ending March 31, and to meet expected fuel costs in the near future. The increase would take effect Oct. 1. The fuel rate is a regulated, direct pass-through charge on all electric consumers for the actual cost of fuel to the utility to produce electricity to meet customer usage. The Utilities Commission reviews the fuel component of Progress Energy's rates annually. The fuel charge is separate from the company's base rates, which have not been increased in more than a decade.

State contributes $7.5 million to buy wilderness mountain tract
The Board of Transportation agreed to kick in $7.5 million toward the purchase of 4,400 acres in Macon and Swain counties along the Little Tennessee River. The state is working with The Nature Conservancy to buy the land from Crescent Resources for $19 million. The U.S. Fish and Wildlife Service has put up $2 million toward the project, the state's Natural Heritage Trust Fund has agreed to pay $1.5 million and the Clean Water Management Trust Fund has tentatively put up $6 million. The Nature Conservancy has committed to raise around $2 million in private money for the project.

Public hearing set on air quality permit for Fed Ex hub
The N.C. Division of Air Quality has scheduled a public hearing for Monday, June 23, on an air quality permit for the proposed Fed Ex air cargo facility at Piedmont Triad International Airport in Guilford County. The air permit is needed to ensure that the project would not cause local violations of the air quality standard for carbon monoxide (CO). In developing the draft permit for the facility, the DAQ analyzed computer modeling of CO emissions from aircraft, ground support vehicles, cars and trucks, and other sources. To obtain a final permit, the air modeling must demonstrate that the project would not cause CO violations. The public hearing will be held at 6:00 p.m. at the Radisson Hotel Greensboro. Citizens may be asked to register to speak and limit their remarks to three minutes or less. State officials will accept written or oral comments at the hearing. Comments should be limited to issues relevant to the permit. The DAQ has no regulatory authority over issues such as noise, the location of facilities, or the type of airport expansion. Local governments are responsible for such planning and zoning issues. In a separate matter, the DAQ previously analyzed the airport's General Conformity Analysis with regard to the air quality standard for ozone. This analysis demonstrated that the project would conform to the area's current emissions budget for ozone.


DAQ gathering data for Clean Smokestacks report
Public meetings to discuss studies of emissions and various technical issues regarding potential controls for mercury and carbon dioxide in North Carolina will be held at the state Division of Air Quality (DAQ) in Raleigh on June 16 and July 11. The N.C. General Assembly directed the DAQ and the Department of Environment and Natural Resources (DENR) to conduct the studies in provisions of the Clean Smokestacks Act passed last summer. The agencies must report annually to the legislature through 2005. The first reports will focus on current understandings of emissions and technical issues related to potential controls. The meetings will be held in the DAQ Training Room, Parker-Lincoln Building, 2728 Capital Boulevard in Raleigh. At the June 16 meeting, which will start at 1 p.m., DAQ staff will outline the scope of requirements, provide copies of draft reports, and discuss preliminary comments on the studies. The July 11 meeting, to discuss feedback on the draft reports, will be divided into a 10 a.m. session on the mercury report and a 2 p.m. session on the CO2 report. The meetings are not formal public hearings, although there will be opportunities for participants to comment. However, the DAQ does not plan to publish complete formal minutes of the meetings.


Broyhill Foundation donates $1 million to community college
A million dollar grant from the Broyhill Family Foundation will provide new learning opportunities on Caldwell Community College and Technical Institute's Caldwell Campus by helping make an Appalachian State University Center a reality there. "We are gratified by this leadership commitment from the Broyhill family," said CCC&TI President Kenneth A. Boham. "The dedication and willingness of the Broyhill family to make a university presence in the county a priority validates the importance we've placed on providing new educational opportunities for area citizens. We are excited about the long-term potential of this project and expect to launch plans for the new facility almost immediately." Appalachian State University and CCC&TI envision a three-story facility encompassing 45,000 square feet. The center, to be located at the college's existing tennis courts, will house Appalachian's programs, including teacher education programs, on the third floor while CCC&TI will be able to utilize much-needed space on the remaining two floors. "I am most excited about the opportunity for students to receive a quality senior level education close to home," said Senator James T. Broyhill.

What’s in the state’s new TIP?
The Board of Transportation recently completed a review and update of the state’s long-range transportation plan, the Transportation Improvement Plan or TIP. Here’s a summary of what the plan encompasses and how much it will cost:

 Nearly 2,700 highway projects totaling $10.2 billion
 1,226 bridge replacement projects totaling $1.170 billion
 128 interstate projects totaling $1.077 billion  
 423 rural projects totaling $5.506 billion  
 382 urban projects totaling $1.949 billion  
 82 hazard elimination projects totaling $62.8 million  
 1,004 public transportation projects totaling $758.1 million  
 84 rail projects totaling $161.6 million  
 72 bike and pedestrian projects totaling $49.9 million  
 15 ferry projects totaling $7 million
 213 enhancement projects totaling $150 million

Eden, Edenton, Forest City, Marion added to Main Street program
Four communities have been selected to participate in the N.C. Main Street program, an initiative for smaller towns that focuses on creating new jobs and investment by helping to revitalize downtown areas. “Encouraging new business investment and job creation, as well as supporting the continued growth of our downtown areas in our smaller cities, is vital for their success,” Gov. Mike Easley said. Added to the program were Eden, Edenton, Forest City and Marion. They will join 46 communities already participating in the initiative. Since 1980, Main Street communities have realized more than 2,400 building renovations and new businesses, creating more than 10,000 jobs and nearly $800 million, the governor’s office said.


Economic Development

Two biotech firms pick Asheville for corporate headquarters
Phenix Research Products Inc., a Hayward, Calif.-based supplier to the lab instrumentation market, and Kendro Laboratory Products, a global leader in products and services for the life science, material science, drug discovery, and bioprocessing markets, have selected Asheville for their corporate headquarters and East Coast distribution center. Both announcements came this week.

Phenix has been a leading supplier of lab instrumentation to the life science research market for more than 10 years. The new Asheville corporate offices and distribution center will be located at the Biotechnology Incubation and Training Center on the Enka Campus of Asheville-Buncombe Technical Community College. The company expects to employ nearly 45 people within two years. “We chose Asheville over other locations for several reasons including its central location to our East Coast customer base as well as this incredible biotech facility at the A-B Tech Enka Campus,” said Greg Schulz, president and CEO. “We were also impressed with the proactive approach economic development officials took to get us here,” added Schulz. David Young, chairman of the Buncombe County Economic Development Commission, said Phenix “is the anchor tenant we’ve been looking for to kick-start the entire Western North Carolina biotechnology effort. Their presence here will only aid in getting other biotech companies to locate in our area.”

Kendro will expand its Weaverville manufacturing facility over the next eight months and create a worldwide headquarters in Asheville. The company also has a manufacturing facility in Newtown, Conn., as well as two locations in Germany. It manufactures and markets worldwide a variety of equipment for the pharmaceutical, biotechnology, clinical, diagnostic, and blood processing sectors. Kendro is consolidating the distribution and assembly operations of its centrifuge, safety cabinet, and incubator processes from Connecticut into the Weaverville facility, where they presently employ around 500 people. This expansion will create approximately 20 new manufacturing jobs and approximately 90 office and professional positions at the new headquarters in Asheville.

Ballantine urges all-out effort to land Boeing aircraft plant
The state’s budding effort to land the new Boeing aircraft plant picked up key backing Tuesday when Senate Republican Leader Patrick Ballantine of Wilmington said the state should make every effort to attract the project. Ballantine, who’s running for governor, said the Global TransPark in Kinston would be a perfect site. At least 10 states, including North Carolina, have jumped into the running for the Boeing plant, where the new 7E7 plane would be assembled. The plant is expected to employee about 1,200 people. Ballantine said North Carolina should donate the tract for the plant.

Grant boosts Forsyth Tech’s biotech program
Forsyth Technical Community College received a grant of $754,140 from the U.S. Department of Labor for the college’s biotechnology program. The two-year grant will fund a program curriculum that includes courses in general laboratory, molecular biology, tissue culture, immunology, animal handling, chromatography, instrumentation and laboratory mathematics. The money will go toward equipping the college’s labs with state-of-the-art technology. The school’s biotech program, approved by the State Board of Community Colleges last fall, has 51 students currently enrolled, with an additional 32 entering in the fall. Forsyth Tech is partnering with some local companies that helped develop the curriculum and will hire students on a part-time basis while they’re in school and on a full-time basis once they graduate.
 
NC remains third in filmmaking, behind New York and California
For the 18th consecutive year, North Carolina ranked third in the nation last year among filmmaking states based on direct revenues derived from production, state officials said. A survey by the N.C. Department of Commerce shows North Carolina’s estimated $230,844,586 in direct spending statewide by the makers of movies, television shows and commercials ranked behind only California and New York during 2002.


NCCBI News
Governor inducts Kirk into Order of the Long Leaf Pine
Governor Mike Easley came to the meeting of the State Board of Education last week to induct retiring board chairman, Phil Kirk, into the Order of the Long Leaf Pine, the highest civilian honor the Governor bestows. Easley thanked Kirk for his five-and-one-half years of service as chairman of the State Board and praised his commitment to high standards, high expectations, and excellence in education. On behalf of the State Board of Education, the new chairman, former senator Howard Lee, presented Kirk with a resolution crediting him for leading the implementation of the ABCs accountability program and for "restoring confidence in the state's public schools.” Lee saluted Kirk for visiting all 117 local school systems and 750 schools during his term as chairman.

Names in the News
Department veteran tapped as interim Agriculture secretary
Gov. Mike Easley appointed W. Britt Cobb Jr., a 30-year veteran of the department who most recently served as assistant director of marketing, as interim Agriculture Commissioner to replace Meg Scott Phipps, who resigned last week. Easley said Cobb will lead the troubled department while he considers a permanent appointment for the post. Cobb has been an employee of the Department since 1972 and has served as the assistant director of marketing since 1991. “His knowledge and understanding of the agriculture industry and the inner workings of this agency will ensure that the department operates smoothly and efficiently to serve the people of this state effectively throughout this transition period,” the governor said. Cobb is a 1971 graduate of UNC Chapel Hill and was hired at Agriculture a year later.

 Francis T. Borkowski, chancellor of Appalachian State University since 1993, on Wednesday announced plans to step down effective June 30 and to return to teaching following a one-year sabbatical leave. Longtime Provost Harvey Durham has agreed to defer his planned retirement in order to continue as interim chancellor. The Appalachian Board of Trustees, working closely with UNC President Molly Broad, will soon form a search committee of trustees, faculty, students and alumni to locate a permanent successor to Chancellor Borkowski.  

 Jan Crotts, executive director of the N.C. Association of School Administrators since 1996, announced her retirement. The organization’s executive board appointed Katherine Joyce, director of governmental relations, as interim executive director until a permanent replacement is named. Crotts has a long and distinguished career as a public education lobbyist, having worked for the N.C. PTA Association, the N.C. School Boards Association and the Southeastern Regional Vision for Education.

 Sen. Walter Dalton, a Democrat from Rutherfordton, and NCCBI President Phil Kirk were elected to the executive committee of the Public School Forum. Both the NCCBI chair and president are permanent members of the Forum board. Larry Seigler, vice chair of NCCBI's education committee, has represented the chair of NCCBI on the board for several years. The Forum board is composed of equal representation from three sectors -- educators, business community, and elected officials. The board and executive committee each meet quarterly. John Dornan is the president and executive director of the Forum. Tom Lambeth is the chair.

 Fred Hartman, Gov. Mike Easley's press secretary, was appointed by the governor as executive director of the Agency for Public Telecommunications. APT serves as the telecommunications arm of state government, producing educational programs designed to promote access to services and increase public participation in government. APT also provides a wide range of production support to state agencies. He replaces Leila Tvedt.


Washington Watch
A monthly update of where things stand in Congress, provided by the NAM

Tax-Relief Package: Congress and the Bush Administration warrant praise for acting quickly on economic-growth bill H.R. 2, which was signed into law on 5/28. The final $350 billion, 10-year package includes no tax increases; Senate-passed tax hikes were dropped. The new law includes accelerated tax rate cuts, retroactive to 1/1/03, benefiting S-corporations, their employees and all personal taxpayers; a 15/5 percent rate structure on both dividends and capital gains; 50 percent bonus depreciation through 2004; and increased Section 179 business expensing.

Medicare: With tax-relief signed into law, Medicare reform is one of Congress’ next big priorities, with both committee and floor action expected in June. Business coalitions are working to help ensure that the reforms are comprehensive and any new drug benefits for seniors do not adversely impact employers, many of whom are sponsors of retiree-health benefits. Manufacturers in particular, beset by low-cost foreign competition and unable to raise prices, will resist any effort to increase their costs for health insurance through higher taxes, expensive new mandates and/or the wrong kinds of Medicare changes.

Free Trade with Chile, Singapore: The U.S. signed separate free trade agreements with Singapore last month and Chile on 6/6, setting the stage for congressional action later this year on bills implementing the accords. U.S. exporters are urging policy-makers to adopt the legislation quickly -- before they lose more market share to global competitors. For example, Chile’s existing free trade pacts (with the EU, Canada, Mexico, others) are currently taking away up to $1 billion a year (13,000 American jobs) annually.

Class-Action Reform: Manufacturers and other supporters of sensible class-action litigation reforms believe they’re very close to securing the 60 votes necessary to pass legislation in the Senate. House passage the week of 6/9 sets the stage for Senate floor action just as soon as Majority Leader Bill Frist (R-TN) is assured that allies of the trial lawyers won’t be able to filibuster the bill indefinitely. S. 274 and H.R. 1115 would curb trial lawyer “forum shopping” by shifting most major class-action litigation to federal court. A “Consumer Bill of Rights” would ensure that all claimants can collect their share of the settlement.

Clean Air Act, New Source Review (NSR) Program: Manufacturers welcome EPA’s proposed changes to the NSR program’s routine maintenance, repair and replacement exclusion. The NAM, in comments filed 5/2 with EPA, said the proposed rule will help promote safer, cleaner and more efficient factories, refineries and power plants. The complexity of the current NSR program and its related burdens create significant disincentives to new investment in energy efficient and environmentally-friendly technologies and processes. The NSR program affects 22,000 facilities around the country that form the background of the nation’s economy. A final EPA rule on NSR is likely by the end of 2003.

Foreign Sales Corporation/Extraterritorial Income (FSC/ETI): House Ways and Means Committee Chair Bill Thomas (R-CA) has postponed introduction of an international tax reform bill until after his panel addresses Medicare issues. The international tax bill is expected to be a modified version of the bill Thomas introduced in 2002 (H.R. 5095). Based on initial reports, the new bill will include international tax reforms, an extension of the R&D tax credit and a temporary foreign earnings repatriation provision. The bill also is expected to include repeal of the current ETI provisions.

Comp Time: House leaders have pulled H.R. 1119 (Biggert -- R-IL) from the chamber’s floor schedule in early June. House Majority Leader Tom DeLay (R-TX) has indicated the bill might not receive a House vote unless GOP leaders are sure it will pass. A close vote was expected on the measure. No word on the timing of future action on the measure. The bill would allow employees at private companies -- only with the mutual consent of their employers -- to opt to take paid time off for extra hours worked instead of receiving overtime pay.

Stock Option Accounting: NAM-supported stock option reform bills H.R. 1372 (Dreier -- R-CA/Eshoo -- D-CA) and S. 979 (Ensign -- R-NV/Boxer -- D-CA) were the subjects of a House subpanel hearing on 6/3. The bills would require enhanced disclosure of company stock options and call for a three-year study of the effects likely to be brought about by mandated expensing. The legislation “sounds a note of caution that we should heed before hurrying off to substantially change an employee incentive that, by and large, has improved productivity, helped companies grow, and created considerable wealth,” says NAM lobbyist Kimberly Pinter.

 

Here is a summary of the Senate’s budget offer, as taken from an information sheet distributed by Senate leaders:

Fiscal Responsibility:
 Puts $100 million yearly in the Rainy Day Fund in case economic recovery is slower than predicted.
 Carries over $394 million in unspent funds from the first fiscal year (FY 03-04) to address the shortfall in the second year (FY 04-05).
 
Reduced spending:
The original Senate budget reduced spending by $560 million over the next two years (from the base budget). The new budget offer is $254 million less than the original Senate budget plan in FY 03-04. The new budget offer is $51 million more than the original Senate proposal in FY 04-05 because $75 million for higher education enrollment growth was included in the plan.
 
Economic Development:
Senate budget offer maintains the economic-growth investments in the original Senate budget. The original budget:
 Provides $10 million to the One NC economic growth fund in FY 03-04 to help bring jobs to our state. The new budget offer also adds $2M in the second year (FY 04-05).
 Started an express permitting program so businesses can locate and expand more quickly.
 Kept Industrial Development Fund intact to bring employers to rural communities.
 Provides economic-growth funds for counties with the highest unemployment in 2002.
 Strengthens support for NC military bases in light of base re-alignment and closures
 Reduced cuts to the Rural Economic Development Center, which helps bring economic growth to rural communities.
 Did not intercept payments into the Golden LEAF Fund, used to promote economic development in rural areas.
The new offer provides $75 million for the Clean Water Management Trust Fund, which helps communities with clean-water projects that attract businesses and protect public health. (House budget offer was $30 million)

Education
The Senate offer maintains the funding level for education contained in the original Senate budget ($8.48 billion). Original Senate budget included:
 Smaller class sizes ($25.3 million to reduce 2nd-grade class size and hire 571 new teachers).
 Higher teacher salaries to recruit and retain quality educators (1.81% average increase)
 ABC accountability bonuses for schools with improved student performance ($96 M)
 Funds for vocational training will help high school students learn the skills they need to join the workforce (Senate restored a $25.6 million cut to vocational programs).
 Additional funds for small schools ($2.5 million) and low-wealth districts ($2.5 million)
 Restores funds to help schools build new classrooms for enrollment growth ($59 million)
 Full funding of enrollment growth at universities ($46.6 million), community colleges ($31 million) and private institutions ($2.8 million). New budget offer also provides $75 million to fund enrollment growth in the second year (FY 04-05).
 Average 2.3 percent pay raise for community college faculty.
 Financial aid for students ($10.2 million community colleges, $23.75 million university) will help offset tuition increases to keep higher education affordable.
 Creation of Community College Instructional Trust Fund to match private donations for community college scholarships.
 Community college funds and enhanced job-training programs will improve services for workers trying to get back on the job.

Health and Human Services:
The Senate budget offer maintains funding for critical health and human services at the same level as the original Senate budget plan. The original Senate plan:
 Restored funding for prenatal care for pregnant women.
 Expanded Health Choice for uninsured children to serve more than 105,000 kids.
 Improves the quality of childcare with stronger efforts to fight abuse and neglect, funds for child-care worker training and day-care services.
 Reduced the waiting list for the community alternatives program for disabled adults.
 Kept seniors safe by restoring cuts to efforts to monitor adult care homes.
 Restored nearly $2 million in funding for Smart Start.
 Hires new DNA analysts in SBI Crime Lab to reduce the backlog of untested rape kits and expand North Carolina’s use of DNA as a crime-fighting tool.
 Increased funding for Criminal Justice Partnership Program grants to counties.
 Increased funding for the Mental Health Trust Fund by 50%. ($15 M)
 Restored $19 million in funds for area mental health programs (Gov. suggested a $20 million cut)
 Provided school nurse positions to help treat asthma, diabetes and critical needs of children in public schools ($2.5 million)
 Avoids deeper cuts in the Medicaid program. For every dollar the state pays into Medicaid, we draw down $2 from the federal government.
 State Employees:
 Average state employee salary increase: 1.81 percent (compared to House average raise of 1.6 percent)
 Maintains financial integrity in the State Employees Retirement Plan and provides a 1.45 percent cost-of-living increase for retirees (1.28 percent in House plan, 1.5 percent in governor’s plan)
 Fully funds premium increases for employee coverage in the State Health Plan and avoids dramatic benefit reductions.

New Finance Changes:
The Senate proposes the following revenue enhancements: 
Tobacco tax increase: $200.3 million
 25-cent increase to manufacturers participating in the Master Settlement Agreement
 Additional 50-cent increase to nonparticipating manufacturers
 Increase in other tobacco products (snuff, etc.) from 2 percent to 18 percent 
Alcohol tax increase:
 5 cents per can of beer (.0537 to 1.07 excise tax increase) -- $100 million
 Increase in the rate on wine comparable to the surrounding state average (.21 to .34 unfortified and .24 to .37 fortified per liter) -- $7.2 million
 Increase excise tax on liquor by 6  (from 25% to 31%) -- $23.3 million