February 23, 2011

In This Issue:

 

 

 

The Governor released her biennial budget plan last Thursday seeking to close a $2.4 billion gap between revenues and expenses in the first year and a $2.0 billion shortfall in 2012-13.  The budget would cut 10,000 employee positions, consolidate some agencies and programs and partially extend a temporary sales tax. 

-          Lowers corporate income tax rate from 6.9 percent to 4.9 percent ($115 million savings in first year and $303 million in second year), making it the lowest in the southeast and third lowest in the country. 

-          Provides an unemployment insurance tax credit to small businesses

-          Provides $75 million in capital from the year-end credit balance for repair and renovation to university and government buildings statewide (this appropriation was also included in last year’s budget but the Council of State elected not to issue the bonds for the projects due to the economy)

-          Invests $25 million to upgrade equipment and technology needs in the community college system

-          Provides $77 million to the Transportation Mobility fund to reduce critical congestion bottlenecks and improve logistics capabilities.

-          Keeps three quarters of one cent sales tax increase that is scheduled to sunset on June 30

-          Lets the corporate and personal income tax surcharges expire as scheduled on June 30

-          Eliminates 10,000 positions – 3,000 of them filled. An Employee Retirement Incentive Program is expected to eliminate at least 900 positions statewide.

-          Privatizes some services and closes certain facilities (state parks and welcome center to two days a week)

-          Reduces most state agency budgets by between 7 – 15%

-          Sets aside $25 million for a new Consolidation and Efficiency Incentive Fund to incentivize local governments and state-funded nonprofits organization to reorganize, consolidate or regionalize services

-          Creates the Department of Management and Administration which includes the Department of Administration, Office of State Personnel, Office of the State Controller, and the Office of Information Technology Services

-          Merges the Department of Commerce and the Employment Security Commission for a savings of 53 FTEs and $251 K in the first year and $377k in the second year

-          Eliminates State Energy Funds to Universities ($2.69 million)

-          Closes Welcome Centers two days/ week and privatizes all Centers in second year ($2.5 million)

-          Reduces Funds to 13 non-State Entities by 10% ($7.3 million) ; Includes $2.0 million reduction to Biotechnology Center and $2.3 million reduction to Rural Center

-          Reduces the Division of Water Quality ($1.67 million) by 11.5 percent and 22.5 FTEs

-          Maintains the Clean Water Management Trust Fund at $50 million

-          Adds $10 million to the One NC Fund

-          Adds $8.5 million to Jobs maintenance and Capital Development Program

-          Provides state match of $7.1 million for the Drinking Water State Revolving Fund and $7.4 million for the Clean Water State Revolving Fund

-          Provides $4.5 million in Water Resources Projects

-          Provides an additional $83 million in the first year and $104 million in the second year for highway maintenance

-          Includes non-recurring funds of $15 million in each year of the biennium for replacement, renovation and repair of field facilities

-          Provides $3 million in state matching funds for the rail division

-          Reduces administrative budgets for DOT Administration, Division of Highways and Division of Motor Vehicles

-          Recommends no changes to Turnpike Authority projects and “Gap” funding

-          Recommends internal efficiencies, outsourcing and privatization efforts that would eliminate 320 positions in the department. These numbers are not included in the Governor’s budget. 

-          Recommends work plan adjustments that would shift resources in the following way:

           

            Discretionary -$3 million

            Spot Safety     + $3 million

 

            State Secondary System -$35 million

            Contract Resurfacing +$35 million

 

            Primary System -$17 million

            Secondary System - $17 million

            System Preservation   +$34 million

 

            Secondary Roads -$50 million

            Bridge Program +$50 million

 

-          Protects teachers and teacher’s assistants in K-12 public schools

-          Shifts some transportation expenses from state to local government

-          Eliminates funding for Science Olympiad and NC Science, Math and Technology Education Center

-          Reduces the UNC System budget by 9.5%

House and Senate Appropriations committees are currently reviewing the Governor’s budget and beginning to formulate their own ideas and recommendations. The House will be the first of the two chambers to unveil their budget scheduled for release on April 22. The Senate budget should follow three weeks later. The two sides will reach a compromise that Republican leaders in both chambers expect to be no later than June 1 – one month before the beginning of the fiscal year of July 1. 

North Carolina Governor Beverly Perdue announced yesterday that Rep. Pryor Gibson (D-Anson) will be leaving the North Carolina General Assembly to become the Governor's "Senior Adviser for Governmental Affairs."   

Rep. Gibson, currently serving his eighth term in the N.C. House representing Anson and Union counties, has consistently been rated as one of the most business friendly members of the N.C. House Democratic Caucus, scoring a 72.3 on the North Carolina FreeEnterprise Foundation's Business Ratings of the 2009 North Carolina General Assembly. (State lawmakers who obtain a Business Rating of 70 or above are considered "Business Base," which means they are a consistent supporter of business and free enterprise principals.)   

Local Democratic Party leaders will select a replacement for Gibson in the coming weeks and recommend that individual to Gov. Perdue for appointment to the House.

 

(The Governor's press release also notes that Andy Willis, who currently serves as the Gov's senior adviser for governmental affairs, will take over the role of director of the Office of State Budget and Management upon the departure of Charlie Perusse, who is leaving for a position with the UNC System.)

 

SB 13 – An Act to Enact the Balanced Budget Act of 2011 has been vetoed by the Governor. The Governor had expressed concern over the cuts to incentive funds used to attract business and industry to NC. 

HB 45 – Accelerate Cleanup of Industrial Properties – An Act to allow the use of risk-based remediation to accelerate the cleanup of contaminated industrial sites for the purpose of limiting human and environmental exposure to safe levels, to protect current and likely future uses of groundwater, and to ensure the cost-effective application of limited public and private resources. This bill has been given a favorable report in the House Environmental committee and has been referred to House Finance for further consideration.

It appears that lawmakers will again have the chance to take up legislation that would soften the state's longstanding ban on hardened structures along the coast. Sen. Harry Brown, R-Onslow, said Monday that he plans to introduce a bill that would allow beach communities to build terminal groins to help control erosion. “I just think it’s worth giving them a chance,” Brown said. Similar measures have won Senate approval before, but have never cleared the House. Todd Miller, executive director of the N.C. Coastal Federation hopes such a bill doesn’t become law this year either. “It’s going to be a pretty radical change in coastal policy in North Carolina,” Miller said, noting that since 1984, the state has prohibited any groins, seawalls or hardened stabilization structures on the North Carolina seafront.

Miller said that while such structures could forestall erosion at certain areas along the coastline, they could hasten erosion in others. Such a structure could create liability problems for areas down the coastline from the structures, he said, adding that in some other states, people whose houses were affected won legal settlements. Brown said his bill will have safeguards built in to handle such problems. “In the bill it’s going to say if it causes these problems, you’ve got to take them out,” Brown said. He said he expects the bill to have bonding requirements in case local towns will need to remove the structures. Brown said the effort to curtail beach erosion is tourism driven. Coastal towns, whose economy is driven by tourism, are pushing the bill. He said the bill is still in its draft stage. He hopes to have it ready for introduction this week.(Barry Smith, M2M POLITICS, 2/21/11).

Some people who do business with the state would be prohibited from donating more than $500 to a political candidate per election under legislation introduced in the House. The bill, filed Thursday by House Majority Leader Paul Stam, R-Wake, applies to people with contracts with the state of $25,000 or more. It also would apply to employees of businesses with state contracts of $25,000 or more when such an employee derives certain financial benefits from the contract, oversees the contract, participates in the development of contract terms or serves on the state entity which takes action on the contract. Current state law limits donors to giving no more than $4,000 per candidate per election. The bill, which targets perceptions of “pay-to-play” politics, is based on measures now in effect in several states and has been sought by government ethics reform groups in recent years, Rep. Rick Glazier, D-Cumberland and a bill sponsor, said in an e-mail to The Insider. Glazier said a similar measure was filed in 2009, but failed to gain traction in the Senate. It was also not included in a sweeping ethics reform measure approved in 2010.(THE INSIDER, 2/22/11).

 

Industrial manufacturer Eaton Corporation stands to receive more than $1 million in state economic development incentives for its plans to expand its Roxboro facility, creating 120 jobs and investing $23.3 million in the project over the next four years, Gov. Beverly Perdue’s office announced Monday. The company plans to manufacture automotive engine valvetrain components at the expanded facility. The average wage for the new jobs will be $35,875 a year, not including benefits. The Person County average annual wage is $32,136. The company has been awarded a $100,000 grant from the state’s One North Carolina Fund. It has also been awarded a Job Development Investment Grant worth up to $958,000 if the company meets annual performance targets over the next decade. Eaton has more than 70,000 employees in 150 countries, with 3,400 of those employees in 12 locations throughout North Carolina. Eaton has operated the facility in Roxboro since 1965.(NEWS RELEASE, 2/21/11).

 

Gov. Beverly Perdue said Monday that the state will focus on small businesses despite steps it will have to take to grapple with a $2.4 billion budget gap. "There are a lot of holes (in the budget), but we are going in the right direction," Perdue said during a small-business roundtable at the University of North Carolina at Wilmington. Perdue said she is focusing on sustaining small business, which makes up nearly 95 percent of all business in the state. But her budget proposal cuts funding for the UNC system. And officials throughout the system tout the schools as the key to creating small-business leaders. "The tradeoff is that by not cutting K-through-12 education, we make an early investment," said Rep. Susi Hamilton, D-New Hanover.

During the meeting, Perdue said small North Carolina contractors will benefit by having increased opportunities to work with the state. And Perdue said the state's greatest investment in small business will be through using a $46.1 million federal jobs fund to implement a program that will create nearly $800 million in small-business loan opportunities across the state. The Capital Access Program will match an up-front fee, about 2 to 7 percent, paid by the lender and borrower to make it easier for businesses with 500 or fewer employees to receive loans. Larry Clark, dean of the Cameron School of Business, said the program will give small businesses what they need most. "One of the greatest difficulties is access to capital," Clark said.(Jason Gonzales, WILMINGTON STAR-NEWS, 2/21/11).

The University of North Carolina at Asheville is grappling with budget shortfalls, layoffs and a construction boom. School officials say the various building projects around campus are part of a long-term capital plan and have no impact on the school's yearly operational budget. But as construction takes place, the college is shedding jobs. UNCA recently eliminated 22 positions and laid off seven people and is preparing for deep cuts in next year's budget. The extensive construction activity during a deep fiscal crisis has some people asking where the money is coming from. “It's a common question,” said John Pierce, UNC-A vice chancellor for finance and campus operations. “It is best explained through different streams of money. ... (There are) two different pools of revenue coming to the university from the state.” He said the money for construction is separate from funds used for operations.

The university makes special requests for capital projects from the General Assembly, and those do not affect the college's $40 million annual appropriation, which funds salaries and operations. The university is legally barred from shifting funds from capital project accounts to operating budgets. Many of the projects have been in the planning stages for years, said Don Gordon, UNC-A director of design and construction. The largest project under way is the 133,000-square-foot Health and Wellness building, which will serve as a multipurpose facility for UNCA athletics and the N.C. Center for Health and Wellness. It is being funded through a $35 million special appropriation from the General Assembly and $5 million in private donations. Two halls constructed in the 1960s are being given upgrades totaling $8.8 million, including updated classrooms and modern fire protection. Meanwhile, the school is funding the renovation of five dormitories and constructing a new one.

Pierce said the economic environment is good for the university to do construction projects. The construction industry is still in a downturn, and building costs have decreased. “It's an economic stimulus for the area when construction is down,” Pierce said. Pierce said he understands the public's concerns about construction in the current budget climate. He emphasized, however, that the college must continue to plan for the future while still managing the day-to-day operational costs of running the institution. “Capital planning for the state is a long-range proposition,” Pierce said.(James Shea, ASHEVILLE CITIZEN-TIMES, 2/19/11).

 

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