Legislative Report #05-13

Report 05-13
April 29, 2005

SENATE "PACKAGE" NEXT WEEK?

The Associated Press reported yesterday that Senate leaders have announced that the proposal to establish a state lottery and some of the tax measures proposed by Governor Easley would be included in the Senate's budget bill. Senators David Hoyle and Kay Hagan were quoted as saying that the full Senate could adopt the proposed budget package as early as next week. Following Senate approval, the budget package would go to the House which narrowly approved a separate lottery bill several weeks ago.

BILL INTRODUCTIONS

Two bills of interest to retirees were filed recently in the House. These bills are summarized below.

House Bill 1267: Exclude Pensions From Income Tax (primary sponsor: Rep. Underhill)
This bill, which was filed last week, would allow governmental retirees to deduct public pension income from their taxable income for the purpose of calculating state income tax liability. Specifically, the bill would exclude the following pension payments from taxable income under the North Carolina State Income Tax Code:

1. payments received by governmental retirees from the North Carolina state and local government retirement plans,
2. payment received by retirees from Federal government retirement plans, and,
3. withdrawals by governmental retirees from any individual retirement plans (401K supplemental retirement plan, state deferred compensation plan, etc.) treated as individual plans under the state tax code.

Currently, only retirees vested (5 or more years of service) prior to August 12, 1989 under the provisions of the Bailey court decision are exempt from payment of state income taxes on their pension income. This bill essentially would extend the state income tax exemption to all current and future governmental retirees.

House Bill 1267 was referred to the House Finance Committee. The bill would apply to 2005 and subsequent tax years.

House Bill 1497: Elected Officials/Local Retirement (primary sponsor: Rep. Rhodes)
This bill would authorize inclusion of elected local governmental officials in the Local Governmental Employees Retirement System. The effective date of the bill is July 1, 2005.

HOUSE PENSION COMMITTEE ACTIONS

The House Pensions and Retirement Committee approved one of the several bills that have been introduced to extend the sunset on the state “Teachers Return-To-Work” policy. On Wednesday, the Committee gave House Bill 1073 a favorable report and re-referred the bill to the Appropriations Committee. The key provisions of the bill include:

1) A 1-year extension ( to June 30, 2006) of the provision allowing retired public school teachers to be re-employed as classroom teachers after a six month separation from service without loss of retirement benefits or limitations on earnings.

2) A study of the impact of eliminating the post-retirement earning restriction for teachers and for other state employees.