Legislative Report #07-19

Report 07-19
June 1, 2007

SENATE DOES NOT COME THROUGH

The Senate version of the state budget for 2007-09 was approved on Thursday and returned to the House for concurrence. The House is expected to reject concurrence. Both chambers then will appoint members to a joint conference committee to resolve differences between the House and Senate budget proposals. The conference process likely will take a long time to resolve the many points of disagreement in House and Senate budgets.

The primary difference involves the two-year extension of temporary state income and sales taxes that were enacted in 2001. The House did include the extension but the Senate budget allows the taxes to expire, creating a $300 million difference in proposed expenditures.

STATE COLAs

The Senate budget does not improve upon the 2.0% Cost-Of-Living Adjustment for retired state employees that was approved by the House last month. The Senate provides a 2.0% COLA for retired teachers, state employees, members of the Judicial System, and legislators.

There was an effort in the Senate Appropriations Committee to increase the state retiree COLA. Senator Martin Nesbitt offered an amendment to provide an additional $10 million to improve the COLA. However, the amendment was ruled to be out of order by the Appropriations Committee co-chairmen and was not debated by the committee.

Later, during the Senate floor debate of the budget bill, Senator Nesbitt reminded his colleagues that the COLAs provided to state retirees over the past several years have not kept pace with inflation. He urged the Senate budget conferees to find a way to improve upon the 2.0% COLA when the conference process begins.

LOCAL COLA

On a positive note, a Senate floor amendment will allow the 2.2% COLA for retired local government employees to become effective in July even if the state budget has not been adopted. The Senate approved an amendment offered by Senator Richard Stevens that removes the local COLA from the budget. Senator Stevens pointed out that the local COLA already had been approved by the Retirement System Board of Trustees, no state appropriation was required to provide this increase, and the General Assembly had taken this same course of action last year.

REPAYMENT OF ESCROWED FUNDS

The Senate budget does not include the full final installment to repay the funds that were diverted from the Teachers and State Employees Retirement System in 2001. The House budget includes the required $45 million to complete the repayment in 2007-08 on the 5-year schedule that was adopted in 2002. The Senate appropriates only $10 million in 2007-08 and another $10 million in 2008-09. The remaining $25 million would be paid in the next biennial budget.

WHAT CAN BE DONE?

Usually, the rules governing the actions of the joint budget conference committee limit negotiations to items in the budget where there are differences between the House and the Senate. Therefore, the budget conferees may decide that the state COLA issue already has been resolved at 2.0% for 2007-08. However, there is a possibility that, if the House were to prevail on the issue of extending the temporary taxes, some of the additional revenue could be used to improve the COLA.

Please call your Senators and Representatives. Ask them to urge the budget conferees to give priority consideration to a higher COLA for state retirees. Also, urge them to support full repayment of the $45 million that is owed to the state retirement system.
Finally, we believe that Senator Nesbitt deserves a “Thank You” from all of us for his efforts on behalf of retired teachers and state employees. The Senator’s office e-mail address is: martinn@ncleg.net.