Legislative Report

Report 10-07
June 18, 2010

BUDGET CONFEREES CONTINUE NEGOTIATIONS

Subcommittees of the Joint Conference Committee on the state budget met through this week seeking resolution of differences between the Senate and House versions of Senate Bill 897 – Appropriations Act of 2010. The most serious differences between the two chambers are in the areas of funding for the University System and the public school systems.

Failure of the U.S. Congress to approve additional Federal assistance for the states is a cause for concern among the budget conferee. North Carolina is one of 30 states that has included the additional Federal revenue in the budget for 2010-11. Both the House and the Senate versions of the budget anticipate an additional $500 million from Washington during 2010-11. Budget conferees now are considering a contingency plan that would scale back appropriations for next year until it is clear what the U.S. Congress will do.

STATE RETIREMENT FUNDING REMAINS UNRESOLVED

It appears that the budget conferees have not resolved Senate- House differences in funding for the Teachers’ and State Employees’ Retirement System (TSERS). The Senate version of the budget appropriates an additional $20 million for the state pension plan. The House budget provides an additional $40 million in direct appropriation and contains a provision that could generate as much as an additional $135 million for TSERS. This provision would give the state retirement plan any excess revenues (above $110 million) generated by the Department of Revenue Settlement Initiative up to a total $135 million if state General Fund revenues for 2010-11 exceed projections.

The TSERS full funding issue is further complicated by a separate provision in the Senate budget, referred to as the Fair Tax Penalties provision, that would restrict the authority of the Department of Revenue to assess penalties on multi-state corporations that are delinquent on tax payments owed in North Carolina. This week, Revenue Secretary Ken Lay was interviewed by the press and he stated that loss of the authority to assess penalties would hurt the Department’s Settlement Initiative to collect taxes from companies that have deliberately hidden taxable income through complex out-of-state partnerships. Without the threat of penalties, delinquent companies would be unlikely to voluntarily pay North Carolina taxes that they owe.

Our Position:  Under normal circumstances, our Association would have little interest in the dispute about delinquent tax penalties. However, the current situation requires that we support the House position on full funding for TSERS and we must oppose the effort to remove the penalty authority of the Department of Revenue.

Please make sure your members of the Senate and the House know where we stand. Please take a few minutes to contact them if you have not already done so. If you contact members of the Senate, ask that they accept the House position on TSERS funding. For House members, ask that they stand firm in conference on the House provisions for TSERS funding and that they reject the Senate’s Fair Tax Penalties provision.

OTHER ACTIVITIES THIS WEEK

Normal committee meetings continued while budget conferees pursued a budget agreement. On Wednesday, the Senate and House pensions committees met and acted on several bills of interest.

Senate Bill 1212: Local Government Other Post-Retirement Benefits (OPEB)
(Sponsor: Sen. Clodfelter)

This bill would repeal the existing Local Government OPEB Fund and authorize local governments to participate in a Local Government OPEB Trust to simplify annual auditing requirements. The Trust would accumulate funds to cover the long term liabilities of local employers for such post retirement benefits as retiree health insurance.
The bill received a favorable report from the House Committee on Pensions and Retirement and was re-referred to the House Finance Committee.

House Bill 1934: Amend Charlotte Firefighters’ Retirement
(Sponsor- rep. Alexander)

This bill allows the Charlotte Firefighters’ Retirement System death benefit to be available to all retirees of the System. The bill received a favorable report from the Senate Committee on Pensions, Retirement, and Aging. The bill went to the Senate floor on Thursday where it was approved on 2nd and 3rd readings and sent to the Governor.