Come to order please, thank you we'll introduce our pages first, Mathew Panner, Sharley, Maggie Chambers, Rockingham, Emily, Ryan Stutter, Cornelius, Beshown, Randleman, Radwana, Japohill[sp?], Reggin Jones of Newport[sp?], Catherine Benson, Roley, Kelvin, Chritopher Pesh, Devlin, Isabelle, Mickenkun[sp?], thank you. Fredrick Berg, Virginia thank you I think that's the [xx] and that's Senator [xx] granddaughter well welcome, welcome all. Our sergeant at arms staff today is Steve Wilton and Dotam Blake [sp]. Thank you all, this afternoon we will go through the finance portion of the budget and there will be no amendments to the finance portion any amendments from this point on will be made on the floor if there are to be any, so we're going to have staff go through this and we're going to start with the fees, so staff you have the floor. Mr. Chairman before you all have not only the bill but the packet of amendment that were in appropriations, you also have a chart, assembly chart of the fees, a summary chart of the tax provisions and a one page fiscal chart the tears after we start with the fee provisions we have the analyst here from the various appropriation subcommittees and we've just asked them Mr. Chairman if its okay for them to quickly go over their parts of the fees. We will start from the top, thank you. Thank you Mr. Chairman, Brian Madison of fiscal research will review on page one the education fees, there is only one fee as you can see in the tittle to modify the driver education training fee currently this fee is set at the maximum of $65 and the type of discretion local school administrative units by whether to levy the fee for driver training, programs the bill the senate budget would change this fee to an amount not to exceed the actual cause of providing the course in a related new state funding for driver training is eliminated in the 15/16 budget subsequently the committee colleges are directed to establish a community driver training program starting in the second year of the biennial. Thank you, we're going to hold questions until we have gone completely through the budget and then we will open it up after that, okay. Next group Denise Thomas, fiscal research division starting with the HHS fees, the first fee is increased and the medical examiners autopsy fee increases from $1,250 to $2,800. The second fee is the increase in the medical examiner fee paid to the county medical examiners and that increases from $100 to $250. Sean Ryan, fiscal research division now continue with HHS third fee section 12H.4 is a medicaid provider application credentialing fee. This is not a change in the fee nor the frequency of the charge, this is just a continuation of what they have been doing. [xx] Fidel, fiscal research, starting on page three going through the ANR fee items the first item that you see on that list is a drug manufacturing licensing registration fees. This are fees that are paid by out of state prescription drug manufacturers, re-packagers, that fee will increase from 500 to $1000 wholesalers in that same category would go from 350 to 700, same thing for instate companies as well, you'll see that fee going from to 500 to 1000 for prescription drug manufactures and for anyone else from 350 to 700. Second item that you see there is food manufacturer and retailer inspection fees increases annual inspection fees to dairy retailers from $10 to $50 and from wholesalers from $40 to $100. Jenifer Hopin with the fiscal research division moving down that page, the inlet import access management fees. This creates a new coastal waterways user identification number and associated fees on two types of vessels, vessels that are registered with the Wildlife Resources Commission, that are 24 feet in length and greater, and that are operated in coastal waters of the state, as well as vessels that are registered in another state or documented with the US Coast Guard that are 24 feet in length and greater and engaged in commercial or recreational fishing that requires certain North Carolina fishing licenses. The user fee is based
on a formula thats set out in the provision if you look at the chart on this chart you can see the range of the fees. The lowest fee is $72 for a boat length of 24 feet and rises to $1,250 for a boat that's a 100 feet or greater, at the bottom of that page is the shellfish Cultivation Leasing Reform. This basically extends the duration of a shellfish lease from five to ten years, currently shellfish renewal fees are $100 every five years for contracts that were entered into after 2009, and 10 years for contracts that were issued prior to that the impact will be minimal. If you flip to page three, you have a provision titled SCFL Exemption for Employees of Leaseholders that stands for a standard commercial fishing licence, and this provision allows an employee of a shellfish lease holder who holds a standard commercial fishing license to take shellfish without a license from an area that's leased for cultivation of shellfish. The number of shellfish lease holders who are also employees of a shellfish leaseholder holding a valid standard commercial fishing license is unknown. The water column leasing clarification amends the current leases for shellfish cultivation to specify that, that lease includes the right to place devices or equipment related to the cultivation or harvesting of marine resources on or within 18 inches of the leased bottom. Devices that don't attach to the lease bottom or extend more than 18 inches off that bottom would still require a water column lease. Moving down the page section 14.11 dynamic pricing for state park and attractions, this provision allows dinner the department of cultural resources and the department of art to adopt flexible prices for entrances, for entrance fees and related activity fees, to reflect seasonal variations, special event interests and other market forces to maximize revenue for the following entities; the zoo, aquariums, museums, financial sciences, state parks, historic sites and museums and state forests. Section 14.20 are land field changes, these provision replaces the existing permit fees structure for [xx] management facilities with a new permit fee structure based on it's single annual permit fee. The new fees structure is estimated to generate a lot more than $220,000 more than what is currently being generated under the existing permit fee structure. This provision also extends the duration of those permit for senatorial land fields and transfer stations to a facility life of sight. Section 14.23 is the Compensitory Mitigation Requirements, this provision requires the division of mitigation services to stop accepting any new mitigation fees for impacts permitted to occur in the news, the cat fear and the top pamlico river basins, 30 months after the effective date of this act governmental and non-governmental entities will be required to use private mitigation banks to satisfy compensatory mitigation requirements with one exception and unforeseen unique or exigent circumstances the secretary of commerce or transportation may request that the division of mitigation services continue to provide any new mitigation fees to support permits for projects that are owned or sponsored by those particular departments. The section 14.26 the provision titles long, it repeals the segmentation control commission and transfers responsibilities is to the EMC, the financing portion reforms the civil penalties under the sedimentation pollution control act, and basically it sets a maximum total civil penalty of $25,000 for first time violators of the sedimentation pollution Control. Obrien Kabaya with fiscal research, section 15.13 repeals the apprenticeship fee that is a $50 annual fee upon initial registration and thereafter for participance in the apprenticeship program, actual receipts have been approximately $170,000 annually but there will be no general fund impact as the department plans to absorb this loss through implementing operational efficiencies. [xx] Fidel again, utilities commission regulatory fee, the general assembly typically sets regulatory fee in the budget bill every year this essentially incorporates the house bill, that passed the house that allows the utilities commission and public staff to set that regulatory fee moving
forward with certain safe guards in place, the fee is expected to generate roughly the same amount of revenue they currently receive. Thank you, justice from public safety. Christine [xx], fiscal research, there are two JPS fees the first is in 16B.6 clarifying the boxing commission fee, it changes the fee collected in events by the boxing commission from $2 per sold to $2 per spectator and it's anticipated to generate about $4,000. Section 16B.8, it's clarifying hazardous material fee, to say that maximum hazadous materials facility fee is a first sight maximum, not a reporting entity maximum. Denis [xx] fiscal research, page five begins the general government portion, section 20.1 is the insurance regulatory charge it keeps the rate at 6.5% and it's expected to bring in about 33.5 million, so there is no net physical impact to the general fund. Section 27.8, the drivers licence and duplicate fees, this will increase the money going to the highway fund like $275,000 it eliminates the licence to give trust fund that had been receiving money from DNV fees, this will not go the highway fund. Thank you, transportation. [xx] fiscal research, we'll begin with section 29.22 this provision authorizes the rail division within DOT to generate receipts through concessions or by other means including sponsorship revenue on it's state asset, those proceeds would go to offset the cost of operating the inner city passenger rail services for the state. Section 29.23A, the second item there under transportation is an authorization to credit the net proceeds of work performed by the North Carolina ferry division ship yard for a capital reserve for ship yard improvements including equipment and infrastructure. Section 29.23 B the third item under the transportation section establishes $150 system wide per audit fee and authorizes those proceeds to be used to offset round operating cost. Section 29.35 reflects an agency request to consolidate two forms of temporary registrations one is a 10 day trip permit and the other is a 10 day temporary tag. The agency had a request to consolidate under the 10 day temporary tag and also increase the fee from $5 to $10. Section 29.30B, the special registration plate fee there is no change to the individual fee rates, here just to change to the destination accounts, the remenses[sp?] to department of commerce and the department of health and human services from the special registration plate account are eliminated and the corresponding proceeds within credit to the highway fund. Section 29.30 similarly for the license restoration fee, the amount remitted to the general fund for [xx] is being eliminated and the destination account is being changed to the highway fund. Moving to section 29.30, this provision extends for several pages within the table the enumerated or the changes to the individual fees that are affected, but generally this provision increases the MVPs across the board by an average of 20% commensurate with inflation. You see the expected yield for the highway fund in the first year based on half year implementation is $29 million, second year about $77 million dollars for the highway trust fund about $3.7 million and for the second year for the highway trust fund, $12 million. Thank you, taxes and miscellaneous provision? Yes sir Mr. Chairman, I would be happy to go over these. Some of these are items that are in chapter 105 so we just wanted the finance committee to be aware of their existence one in section 2.2 of the bill as it ends the transfer from the highway fund to the general fund that was put in place around some years after the department of transportation was given sales tax exemption. At one point there was the thought that when you had the money going from the sales tax it would go into the general fund once the department of transportation was exempt the money saved in the highway fund, this is just ending that transfer. The other tax provision that you will see is at the bottom of that page section 29.27A. This is a local tax on motor vehicles, cities have the ability to impose a $5 tax on a motor vehicle. There have been local modifications for years, the highest local modification is $30, what this provision does is it gives every city the authority to enact a tax on a motor vehicle up to $30, but the reason the remainder of the proceeds must be used for public streets.
It does not do anything to change any local modifications that the city has to this point. On the last page on section 29.34A there is an adjustment to the maximum highway use tax, right now the maximum tax for a class A or B commercial vehicle is a $1,000 this would increase it to $2,000. The maximum highway use tax on recreational vehicle is 1,500 this would make it the same as a class A or B commercial vehicle at 2,000 and the maximum tax for a vehicle that a person has had registered in one state moves to this state and registers in this state is $150 this would increase it to $250. Thank you, we will now cover the tax portion of the bill and staff will do that. Yes sir and you'll see a packet in your materials for part 32 it still has parts listed such as you saw in house bill 117, these provisions are the same as that in [xx] will start us all. So as Cindy mentioned beginning on part 32 of the budget bill which is on page 458 the bill are those have the finance provisions starting with the desegregation of economic development grant funds, section 32.11 modifies the JDIG program regarding JDIG commitment availability the PCS would make two primary changes, first it would increase the maximum JDIG commitment for the current period by collapsing the current fiscal biennium period with the latter half of this calendar year which effectively makes it 7.5 million designated for 7115 through 1230115 immediately available for commitment, it also adds $5 million of additional capacity that may be committed in JDIG awards during the period. Second, it would also extend the program two years allowing JDIG commitments to be made through January 1, 2018. The JDIG award business receives would be changed also in two ways, first the JDIG award calculations would change from a flat 10 to 75% of the personal income tax withholdings generated by the eligible created positions to a development tier link to maximum percentage of with holdings, that maximum percentage will be 80% withholdings of the projects in tier one, 70% for tier two, 60% for tier three and 50% for major market communities which are counties with one of the three highest average weekly wages in the state. Second, the portion of the award devoted to the utility accounts is changed, tier one continues to have no utility account diversion, tier two utility account diversion changes from 15% to 5%, tier threes UA diversion changes from 25% to 10% and the UA diversion for major market community percent. Minimum criteria for participation in the JDIG program would be increased under current law a business must create a minimum of 10 jobs in tier one or 20 jobs in tiers two and three, those minimums would increase to 20 jobs for tier one, 50 jobs for tier two, 100 jobs for tier three and 250 jobs for major market communities. Additionally a wage standard will become a prerequisite part of the JDIG calculus, to participate in the program the company would have to pay an average weekly wage at least equal to a percentage of the counties average weekly wage, that percentage is tiered, 100% for tier one, 105% for tier two, 110% for tier three, and 120% for major market communities. The PCS will create a component for recruiting high yield projects for a business to invest at least $750 million and creates at least 2,000 jobs. Programmatically when a high yield project has landed the annual JDIG commitment cap for that year increases from 15 million to $30 million as the business meets the job creation investment requirements, and meets all performance matrix for three consecutive years. In that situation the businesses JDIG award is augmented in three ways. First the basis for calculating the award increases to 100% of the withholdings associated with created eligible positions. After eight years is added to the 12 year term limitation and any utility account diversion is eliminated. In the event a high yield project fails to meet performance matrix after receiving the augmented award in any year, the augmented benefits expire and a company cannot thereafter regain the augmented benefits. The bill would address concerns that come comas consume JDIG availability too quickly each counter year by splitting the single year $15 million basis for commitment caps into two equal semi-annual installments of $7.5 million. Within a single calendar year amounts not utilized in the first six month period roll over to the next period. A couple of final miscellinous changes the JDIG these include
adding a pre request finding that the locality has appropriately participated in recruitment efforts and instead it's offered it strengthens the recapture provision for failure to maintain operations for 150% of the grant terms. It modifies the relevant time period against which increases an employment or measured and it adds to the reporting requirement, a tier itemized listing of unaccepted offers and their aggregate values. Section 32.12 of the bill concerns the One NC Fund. One NC provides funds to local governments to secure commitments for recruiting, expanding, or retaining businesses, broadly speaking as used for equipment installation repairs, improvements or renovations to, or infrastructure improvements for buildings. The PCS would modify one NC local match requirement making it tiered, there will be three state dollars for every one local dollar in tier one, two state dollars from the One NC Fund for every one local dollar in tier two and even local match requirement for tier three, and it would require two local dollars for every one state dollar for major market communities. That concludes the discretionary fund changes in the bill. Thank you, corporate income tax? Yes, for corporate income tax I'll be continuing to refer to the summary chart. The bill repeals the corporate rate triggers and sets the corporate corporate tax into statutes at 4% for 2016, and at 3% for 2017. The consensus forecast had projected that those revenue triggers would be satisfying. The next provision broadens the tax base by eliminating a special provision that had lowered the tax viability primarily the few larger banks. The next provision repeals a privilege tax on banks that was equal to $30 for each $1 million of total assets, the next provision also is a base broadening item that closes a loophole some cooperates have tried to use to avoide tax by inflating interest expense deductions on loans from affiliates. The next phase is just eliminate obsolete deductions in the law. Part four is referenced on your chart faces in single cell federal rapprochement over three years and adopts market base sourcing for the rapprochement based on module language from the multi state tax commission also creates specifics on how broadcasters should do market based sourcing. The franchise tax changes, the tax rate will be reduced from $1.50 per 1,000 to $1 per 1,000 of the tax base, the amendment tax would be increased from $35 to $200 and then on holding companies you would have the same increase on the minimum tax from 35 to 200 in the maximum tax on a holding company franchises tax liability would be changed from 75,000 to $150,000. Franchised tax calculations would be simplified to make it more analogous to generally accepted to county principles, obsolete deductions will be eliminated and the base would be brought into bit by eliminating a loop hole some corporate since they have tried to use with related parties and that concludes the corporate and franchise task parts. Mr. Chairman, continuing on that chart part six which is analogous to section 32.16 in your bill on page 480 are the individual income tax changes. The bill increases the standard deduction beginning in tax year 2016 from 15,000 for a married fund held jointly 17,500 it continues to increase that standard deduction $250 until the tax year 2020 when that amount is 18,500. The bill reduces the individual income tax rate a quarter of a percentage point from 5 3\4 to 5 1/2% in 2016. It also changes the way itemized deductions would be treated at the state level, right now there's a $20,000 cap for mortgage interest expense in property taxes paid on real property, and a person is allowed to carry their charitable doc deductions. However, there are several other itemized deductions that tax payers aren't allowed to take forsake tax purposes. This would allow a taxpayer to use all their itemized deductions, but would put them all under the $20,000 dollar cap. The bill would also adjust to withholding ask the department to adjust to withholding tables beginning with the 2016 tax year to be on August what the rate would be, if
it was a 10% higher and that is to address a problem that we've incurred this year with many returns being filed with low balances due and no remittance with those returns. This would help to take account of just miscellaneous type incomes of which there's no withholding requirements or estimated tax requirements. The next part seven which is analogous to section 32.17 in your bill would increase the excise tax on mill machinery and other types of capitalized equipment from 1% with an $80 cap to 4 3/4% with a $500 cap. Section 32.18 in the bill beginning on page 485 begins your sales tax changes. The first change is that the tax rate on boats and aircrafts would increase from 3% to the state general rate in the state general rate is 4 3/4%. Right now there is a cap on boats a $1,500 that cap would remain, there's a cap on aircraft $1,500 that cap would be increased to $500. There's also an exemption in the bill to $5,000 I'm sorry it's not 500, $5000. There's also an exemption in the bill for service contracts on aircraft and engine, certain qualifying air crafts and engines if that service contract is purchased from the manufacturer within 90 days of the purchase of the actual tangible personal property thinking that the $5000 cap would have been met. And also increases the sales tax base to include repair services, maintenance services, advertising services and it repels the sales tax exemption that is currently imposed on installation making that subject to the tax. It also expands the sales tax base to include pet care service and veterinary services. Last year there was a cap put on the non-profit sales tax refunds. This bill will continue to limit that the ability to obtain that refund, the amount of purchases that would be subject to the refund. Right now a non-profit would have to purchase over $666,666,667 worth of tangible property and services before the cap with a 45 million would be reached. This would gradually decrease the exact amount of purchases so that at the end you would have a $1 million cap. The next part of the bill is your local sales tax distribution, this is section 32.20 of the bill beginning on 495, these provisions are just like the provisions that you saw on house bill 117, however, in this part there has been a couple of changes, and I will note those. The first is that beginning effective July 1, 2016 the distribution under all three articles of your 2% local tags articles 39.40 and 42 would all be distributed on a point of collection in a per capita percentage and those are noted in your chart it would face ENC, by the year 2019, 2020 it would be 20% point of collection, 80% per capita. Food would be distributed in the same way there's no change in the way the dollars would be distributed between the county and the cities in those counties right now the county decides whether it's an advalora method or a per capita method and they would still retain that ability. The city held harmless is being retained with no changes and this bill differentiate the one that you had before your last week and that the county hold harmless is also retained it will continue to exist. The formula has been adjusted to make sure there's no change in the amount that counties would receive and the amendment that was adopted in appropriations there was a change made to the way counties could use the money. Right now under articles 40 and 42 counties must use a percentage of that money for public school capital outlay purposes in the amendment that was adopted. It was House 97-AML-50, it was amendment number one, on page three of that amendment it was changed so that there's no longer that requirement that counties use a percentage of the money for public school capital outlay but they would have to use the money that they received from the percapita distribution for public education purposes including community college education purposes. The next section of the bill is section 32.20 it can be found on page 495 and these are the local sales tax options, this section of the bill is similar to the provisions that were in House bill 12.24 the end of session last year and it is similar in that it authorizes a new local option sales tax of up
to half signed for education, it increases the authorization for a public transportation tax from one quarter cent to a half cent for 94 of the counties, and it also increases from one quarter to a half cent the tax for general purposes. A county could levy any combination of these up to a cap of 2.5% with a referenda. The new aspect of this section is that counties may only enact these in one quarter increments, so you could only have a quarter cent on a given referendum ballot. With regard to the cap of 2.5% this will impact four counties Mecklenburg, Wake, Forsyth and Guilford. They currently have a cap of 2 3/4 and under the bill their cap would be set at 2.5%. The proposal also uniquely impacts Wake with regard to its ability to levy the half cent for public transportation in that currently Wake could hold a referendum for a half cent enjoying this special district that exists with Durham and Orange. But under this bill Wake would have to hold two successful referenda at a quarter cent each in order to reach that half cent, and other than that as I said this section is very similar to that provision from last year. Okay, were we going to pass out? Okay we're printing, there was a printing error on this little one-sheeter here that says the repeal of the county hold harmless that is incorrect. We are printing, and we'll distribute the proper one of those momentarily and while we are waiting on that, first an announcement Pensions & Retirement will meet at 4 PM in the normal meeting place as Senator Apodaca would say, and we'll take questions now from the committee, Senator Tillman. Thank you, Mr. Chairman. I'm looking back on page 5, Section 27.8. I know we're trying to slip all those funds back to transportation. This one I need to be a little somebody can tell me, I think this money here goes to the organ donor program, the staff know if that's where that money had been going, they will all figure it once now. Yes sir, Daniel [xx] fiscal research, that is correct it goes out to organ donation non-profit. The most recent one was the community health coalition and corporate and total christian ministries, the biggest receiver of that fund is Donate life North Carolina in September 23rd, 2013 they received their last grant, and that was for they received two grants, so one for 503,000 and another for 300,000. Follow up. Follow up. Mr. Chairman, I don't know if that will mean the end of the donor program or not the organ donor program saves the state a lot of money, if these people didn't get a kidney or a liver or a heart we would be expending a lot of money trying to keep these people living, and I just wondered if as we move along we'll keep that in mind. I don't know where I'm going with this right yet, but I do want to know if that's going to be the end of the organ donor problem. I hope not, but we'll [xx]. Well, we'll need to ask that question a little later if we can find that out. Sure, Senator Blue. Thank you Mr. Chairman. I have a series of questions, but I'll ask the obvious one first. What is the rationale of the drafters, the sponsors of the provision that singles Wake County out on the public transit question. It's a debate that sort of like a bad penny, it keeps coming back. And we went through that during the last session, but of all the counties where you're taking away options in addition to taking away the local sales takes generally, you're taking away this unique, unique ability that we gave Wake County in the last session to impose a one-half cents sales tax for public transportation, so that it could then join Durham and Wake County and I know you [xx] is going to be that yeah, I'm taking it away, but you forced the voters of Wake County to put on two elections,
the cost associated with it and do it a quarter of a penny at the time when they've already joined an agreement to join Wake, I mean join Orange and Durham counties in the health and sales tax for public transportation which is something that takes a tremendous burden off the state. If these three counties jointly want to try to do something about congestion on the highways and create a public transportation system whether it's trains or buses or all the other things that they have agreed to do with it, why do we consistently try to take that power away or make it more difficult? If somebody could answer that I would at least Thank you, Senator Richard [xx]. Thank you, Senator Blue we din't take it away. It was divided over two what we're trying to do is to be consistent with over 100 counties and how this is going about the effort was to, they were a number of counties that had the ability to do quarter cent on transit which was something that they never would do so what we did is give a lot more flexibility in how that is broken up and utilized, so in reality it is still there for Wake county to decide if they choose to do two quarter points over the period of time then they will be eligible for the 1 1/2 cent to do what they needed do. Thank you Mr Chairman. Senator Richard you understand that your are talking about now two elections. We went through all the hoops last time so that and ultimately came out with provision that Wake county could conduct this referendum by 2016, so that it could join your county Mecklenburg, Orange and Durham and I think two other counties may have it, Guilford and Forsyth, so there're only six counties that had this ability and what you're doing now is saying that you have to go to the voters two times with a quarter of a penny each time, now if you pay as the first and then you go back and can't pass the second, then you've defeated the whole thing, and it raises questions to what you do with the money that you raised from the first knell, and it seems that all of these gyrations that you're going through to prevent Wake County from having a referendum by the citizens of this county on what kind of public transportation they want to support doesn't make a lot of sense. And I'll point one other thing to you since I'm asking the other question. You say that you are trying to accommodate consistency with the other counties that have this 1/4 cents sales tax, in the same bill you're uniquely singling out Wake County, Durham County and Mecklenburg County to treat differently than the other counties when it comes to JDIG and other things for job creation, so what stretch of the imagination does it take to treat Wake County differently since it is the only county that's adversely affected by this provision, and it only affects the citizens Wake County and gives them the opportunity to decide themselves whether they're willing to pay a 1/2% sales tax to improve transportation here. You've got a question or whats that? Okay. Speech. Well that's a speech question. It was a very good concluding question, thank you. It's, Senator Blue I don't believe there was anything agreed upon the last time because 12.24 never did pass in the last, the short session last time all it did is allowed for more flexibility and the traditions of Wake county will have an opportunity to overtime, do either transit or transit in education or transit in general purpose but it let's the people decide how they want to move forward with that and keeps it under the 1 1/2% cap. So it's something that will give some certainty needed some clarity as to how to go about doing it and also helping out in numerous counties that weren't even eligible for this before, so in essence we are trying to parade more flexibility and opportunity for all 100 counties to be able to find a way to raise the money with a referendum. One follow up to you Mr. Chair, as I understand the Chair's earlier pronouncement I'm unable to offer an amendment at this point to fix this little problem that only affects Wake county is that correct? That is correct, but you may offer on the floor. Another question Mr. Chairman, since the amendment that I would offer under our rules another of the constitution would be a material amendment, if it were to pass on the floor then it would delay this Bill from going through its final passage on Thursday, is that right?
If that amendment passed, yes sir. Absolutely if they're reasonable and fair at some point, and it might pay us, but I cannot offer it in this committee, is that right? That is correct by the rules of engagement. May I ask the Chair where are those rules I've never seen before? No, Sir I'm merely well trained ped up here, and that's what the instructions, that we came in and the rules of engagement today. Senator Waddell. Thank you Mr Chair. And my question concerns the section 8.39 which talks about modified driver education training fee, and I see these unknown fees conveyed to local school districts. My concern is that it would hammered by the community colleges and that many students, low income students will not be able to participate here, so what is the number of students that you think would be affected by this? I beg your pardon I didn't hear the last part of question, I can't see you. Okay, I'm concerned about [xx] education here. You've got unknown fees conveyed by the local school system and my concern is that many of the students of low income will not be able to participate, I know you don't have a dollar amount here but you say that $65 per participant, what do you think would be the amount that the community college would charge and what would happen to those students who will not be able to participate because of the low income. Thank you, staff can take over on that and when they finish senator Hise can pick up on that, okay. Thank you Mr. Chair, Senator Waddell to this point I'd note first that this fee that's being modified is solely related to the public school's administration of the program which would again continue and affect the first year of the biennium only. Currently local school districts are authorized to charge a fee of up to $65 for student participation in the program. Not all districts currently charge that fee, in addition there are funds provided this current budget year on behalf of about, 135,000 9th graders across the state. It's unclear what future participation might be especially in light of the amendment earlier and senate appropriations but I think Senator Hise will come in on as well which no longer makes mandatory participation in driver training programs to enter their graduated driver's licence program. Thank you. Senator Hise would you like to follow up on that at all? I think it's fine Mr. Chair, just want to say that the provision in finance did raise the test score and did raise the number of hours required to be driving with a parent or legal guardian before you move forward, but it did take away the fee, the requirement to take drivers there before getting an entry level permit in North Carolina Thank you Senator Brian any question? Mr. Chair, question for staff about the public school capital outlay, could they explain, somehow I got lost in this about article 40, article 42 year mark for public school outlay if they could explain that to me, and then if they can refer me to the special provisions, I don't know if that will help me or not. Sure, I think Miss Obrien can go through 39, 40 42, whatever we need there. Yes sir Mr. Chairman, and right now under the current law there are two half cent local sales tax authorizations, one is in article 40 of the half cent that is the county receipts from article 40, they misuse 30% of that for public school capital outlay, there was a second half cent given to counties in the late 1980's in article 42 of the money counties received from that half cent, they misused 60% of it for public school capital outlay purposes. What the amendment did, that the body approved and the appropriations committee was to remove those two requirements that the counties must use that percentage of money for capital. It substituted a requirement that of the money that counties receive from this per capita distribution of all the sales tax revenue they must use it for public school education and community college purposes. Okay, just [xx] when was the Would you like to follow up on that please? Yes, it's followup I just kind of, I got lost in one point. When was the change, is
the change to public school education the community college in this bill or in some previous bill you referenced? And this where I'm lost. It is in the amendment that was adopted in the appropriations committee earlier today. And then but prior to that we were still at the 30.60? Yes ma'am. Is that correct? Yes ma'am. And there had been no provision and without that amendment we would be still been at 30.60, is that correct? Yes, Ma'am Okay, and then I had a follow up question. Mr. Chairman, I'll be over quickly. Yes, Senator Brown. Senator Brian, the reason we did that is some counties may not need additional schools, and it just gave them more flexibility, counties now could use 100% for school construction. So it just gave them a little bit more flexibility than it had before. I think it would be better for the systems to figure out their own needs. Thank you Mr. Chair, if I get a chance I might come back because I got to find my follow-up and it might take a little time. Senator [xx] Thank you Mr. Chairman, I understood Senator Richard to say that there is consistency among all the counties as relates to local option sales tax so for the 94 counties that are only at 2.0 now, if they want to add a half cent for whatever reason, do they have to do it in two quarters in increments or are they allowed to go to the voters in single half cent bond? They have to do the one-quarter each for either transportation, transit, excuse me transit general purpose and education, one quarter at a time. Do you have a follow up Sir? I have on the drivers head piece that was discussed earlier. As I understand it, taking $27 million and this may be for staff, $27 million out of the highway fund that used to fund drivers head, is that the right dollar amount? It was 26 to 29 and that was done last year. Follow up question. Certainly. How did we fund drivers haed this year then if it was [xx]? Mr. Cameron, would you like to go over that or [xx] the fiscal research, the budget for the prior year actually establishes drivers education transfer from the highway fund as non recurring transfer until there's no forth going transfer from the highway fund to the general fund for the program. As Brown alluded to in his earlier statement, the provision relating to the increase in the cap for the fee to the actual cost of participation is one method for which the program can be funded, with participation fees. Do you have a follow up? I do, how much money has the state, whether it was recurring in the past or non recurring last year how much money has the state contributed to the education of young drivers in North Carolina? Mr. Chair, Brian Madison again, Senator Stein, the appropriation this year to LEA is about 26.3 million Thank you. Thank you, Senator Ford. Thank you Mr. Chairman, I'm trying to follow the money here, and I need some help from staff and some clarification as it relates to the corporate income tax if you look at the summary chart here, you'll see a repeal of the rate triggers, rate 4%, 2016 - 3% and 2017 that to me appears to be real money, but we're not showing it as a loss. What's the justification for that? Staff. John. OK, it was already reflected in the consensus forecast. Follow up? Certainly. But in every other category we're showing loses and I'm still not quite understanding if the money is there now, and the rate is going to be reduced which means we're going to have less revenues, why not reflect that in the summary chart to show the loss in revenues? I'm real puzzled why we're not being a little bit more transparent, Mr. Chairman. Okay, let's Dr. Boardman can you handle that for us? Yes I will. The consensus forecast was all members received a memo in May 2015. At that point, we projected that the triggers for the cooperate would be met, and met easily both years, so we incorporate that into the consensus forecast. At that time we've also included a chart which show the impact.
So, that's our starting point with prospect to general fund, now going forward there're additional changes that are in this bill and those reflected in this chart. Do that answer your question Senator Ford? In a roundabout way, but I still look at it as real money that was being collected, that is no longer going to be collected so it's no longer available, and I respect the forecasting and I'm ecstatic that we hit these triggers, but it doesn't look like a real financial picture as it relates to the moneys that were available which will not be available to the state. Okay, Miss Everest can take a stab at it see if she can clear it up one more time. Senator Ford, that is a matter of existing law, so even if you did not make, even if you did not codify in a different way what this body chose to do two years ago, the result would be the same. So that is the reason it's not on your chart, those numbers would have been taken in to account two years ago in your physical notes, where you would have seen the numbers. This is a matter of law that was changed two years ago. This just puts it into the statute in different way but it is not a law change. If you'd have to affirmatively stop that trigger and increase the rate if you wanted to see a number on this piece of paper. Senator Brian we're back to you for one last. In relation to the minimal wage standard for the JDIG modification, that's my area of question. We are saying that the standard will be a percentage of the average wage for all insured private employers in the counties, I have two questions. One, is there any special provisions and where is that one and two, what does insured private employers mean is that like unemployment issue, health insurance issue, help me. Senator Richard tried to help me out I couldn't hear a word he said. Dan over there, wave your hand Dan, get off there Senator Brian the special provision is on page 460 of the bill, it's section 32.11 sub C and you see the table on lines 23 through 27, that gives them minimum wage standard percentage. Okay. And that's just the word users just a fancy way of saying private employers, it's the standard that we use and one will see in a economic development programs. One follow up do you have, is it easily available, or maybe you could email me if it's not something you can tell me right now, example of what that would be, pick a couple of counties or something and tell me what that average weekly wage it would be? We can get you that information. Okay thanks. Thank you. And then I had one other question. No ma'am, that was two, remember you had go ahead. I don't know but I [xx] unless I miss something can somebody update me on where we are we're Golden Leaf, and where the provisions are in this big I do not know that is covered in that but It's got to be somewhere. Senator Brown can. I would just say we give Golden Leaf an additional of $20 million each year, I think it's a little over 20 actually. $20 million seven how much is that? 75,000. Okay, and can stay off to his reference made generally where that would be is in either one of these books. Does any one of the staff happens to know where that is? Okay thank you sir. [xx] fiscal research, Senator if you wanted to turn to page 10, I believe actually take a look at [xx] I almost hit it, that's the lottery, okay here. I was close. Is there a point of just saying. Okay, thank you. Thank you ma'am. Senator Mckissick. Well a couple of questions and I guess they are relating first to the broadening of the base. Let me get this [xx] perhaps can help me with this. It talks about expanding the base and it gives some totals per year for specific items such as installation repair, veterinary services pet care and advertising but I don't see a total for each particular year as relates cumulatively to what we would be obtaining as a result to this basis banking. Do we have numbers that would provide that information?
A second column sir. If you look over, installation repair 90.9 in 2000. The thing again is a cumulative total for all of them other than. Is your question that you want each individual item broken down? Yeah, I guess I was looking at if you total up the installations, the veterinary, the pet care, the advertising for each specific year, what is that coming to? Because it wasn't clear to me what that was, looking at this particular chart. Okay, we'll let staff work on that while we move on to another question [xx] that question. Okay follow up here. I noticed in the same chart here it referred to under repeal tax on banks effective January 1 of 16. It looks like it's talking about 12 million, but I didn't recall a specific provision in dealing with repeal of a tax on banks unless that's something we've previously enacted. Someone share with me exactly what that amounts to. I believe that is a privileged license that some of the larger banks pay, and we this statute would repeal the privilege license paid. Okay, so that's repealing something that they are currently paying? The Privilege License Tax on Banks, yes. Okay, alright and I guess the additional follow up here if I could, and it's going back to this some of the language here, I guess back on page three, dealing with landfill charges and the compensatory mitigation requirements. It appears as if we are moving to an annual fee, but there's also language here talking about the fact that we would have lifetime permits. So can someone explain to me how these are interacting and working together. Are we giving out lifetime permits for these landfills and transfer stake ins but they will continue to pay annually, or are they paying one time for a permit that just would be good forever? Okay, play. Mr Chair Jennifer Horton with fiscal research that is an annual a permit fee that the cemetery, landfills and transportation will pay annually. They will receive a life aside permit so their permit will be good for the entire life of the landfill, when they need modifications to that permit, they can come back to the department and receive modifications on that permit with no charge, because they have already paid the annual permit fee. Thank you, that clarifies it. Thank you. And one last question that's same related item I don't know if they were to be compensatory mitigation requirements. Perhaps you can help me with that in terms of what we're doing in terms of it looks as it was no longer going to be accepting payments in lieu of what you always see to be a pretty good programs so how is this being changed and what would the impact be? Mr. Chair if I may? Yes Jennifer. Jennifer Horton wiith physical research, so this particular provision basically directs the division of mitigation services to stop accepting any new mitigation fees for impacts and certain river basins. The news the cap fear and the tap chemical river basins 30 months after the effective date of this act. The purpose is to begin to require governmental and non governmental entities, to begin to pursue their compensatory mitigation requirements from private mitigation banks. So dean will no longer be able to provide those services for any new project moving forward 30 months after the effective date of this act. There's one exception again that's for the departments of transportation and the departments of commerce for projects that they are sponsoring. If there's a need, if there's an emergency need or an unforeseen circumstance they could still go to the division of mitigation services to receive those services. Obviously the division receives those fees and they are running a program that impacts unknown on that program at this point. It solves the. Excuse me you haven't. One point of clarification Mr Chair and that would be it, so the private mitigation banks will continue to exist and will continue to function. Mr. Chair yes that's correct. Thank you.
Thank you sir, Senator Stan. Thank you Mr Chairman, couple of questions for Mr [xx] amendment if I may on the CIT. What is the current CIT corporate income tax rate? Right, the current rate is going to 5% from 6 to 5%. Okay, and then with this bill quantifies it will go to 4% in 2016 and then 3% in 2017, is that correct? That's correct. Follow up Mr Chair. Follow up. So am I right that the cost of the general fund of that change for 2015 - 16 is 109 million? Yes Sir. Correct quick follow up and is it in 16-17 is the cost of that change 349 million per year? Yes Sir. Follow up is it 503 million in 17-18? Yes that's what we estimate once it hit the both breakup 5-4, 4-3 are fully in place. And then in 18-19 and 19-20 is 528 million and 554 million? [xx] yes. Yes sir. Thank you Mr. Chairman Thank you, Senator Blue Thank you Mr. Chairman following up on another item and interpreting the sheet and again I see that in the sales tax, the additional sales tax, in taxing charitable organisations. In 2018 that it generates $175 million, and in 2019 roughly $230 million, that's primarily from health care facilities, hospitals, and universities or colleges, is that correct? That is correct. Another question? Follow up. If in fact they are doing the same thing that the state is doing that is the university whether any of the 38 colleges or universities, or the private ones across the state doing the same thing that the state university is doing, and if the hospitals say Wake mate here is doing the same thing that [xx] hospital is doing, competing in the same market, doing the same kind of service, why should they be treated differently? Then the state entity that's doing the same thing, aren't they serving some broader state purpose this dormitories they got to build, these hospitals they're going to build and you can't build any of them now for under $15 million by the way, a hospital will cost you $150 million. Aren't they doing the same thing and I address that question to whoever the major sponsor is of this provision that imposes these taxes, these $230 million in taxes on charitable, non profit organisations such as hospitals, colleges and universities and churches in some instances. I would make a differentiation there, there is a difference in a charitable organisation and a non-profit organisation, for not for profit organisation as you know. But to follow up, none of them are permitted to use the profits for anything other than charitable or nonprofit purposes. To put back into their own organisations. Absolutely. After they spend it as they see fit, of course. Senator Ford. Senator if you don't have a question, you take it back? Okay. Senator Waddell? Yes, just one additional question here. As you look at the itemized deductions concerning charities, and now you say that the 20,000 it's capped at $20,000 but you will include medical and dental expenses is that, I'm on page 4, is that 20,000 total or is separation somewhere? That 20,000 is a cap, it is total and I believe maybe my counter can help me but I believe all deductions that are on schedule A can be used as a deduction now according to this. Is that correct? Yes Sir. My [xx] and at finance council that is correct. Mr. Chairman So, is this better for an advantage for those who cannot in last year deduct medical? I would say I would just say it seems to be a disadvantage for them.
To answer your question, I would say yes Senator Waddell, 93% of all people deducting or making medical deductions would be covered by this clause. Follow up Follow up. But when you put all of these together, they couldn't deduct it before, so it was really a disadvantage, now we've allowed them to, but this is still an advantage in as much as it's connected with so many other things. In my opinion yes, it is more advantageous. Any other questions, I will ma'am make a comment before the motion please. Mark I want to comment again that you can make amendments on the floor and remind you that any amendment that you could or were not able to make here will be eligible to be made on the floor and if the amendment had failed here you could still make it on the floor, so we did not cut anyone off by being unable to do that. And I'll also remind you that pensions is meeting in just a few minutes and that's one reason we could not take your numbers and have everything prepared before the next meeting. We've tried to get things out earlier than ever this year so that everyone had a fair shake and a fair shot at this and that we could have our debates and we've done that thus far, and with those comments I will entertain a motion from Senator Apodaca. Thank you Mr. Chairman, I move for a favorable report as to the senate appropriations base budget committee propose committee substitute as amended. Unfavorable as to the original bill with amendments to remain un-engrossed, with leave for the staff to make technical corrections and conforming changes and with a referral to the senate committee on pensions and retirement and aging. Thank you, the motion is before us, all those in favor please say aye, opposed no, motion carried, thank you see you all in pensions.