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House | July 22, 2015 | Committee Room | Appropriations Committee

Full MP3 Audio File

The first item that we will take up on our agenda, we have a bill, house bill 338 and representative [xx] moves that the PCS be properly before us without objection, so ordered and representative [xx] is here to explain the bill and the PCS. Thank you Mr. Chairman and members of the committee, I know you guys have a lot of bill in the calendar but I'll be brief, but also we're trying to be thorough. This bill has taken a stop already through judiciary has passed through and we're making here to appropriations to make sure that we've got the right aspects of funding if necessary on this bill. The legislature a few years took some efforts to reform the aspects of driving privileges and driving out of license, things of that nature and those reforms are very good in terms of co-deficiency but I believe we have some unintended consequences with those reforms, and the reason why I'm bringing this before you is strictly on the aspects of public safety, when we think about driving without license, we think about the fact that we actually have license [xx] in the state form the aspects of those who traverse our public roadways and public highways that they actually have the right aspects of notification liability and safety training. Right now if you think about the actual aspect of how our laws play out to the public, I hope you will find that what we currently have maybe alarming and that this bill was greatly needed. Say for instance I'm an individual who is inelligible to receive a driver's license eligibility is very clear and North Carolina through the statutes, I believe it's chapter 20-7 in regard to eligibility if I'm ineligible to receive a driver's license, if I would be pulled over and be caught with having no operator's license or drive without a license I'd actually go before the judge, get a class 3 misdemeanor, I'd pay $100 fine in court costs and I'd walk away and on a past defense, I'd actually get points against the license that I'm ineligible to receive I'd have to be polled a second time. Get points to get a license I'm ineligible to receive a third time, a fourth time in the fifth term which would've to be [xx] l within a 12 month period, I would then have the possibility of potentially mandated but potentially are facing between 20 to 60 days in jail as discretion of the judge. Right now in terms of eligibility [xx], this is a major concern on the basis of public safety, ladies and gentlemen, what I'm doing in this Bill here is trying to separate the aspects from the aspects of deterrence. What that's going to change is those in individuals who are eligible to receive a drivers license, the normal process would actually play through. If you're caught driving [xx] mistake that are eligible to receive. The first offence is normal, the normal track. The second offence is a higher fun and it actually has the potential right now on the fifth offence, to actually potentially face jail term. On the third offence it is again a higher penalty as well as you have the face jail time, and the actual state takes the car. Ladies and gentlemen on behalf of public safety, we need to make sure that our laws are deterrent against convening aspects I'm training in public safety. I don't often speak about legislation and tend to pull at people's heart strings. Ladies and gentlement you have face to face a family, a mother and a father, who've potentially buried a child because and individual has reversed out public highways that are actually ineligible to receive a drivers license, but because our current laws are so relaxed, there is no incentive whatsoever, they even get a drivers license the support to this bill just know that the PCS is a little linked here than the original bill, I've veted this through AOC and they wanted to clean up some aspects of procedure statutes within this Bill and that is what you see about the [xx] that is invaded through the district Attorney as well again as [xx] adjust we got appreciate your support Lesdale, Any question from the committee, Representative Jackson is a comment okay? Comment is perfectly fine. Thank you, ladies and gentlemen I think you all know, Excuse me, I try very hard not speak on every Bill that comes through here, but when I read this one I just couldn't help it. I must be clear, you're not eligible to get a driver's license because you don't have a

security number so you said no two classes of people, If I drive on the road with no drivers licence, I'll be guilty of a class three misdemeanor forever It not until my sister Seer[sp?] in my lifetime that I would be allowed to go jail and at that point, I could only go to jail for 20 days however if I'm here without a social security number driving down the same road as the first [xx] and get stopped for identical [xx] on the second offence [xx] $400 fine, and on third offence some [xx] to go to jail. To me that sets out two classes, two classes of punishment for the same kind of conduct that we're are punishing, driving without licence. I can't believe that can constitutional, the idea that we're going this way with no operator licence but two years ago we reduce the punishment for driver without license revolt, when you're charged with driving without license revolt means your licences is revoked for something you done, it could be as simple no [xx] seat belt ticket, never gone to court they revoke your license, it could for killing someone on the highways that the state misdemeanor death by motor vehicles you would your license for years, those people [xx] could not get jail term again and so they had four prior convictions on the [xx] and we did that as money saving mechanism in our budget that change was done in the budget, and I believe it showed about a $2 million savings I think [xx] county fund because we will no longer have to point this people attorneys and so I believe that the cost of doing this bill will be substantial just top on my head. I can think of several things that will go up in cancellation in our county jails which honestry because the state will be going to jail up to 60 days, but it's going to cost the county, it could [xx] our court system because our judges will have to make a decision when that person first steps charged with no operators licence, to ask him have you had a prior offence? yes your honor Are you eligible to get a drivers licence? Kinder of a prop[sp?] road Do you have a social the security number, and if that person answers no, then the judge will have to appoint them attorney because they would be eligible under this bill to get not less than 20, not more than 60 days in jail that will take a lot of time in district court where offence like this typically take less than a couple of minutes, it's going to add a lot of that, you are going to have [xx] counties[xx[ a lot of [xx] defenders without drivers licence currently what they do is, they come in, they pay the court cost is that what you say? They come in and they plead responsible, they pay to court cost, they get out of there. Well now the DA's office is going to be looking at, what can we do to keep this person out of our county jail and the only choice they're going to be given is to just out-right submissive. So we would be losing out on this court cost. And how prove this you'll always here the can't proven negative. In order to prosecute this offense you have have to prove that this person is ineligible to get a drivers license. How do you do that? Do you subpoena somebody from Homeland Security to come to court and say this doesn't have a social security number, cause the defendant has the right not to say anything. He didn't have to admit he didn't have that, so how does the state prove it? They have to get someone to come say John Doe could never get a drivers license and this is the reason why he doesn't have a social security number. How do you do that? How much is that cost to do it one time. How about the 10, 000 or 100, 000 times across this state every year, and that doesn't even count the cost to [xx] this if we're really serious about public safety, we wouldn't be looking at trying to take people's vehicles, what we would be talking about is how to get them drivers license how to get them drivers education fund. How to make sure their cars are insured so if they're on an accident the innocent person isn't is covered. Third thing I want to say about the bill is how it's drafted, and this part I really don't understand because on the third offence the judge may give not less than 20 days but no more than 60. So, a judge to put someone in jail. But if she chooses to put someone in jail she has to do it for at least 20 days, she can't order weekend in jail, she can't order two weekends in jail. Second offense, traveling and paid

offense in North Carolina usually seen as a level two has a minimum 14 days in jail and judges often allow people to do that every weekends. For this, for driving with no licence, that would be the only offense that will have to be given if the judge who wants to give them jail time, they'll have to given at least 20 days. I was representative Baskerville was here today to tell you about his experience prosecuting but on often times people come in and they've been in, they've got picked up and they've been in jail a week, they've been in jail 10 days, and a judge gives them credit for time served, and that's a matter Saves the tax payers money, gets them on their way. Well unless that person comes in the courtroom and have him served already 20 days, judge won't be able to give credit for time served. Because he's not allowed to give a sentence of less that 20 days. It's no time or it's 20 days, so that doesn't make sense to me. Representative Jackson. The chair has let you go on for a while. We have a pretty busy agenda, we've got some other people to speak. If you could save the balance of your comments or anything you want to say again or when the bill gets the floor. And what I would like to do is we have on the list Cleveland and its cafe o'clock, Fisher, if I just represent Glazier, I just want to hear on matters of the cost of this particular legislation because we see appropriations committee and I think other wise representative Jackson has made the substantive argument for why he's not pleased with the bill. I would also remind members that this did go through the J2 committee, so this had been through a judiciary committee. So, if everyone else can be very brief and confine your to, for issues of appropriations that will be appreciated, Representative Cleveland. [xx]. Alright, we'll hold that motion for a moment. Representative Insko. Thank you Mr. Chairman, and I have a question for Staff. And I'd like to have data for the last year, at least last 12 months on how many people have gone through our court system and then we'll be able to get that information if the staff has that data now on the need for this bill I would like to have that data comparing any increases or decreases as a result of our change in law, and I can give a definitely but I see no reason for this bill I know of no need for it and I think our time is better spent on other issues. We will staff has heard that request and we'll provide, do you have the information now or you'll provide it later. Yes sir, this is WIlliam Charles fiscal research I'll get that information for you representative Insko Thank you very much, representative [xx] representative Fisher. Thank you Mr. Chairman, I have to say that and I will have a question for the bill sponsor just shortly but I have to say that this sort of puts driving safety in North Carolina in reverse if you'll pardon the upon and I know of so many people in this state who are and I've actually heard from them in the last several months who are trying to look for ways to be able to get to work, to get to school, to get their children to school, to get to the doctor, to get their children to the docto and to me this just puts everything in reverse. I would much rather see appropriations committee looking for ways to get driver education to people rather than to punish them for not having had it and my question for the bill's sponsor or for staff is how much money is being appropriated to provide opportunities to get driver education in this state? I actually responded to that representative Fischer. Well let's since that's a question with regards to how much money is being provided for drivers' education the staff have that number I believe it's around 29 million if I'm not mistaken. And follow up Mr. Chairman

I would be interested to know as we begin the conferee process on this budget, how much money do we expect to reduce driver education by in this state Well our respond to that the house budget does not have a reduction in it. Representative Glacier. Thank you very much Mr. Chair my question, maybe it's a comment more than anything about cost, relates to cost and if you look at the fiscal impact statement the staff makes clear that this bill will quote have a fiscal impact and sets out the following cause it can't determine it appropriately because it's a new offence since you're trying hard to judge past behavior and put it into play. But I believe Representative Millers was very candid at the j2 Committee and said we're talking potentially thousands of people here we didn't know how many thousands because that's a little hard to gather but assume a couple of thousands and look at the bottom of page one and you get a sense of what the real costs are here ALC will be 57 dollars per charge [xx] defence services zero to 173 and as Representative Jackson I think correctly stated because you're including now the increased jail time constitutionally they'll be a requirement to appoint council if the judge thinks they're going to have to or may incarcerate someone even for a day, so people before, I think thousands of people before but certainly hundreds who didn't have counsel appointed will now must have council appointed so you're talking about a great cost increase IDS you're increasing DPS the community corrections 131 dollars per conviction and then the cost that's not articulaed here because it's not a state cost but will be born in all of our counties is in the jails because you clearly [xx] the point of it, you're clearly going to be increasing these costs I believe this bill is going to be a million dollars, if you take a conservative estimate of this cost for the amount of inmates that are likely to be, and I don't think there's any way around that and I think frankly our conversation if this would have to come up with a figure given a speculation of the number is where we are, so why reasons unrelated ot the the merits of the bill are, this is a really expensive bill and the benefits we're going to get out of it compared to the cost we're goign to pay don't match up, I apologize to representative Millers because a long time ago after J2 he had said if I had some thought with what to do with this and I was going to talk with him but he came up very suddenly obviously in his mind neglect for not. Ido think some of the points that representative Jackson made on teh details the bill, the structure of the bill can be changed to reduce some of those cost, but there should be no mistake in leaving here that we're talking about a multi million dollar bill. Representative Pendleton did you wish to comment on the, okay, representative Cleveland is recognized for amotion thank you Mr chairman, unfavorable to the original bill and favorable to the proposed committee substitute for house bill 33 Coffee division You have heard the motion, further discussion, further debate I believe Representative Torbett I just want to make a point since its like am not into you orders of conjecture here and it sounds like without due respect to representative Glazier and his comments it sound like promoting people going against the rule of law and I think we depending on the last session we should be promoting people to follow the rule of law and think we need to come back to where we are based on, thank you Mr chairman We have the motion before the committee, all those in in favor of the motion please signify by saying aye, Aye! Opposed no. Division please The aye's appear to have it division having been asked for if you are raise your hands, all those in favor raise your hands, the clerk will count thank you, all those opposed kindly raise your hand, the ayes have it and the motion is adopted. So we'll have some discussions next week on the floor I suppose.  Alright, we will move on now to discussing some aspects of the budget and we wanted to start out with the presentation by Dr, [xx] Dr [xx] has some slides and [xx] you're getting a paper copy of it now we had asked him a couple of

questions for him to respond to, one was with respect to what the general fund might have been or what could've been spent had a table of tax payer protection been in place sometime in the past, and the other is the value of the tax productions and tight reforms that has taken place over the last four, five years, so represetative Boardman's recognized. Good morning I'm [xx] Boardman a fiscal research excavation is a [xx] mentioned I've been asked to present on a couple of concepts if you'll one deals with the general fund, the revenue. It will happen if the revenue were to grow at the rate of inflation plus population growth. And the other question is what are the cumulative changes to revenue since 2010, 2011. This will be a relatively brief presentation, I just have a couple of slides to go over with you so I'm going to go ahead and just jump into it. When I talk about General Fund Revenue just to be clear I'm talking about your tax revenue, you also have non-tax revenue, you also have transfers related to that. The other definitions if you will are state population grows and I'm doing this, not exactly like a [xx], that's a tax payer bill of right which can strain spending on inflation and population growth basis, I'm not saying I'm actually blind up exactly what some of those bills if passed would look like. What I did is just took fiscal year, state population growth estimates and fiscal year inflation and said going forward, if revenues were to grow at that pace, what would they would look like this is a chart with a lot of numbers on it, I just want to draw you attention to each column, the first column other than the fiscal year is the actual numbers. The bold for 14-15 15-16 16-17 are the projections that came out for may 2015 concensors focus, the next column over is what would those revenues, and this is starting in 2005- 2006 what would those revenues look like if they had grown at a different pace? And that pace is the rate of inflation and population growth the difference between what our actual revenues either have been or are projected to be compared with a pace that was quite a bit greater than what we actually realize, the point I want to make, and I think for a lot of forks if we just look at pictures it's a little bit easier than all those numbers prior to the recession, it's great out there, you see that the revenues where actually moving a little bit ahead pays with respect to the states population growth and inflation. The recession hits revenues drop precipitously and they've never caught back up. They've grown close to the pace of the state's population inflation, inflation they dropped off and so forth and there's two reasons for that, one of them obviously economic and the other is because there's been some significant tax policy changes. I counted, when I was putting all these together the cumulative changes since 10 11, there have been almost a little over, there was either 46 or 47 tax law changes that had taken place, I should say tax and non-tax changes affecting revenue when I look at that, that included sunset in other words allowing either rate increases to sunset or incentive to sunset some of those are positive some of those are negative impact is certainly included all the changes, tax load changes that were included in the house bill 998 and then there along the way they've been other tax law changes as well [xx] and some none tax revenue changes for example fees some of those things that have changed over since 2000, 10, 11 all of that was included and when we look at that how did those cumulative changes affect 15, 16 to 16, 17 and this is a pretty

high level summary of those changes but you see personal income for 15, 16 a little low for a billion sales and used tax a little over 600 million, cooperative income tax, other tax no tax to transfers smaller pack but the net impact for 15 16 was a reduction in revenue due to tax law changes of over $ 2 billion, 16, 17 is a little more than that if you go out so those that's the [xx] of that impact that probably hepls explain when we go back and we look this picture, why there's a green line that says here's the space that we might have followed, we see the fall off from the recession and we've kind of moved the law we've kind of drifted away from that and part of that is because of those tax law changes, so the basic question to me was, why has the revenue kept out necessarily a cock back up to state growth inflation Bases are even moved above it like it was prior to recession, obviously big part of that has been because of tax laws changes but that's not in there some target here since we came out of the session we've had a pretty taught time getting a lot of traction economic traction employment grow's been slow, wage growth have been slow, so it is not only tax law changes but it has been a combination of both that have our revenues that are growing at a pace or below That inflation and population growth. That's all I was asked to present. We will take questions. Let me ask just a couple here to begin with. So just to be clear on slide six the 2.2 billion dollars for 15, 16 and the 2.4 almost 2.5 billion dollars in 16, 17 represents the value of tax relief annualized value of tax relief for what the citizens beginning with the since they are  FY 1011 budget that would be correct yes that's the cumulative impact alright and the other question is just to frame it and that is that if you go back to I think a third slide. Give us a third slide the Right, so along the bottom line if you began tax payroll protection for example that has been enacted in the middle of the last decade inflation and population growth today we would be our budget projected to be at least 3.3 billion dollars below that in terms of available revenue blow what that cap essentially would provide for. Yes, tha's assuming a starting point of 0506. Assuming that starting point. Okay thank you very much. Representative Stan. Doctor Wodman, to me the anormally in cable analysis is what year do you think is the base year, what would be helpful to me if your office just generate a table is if you would have start with a the last year the unaffected by the recession punch a few buttons [xx] We'd be happy to provide that in the committee. Just to follow up on if I recall correctly Doctor Bondman[sp?] that   would actually be a higher figure that's correct Representative Insko. Thank you Mr Chairman I have two questions one if about the slide number on page four which shows the graph. It appears just looking at this from 2008 until 2012 we roughly were parallel we were keeping up at a lower level but moving the economy was moving parallel to population growth if you look out beyond that now it appears from 2015 in 2017 that you're projecting

that there is a fall off that that gap is larger. Could you just comment on that? Would be happy to the scale I've used here made that difficult to pick up but you're absolutely right that what you're saying is at least over this time frames moving 16, 17 15, 16, 17 that the gap is starting to widen a little bit economic growth over this period hasn't changed but the cumulative impact tax law changed [xx] and my second question also on I think it's on page four the one that Representative Dollar was looking at no that four is where I was it is on page six can you give us an estimate of what we would have needed to do to keep that line parallel to where it was going through 2008 in 2013 to keep that same trajectory what difference would we have to do on our packages in order to get that trajectory going parallel to population growth from 2007, it's still a lot below where we were with revenue but it would've been parallel? As I mentioned there were actually 45, I think it's actually 46 or 47 different tax law changes that have occurred either through allowing sunsets to sunsets or laws, passage of bills that affected the tax laws or passages of laws that affected the fees and non-tax collections for example master ceremony[sp?] was additional 137 is now available to you, that's a positive impact, so, short of not moving forward with all of those changes.  So Mr. Chairman, I think I better wait to ask that question, it has to do with just revenue, how much additional revenue would we need in order to keep that line parallel without reference symptom?  I haven't actually looked at it, in that respect that I can, I'll try get back to you on that. Representative Avila,  Thank you Mr. Chairman, thank you [xx] question, when did the 46 or 47 changes take place? Are they evenly spread out or they comp[sp?] together and does the political and the economic do not always overlap because there is a drag time for the economy to catch up for those kinds of changes. What is that, that we looking at here. Obviously, well maybe not obviously but the biggest number of changes occurred with the passage of House Bill 998, is that touched a lot of different areas. Some of the sunsets that occurred and then we're going all the way back to 2010/11. We're small at the initial but they sometimes have longer impacts out but but the majority, I mean the lion share if you will, of all those changes occurred in the 2013 session with House Bill 998. Rep. Daughtry, Follow up I'm sorry The question I had about the overlay of the political changes and the catchup with the economics, what is that going to look look like in terms, we understand there's not an immediate recoup when you do a tax change. Are people expected, the business it doesn't work that way, so what are we looking at here? I think part of, what's included in part and I may not be to actually get to the level of detail that you're hoping but what we're seeing and have seen really since the end of the recession is that the economy hasn't caught up and hasn't surpassed some of our baseline or basic expectations and we're still at May 15 2015 consensus continue expects that trend to continue, where we study we move forward but we don't accelerate above some based or average type growth, so it's difficult for me to answer when does that overcome or begin to have a trade off with some of those effects. Representative Daltrey[sp?]. Thank you Mr Chairman, Dr. Rodman[sp?] I believe you indicated that our revenue growth over the last few years have been slower and somewhat staggered than we had hoped. Taking that into consideration with additional tax cut, how would

that impact the economy now if we went forward and cut taxes additionally what could happen if you can guess It's really probably outside the scope of my actual ability] to measure because I have so many variables that I follow my biggest two drivers are just employment and income and that really determines what's happening, how tax law changes and how tax policy you know plays there and so if I see 10, 000 additional jobs over what I expected, how can I pass that out as to whether it was a result of effects national policy changes or just national economic changes. It's difficult for me to do with the data that I have. Maybe I asked the question wrong, what impact has the tax cuts that we have already put in place had on the economy maybe you can guess that, Again look at it a very static sense and I know that what you have done is, looking at 15, 16 I think that you've lowered your tax liability to tax payers by 2.3, we're estimating $2.3 billion. I guess what I'm saying is the difficulty is knowing how that plays out in the economy. It's beyond the data I have and what I work with to be able to provide that kind of details analysis that will be needed. Representative Stam. Yes, Dr. Odon, I assume this is projection includes the 4% the clerk protects, right? Does it also include going down to 3% or is that still in the air p [xx] That does and to reiterate with the May 2014 consensus forecast we project that the tax revenues which were part of the corporate rate triggers not the total revenues but only tax revenues. The tax revenues for 14, 15 would be higher than the trigger amount and therefore the rate will go from five to four, we also project that in 15, 16 tax revenues will be high enough to get again [xx] the rate cap from four to three and both of those impacts are included in this number. Rep. Browley Thank you Mr. Chairman. Dr. Bodman, I know if we were talking about the United States we would use a phrase gross domestic product to talk about what our total economic output for year was. What's the term that's used for a state, is it the same thing? It is, it's usually identified more subscencly by using gross state product but essentially the same concept. Thank you, follow up. Yes, go ahead. On your chart on page four you've got one line that would show general fund, budget revenue and inflation and population growth. Now that is a growth based upon inflation and population but bears no relation to the percentage of the gross state product that you're taking in taxes, is that correct? That's correct. And then the other line shows the actual revenue that we were taking out of the economy, once again not necessarily a percentage but just the actual dollar amount, is that correct? for the period showing as a recession the land dropped because tax rates were remaining the same or actually at one point I think there was a tax increase, a temporary 1% sales tax increase and a 6% surcharge on adjusted gross income for the state of $60000 or more than actually generated additional tax revenue as a percent, is that correct? They were enacted in the 809 by the operator in the assembly a once increase the sales tax and the surcharge on personal income, I cant remember the exact, two or three percent I think income was three percent but [xx] charges did apply five percent so when that was expired and our rates [xx] we were actually taking and a smaller percentage of the gross state product is that correct? Yes and the land, the lower land which you were showing where we are trailing that is once again absolutely dollars and its not really representing what percentage of the state income activity we were taking is not correct I think thats correct, the point is I said we have two issues to play have

been asked to provide the committee and that is I think to your point but there was an economic aspect to this that revenue comes out of what you consider out of your growth and population or what have you or economic activity measured by gross state product but you also had a reduction in revenues and you pointed out two sun sets that are included in the chart I think page six that is the sunset of the sales tax the sunset of those [xx] charges which will allow in the 09, 10 excuse me 10, 11 we included 10, 11. Follow up go ahead then we also have tax rights in 998 as you pointed out, wouldn't one assume from that that we were taking a smaller percentage of the state gross income or gross domestic product then we would have the rate to remain higher? Yes.  So essentially actually the point were raised earlier about the gap between what a normal table growth would be and what we're taking the easy answer is we can raise taxes and close that line we can raise taxes and catch up to that line with that main difference is not because the economy is worse off, the main difference is because we're taking less out of it, isn't that correct? The main difference is, right exactly to chart six again it shows the tax law changes that are produced revenues of the 2.3 billion. Okay, so essentially your chart confirms I think what was, we need to take less out of the pockets of the taxpayers, so that money is available for additional economic activity. I think that chart shows. Thank you say I appreciate it. Representative Brolliam[sp?] before I go to the next person I'm going to follow a little bit not as expertly as you just did, but I think one of the key points here is that key points is: one, there's been substantial reduction in tax burden of the state, already baked in and has been done over the last several years, and spending on the appropriation side that has gotten various discussion is well below what would be allowable under any of the taxpayer protection provisions that have seen or bills that I have seen over the years and I think that's forgotten or missed by lots folks lots of times thank you for your questions Representative Fisher. Thank you Mr Chairman this is a question for Doctor and I'm by the way here Hi, I tend to like to look at things' big picture and I remember in my statistics class, I can't even say it. It was sadistic to me. I knew that you could sort of skew things to make them look just about anyway you wanted to and that's a statistics class, and we see that a lot in real life. But what I'm interested in is without the comprehensive tax reform package that we witnessed last session what do we look like nationally in terms of trending past the recessionary period? How does North Carolina compare nationally? I assume is that that is inferenced to the economy we have floated back and forth with surpassing the average growth rate of the economy and then we tend to slow back down we pick back up but this is kind of common with a lot of states their are a hand full that have a different industry mix that affect that as we're by some of the things that are happening both to to national and international economy the forecast that is embedded into May 2015 and that's my most recent really look in our economy this for us to keep pace with our national economy by 16, 17 actually out takes growth, we haven't done that in 12 and 13 data is just coming out on 14 and 15.  Alright Rep. Pedal Tone. Mr. Chairman I would like to ask Dr. Bordne[sp?] something, I'm new in the general assembly I would like to know hope that you did this but before you did this tax cuts were economic studies done to

show what it would do if we cut taxes and gave that to tax payers who pay them versus income to state government, how will it affect the economy? I can say that fiscal research was not involved if those studies took place they weren't involved, as much as fiscal research would like to be involved and that really is beyond scope of our ability as staff to do that level detail, and I don't want to get too bugged down on it, but these usually require very complex general equilibrium type models that quite frankly we just don't have those types of resources to produce those. And even if we did my take, and I think that most of the forks in the academic world take is that they give you an idea of a type of impact, but they are not a very precise measure, but again it's beyond the scope of a physical research to produce that type of analysis Follow up. Follow up. I'm sort of disappointed because if we don't have the people in the house I think and I'm not criticizing you, I'm criticizing what happened, is we should have outsourced and got an economist, to do that is just like the Senate is proposing cutting income taxes a 1/4 of a  percent, we need to know is it really worth anything to our economy verses just doing it. I know its good for the tax payers but the amount of money we would lose, it's just not good business practice on half of the general assembly not to know what it's going to do to our economy. So I wish the people in this room would think about it. Representative Yarber. Thank you Dr. Rodman, I'm looking at this this graph on page four and the deep in 2013 I guess we'd decided it was as result of out of the reforms that came in 998, the next part of that line is a fairly steep increase is that reflective of the surplus that we recently reported? They steep increase there actually you see is rely a change, that mostly a change economic conditions, it also reflects some of the timing of when these changes took place again house bill 998 did a whole lot of things in 13 some of them had different levels of timing impact, some were immediate, some took time to play off, in the meantime we also have economy is changing that are influencing the revenue and so that what you seeing there combination of both changes in the economy and timing in respect to when those tax law took place. So we often hear that the revenue projections are very conservative and the economists are been careful not to project but isn't quite possibly a more optimistic projection will continue that fairly steep slope going forward it's kind of an interesting question but we do try to be very conservative or cautious I think in our focus, we keep in mind that growth that we've been forecasting really since the end of the recession has been, and I'm talking about total revenue growth, has actually been below from a baseline perspective. When I say baseline that's taking out all those tax law. It's actually been below what we experience prior to the recession, so we've never caught back up or picked up the pace that we've prior his session but remember some of that was asset bubble driven and there were some other reasons the pace was high, but the baseline outside at all these tax changes has remained cautious, progressively increasing from 2-3% gross, now we're talking about 3.5- 4.5%. representative Enscar. Thank you Mr. Chairman and actually I think hiring any economist is a really good idea and I would recommend paul for recruitment. I would never ever pay him a nickel,  I apologize for the commentary.  Go ahead with your question. It's okay. Just go ahead with your question. If we do hire promise we made sure we get one on each side, and so I think that as I look at this the issue do we've

enough money, coming in to pay for essential services? And I think we actually a lot of us agree on what the essential services are. So, whether or not the attacks could stimulate the economy that's a short term change, and as we look at our programs we really have to take a long time view, and decide whether the decisions we are making today are going to produce the outcomes we want and our programs and especially things like education where you don't get the payoff when you deliver the service, you get to hear us out and that church [xx] is showing the increase and the spread between population growth and our revenue our ability to cover services, I think that that's, I would hope that will try to look at the programs that agree on before we need a long term support of our infrastructure in order to maintain and plan for a healthy economy in the future and are there all kinds of programs that we need to look at, I think roads is another part of our infrastructure are energy, support, all of those what is the best investment that we can have today to have that long term outcome and do we have the revenue? And if we don't what's the balance between not making any cuts now in order to provide that long term support versus guessing that we can make a cut and have some future stimulus somewhere. And I'll get together, I'm interested in the points that, between 11 and 12 there was a little incline, 12, 13 another little cline I'm between 13 and 15 and then at that gradual drop off after that I will get with Doctor Bodman after and see if I can get more information on those points. Thanks I would just make another comment. In terms of an economist, we have an economist, Doctor Bodman has a PHD in Economics but I think what he was referring to earlier was some fairly complex econometric modeling which requires lots and lots of people and lots of money to back those kinds of processes I recall correctly Representative Catlin Thank you Mr. Chairman, a question for Dr. Bodman, or a comment. I want to make everybody aware that there is an issue that may address that gap that I have brought up and is not completely researched and solved yet and that's the huge growth of 1099 employees. In 2010 there were about a half a million and probably by now, and I don't know the number now but I'll be surprised if it wasn't close to a million employees that are 1099 and those employees don't all pay their North Carolina income taxes. And so I think that is a growing issue. Many, many businesses make their employees 1099 so that they're exempt from the illegal alien requirements many employees go to 1099 so they're exempt from Obama care. So it is a growing issue that may be over a million employees that are not necessarily paying their North Carolina property taxes so, I guess my question is would it be possible to add that research to this chart to see if we couldn't fill some of those gaps if we could fix that 1099 issue. I know that issue has been raised and I think the department of revenue has in some respects looked at it. I'm not fully aware of all the details but I know that that's an issue that the department has looked at.  Public revenue. Yes. Follow up. Follow up. Wait, we're looking at some over data. And I think that the number is growing a lot. And I think it needs to continue to be some research that we're doing on this issue. Thank you. Representative [xx] Thank you Mr. Chairman Dr. Bobourn you are our choice in economists we appreciate the work you're doing, thank you. I'm glad to see from the chart here that state government has input on a responsible diet and that's good news and simultaneously, tax payers have had their wallets fattened by

over 2 billion dollars, that's good for North Carolina and you've also shown that we can do something like [xx] in a responsible way and it has good results for our state coincidentally as a happy sponsor of [xx] legislation I'm glad to see this and this helps my presentation to my colleagues. As I'm looking at [xx], if you could provide for me, maybe the committee members as well, additional information on a chart similar to what you done on page three and that includes actual total spending for the year and then a year by year table evaluation of that growth and again I thank you for your work and being here in the presentation today. Thank you Rep. [xx] Thank you Mr. Chairman, I've a question about, I've heard several times that the recession that began 09 referred to in the past tense. I'd like to know when that recession ended? it's a good question. Technically, National Bureau of Economic Research represented in June, 2009 but for many of us that attract the economy, it's been slow to let go. I will say that the states are much more solid[sp?], then we weren't 10, 11, 12, 13. We had a better shape we've had it in terms of payroll jobs last year 100, 000 jobs to give you some perspective on that, the first year after recession she was close to the vendor we barely got over 20 000 jobs added to the economy, so we haven't proved but it's has been at a very slow sluggish pace. Follow up follow up. Well I agree it's been sluggish in fact I think that they just declared that the re-session was over and in fact it's continued and continues to this day, and your chart here page six is reflective of that, it's parenthesis all the way down meaning there is less tax revenue from personal income, I'm reading this correct, because there's less income. People aren't making any money, the economy struggling, everybody knows these, and so I think the federal government just declared that the re-session is over and then never ended and we could be in a lot worse shape than we are in. Mr. Chair, may I make a Chairman Johnson is recognized. I don't mean to interrupt or step in front of anybody but I think this gives me the opportunity to say what I think our budget says, and you're asking when will this recovery be over? And I think our budget says that it says that we're responding and we have responsible funding for our central programs and we're keeping our promise of commitment to North Carolina to finish the recovery  I think that's what our budget say is we are trying to do that in this process to show those stales so I think this is part of the process to explain to the people of North Carolina what the house budget is. Thank you Mr. Chair. Can I respond Chairman Josh Do you have a question or comment Representative Brockman? I did. I agree that that's why I said we can be in a lot worse shape that we're in is because of the work we've done and we've held on and held our own when a lot of states are in a lot worse shape than we are in and so absolutely I agree with that thank you Representative Stam. Representative Riddell, and I'm not sure if he was referring to the [xx] budget includes federal funds which is another 30 Billion or so but the information I received from your staff I think Karen Heisenberg was that total state budget which includes Washington DC pass throughs has increased much faster than our state, our general club. I would probably leave that to our budget team to come and [xx] but I guess the totals pending includes both state general pandoras which is all that I've focused on here and other monies. We can probably get you those numbers but as you said Representatives Stam, those matters would be with the federal government is or is not providing in any given year and since they never

see to pass a budget you never know which you're going to get out of that were hoping the highway authorization gets done sometimes here shortly. Any further questions for Doctor Bondman[sp?]? I'm sorry I had you done representing Allen. It, s a very short name, you probably overlooked it. Yes sir. Thank you very much and quote my former colleague now Senator Brian, I love charts and graphs and Doctor Bondman always thought it was clear on charts and graphs. I would assume these are online on the website for use electronically. They will be posted Thank you. Yes sir. Thank you very much, thank you Doctor Bondman for your presentation. He doesn't have to have a whole lot of slides to get a lot of comments. We had some additional hand outs and things we wanted to go over today but we also have some folks that had driven and to comment on the budget and what we will do is appropriation committee will plan on meeting the full appropriation next Wednesday and we will get into some more of the detail on the appropriations side in terms of some of the spending differences, and the like in the two budgets and where the house is vis a vi that we'll go over   at that time and I think we have one other bill that we are trying to maybe won't take as much time as today's' bill that we need to address as well, so with that I would like to recognize some folks I don't know that will get to everybody who was in that list today but at least we will try to catch some folks who are out of town we had three mayors who drove up who would wish to make some comments, yeah Representative Jill Swing from Huntville and if you could identify yourself and try to keep your comments to three minutes and just say your name Mayor Dell Kennedy from Kannapolis if he could be ready to come after Mayor Swing and then Mayor Nancy Yvonne from Greens-burg, that if you could be available to speak after Mayor Kenneth, Mayor Swing welcome to the appropriations committee Thank you Mr. speaker you said three minutes not 30, correct. Three yes mum. Just confirming am Joy Swing I'm the mayor of Hunters Villa I want to thank you all for your diligent in working both on the viability of our state financial well being and on a vision for the success for the future, well I want to speak at link today and might be carried out for exceeding my time limit I won't do that but I want to speak on the positive aspect of your current budget proposal and I want to take my time now to emphasize on behalf of my own region and others our appreciation to each of you, for the recognition, the finding and using money as for transportation funding is absolutely essential. As the state of North Carolina increasingly becomes the recipient of new residents, my town in the last 20 years has grown from 3500 to over 52000. We are receiving residents from all over the world and it's necessary for our current and future infrastructure needs to be addressed before we reach a point of no return. I would surmise that other states if not all of the states probably have someone right now saying this very same thing in their budget discussions. North Carolina is not unique in our transportation needs. But we do have the opportunity to be competitive in economic development by being poised for continued growth. An increased transportation will indeed set as apart I don't need to tell any of you, and yet I will, that the tremendous needs for maintenance on our current infrastructure are very important and the demands for congestion management and transportation options are also important. We are indeed by many accounts behind the Eight Balling Construction. Thank you sir. While I'm supportive of several of the items in the proposed budget, I know I'm backed by countless citizens who would cheer your efforts to increase transportation funding. I'm also the chair of the Metro Mayors Coalition, and it's been my goal this year to make sure our mayors are in the halls meeting with you and being available for discussions and partnerships. We believe, as I hope

you all do, that working together is probably the best economic driver available. Thank you all for your time. Thank you mayor. Mayor Kenneth. Thank you Mr Chairman. I'm Darrell Hinnant, Mayor of Kannapolis and I'm excited to be here with you. I'd like to thank the committee and for house leadership for allowing us to testify about the budget process Kannapolis has said that we need jobs jobs jobs, and I'm convinced that we can be most successful in doing that by working together. I'm here today to support one of the way that the house overwhelmingly voted to make that happen. Historic tax credits are extremely important to the city of Kannapolis When our textile mill closed in 2013 we laid off 4000 plus employees, and as a result to that, our down town has withered away. The downtown had become and alphatroce to the development of our community and the expansion of the North Carolina research campus, Kannapolis is purchasing the down town to bring private investors to revitalize it. And we don't want to own it long term we want only to facilitate the revitalization by private investors, and to bring 1000 to 2000 new jobs to our community as well as 100 million dollars in new investment our community is investing $20 million in this project, and in seven public meetings our citizens overwhelmingly supported this effort, so, we're not looking for a handout from the state. We're looking for a partner, we experts tell us they will take 8 to 10 years to revitalize downtown [xx] with historical tax credits. Without it, it will take 12-18 years. Those extra years cause our citizens money as extra interest, and as well delay the opportunity for new jobs and new investment in our community, but I'm not just asking you for [xx]. As a mayor I have met with many others mayors in urban and rural counties, big and small cities around and as a result of that, they also say they have opportunities in their community for additional investment and additional jobs with the possibility of historic tax credits. As we go through this process of Restructuring our tax code, I believe that historic tax credits should be one of the last things that disappear, only after we've a fully functional new tax code system. I'm in strong support for the work that you've done and supporting historic tax credits, and I stand here to show you that our support for your work is to pitch in and to be a great partner so that Canapes and Metro mayors can be a part of this, as we want to get the work done for all citizens of North Carolina, thank you Mr. Chairman. Thank you Mayor Henett. Mayor Van.   Good morning, thank you Mr. Chair, I'm Nancy Van, mayor of Greens borough and I'm here today to thank you for expending Jdig in your budget. No one likes economic incentive but speaking with one of our economic developers, he describes Jdig as incentives with the most teeth. Jdig is a members can program, and it is success based the state treasury will always come with the net positive. As you know, it is designed so that must companies must meet job wage, and investment commitments before getting JDEG incentives. This program is self funded. Since incentive pro-payments are generated by a percentage of taxes paid by new employee. This is a program that will always have a net positive effect on the state treasury. If we don't get companies on the state treasury is zero. By design JDEG ensures a positive return on investment. By raising the cap you will allow more communities to participate in the benefit of the JDEG program. According to the north Carolina economic development association, nearly 82 million and withholding safeguarding to the utility fund that supports rural economic infrastructure development [xx] is critical for North Carolina to stay competitive to today's economic development environment. It is our basic blocking and tackling too at the state level. It gets us in the game. It really helps cities like Greensboro and other cities. We will lose if projects

make this go away. We will lose looks from potential projects which will never have the opportunity to help us compete, this is a must Chris Chung, CEO of The Economic Development Partnership of North Carolina recently said economic incentives help the state deal in big project, 95 times out of 100. In a recent business journal article he said we're on murderers row when it comes to competition. Noting how aggressive Virginia, South Carolina and Georgia, Tennessee and other southeastern states are in attracting new business and industry. I want to thank you for your leadership on this important issue. I want to thank you for supporting [xx], and please let us know how we can help you. Thanks again. Thank you [xx]. We also have two superintendents, one from Davidson County Public Schools and the other Scotland county public schools, if we can have both of those individuals Dr. Moore and Dr. Hargrave, whichever he's at the microphone first. If you would identify yourself please Thank you Mr. Chairman. My name is Ron Hargrave and I'm The Superintendent of Scotland County Schools. Thank you for allowing me to come before you today to speak on a couple of issues in the budget that I believe is necessary for our students success across North Carolina. Let me begin by thanking members of the House for including appropriations for teacher assistants in the budget. Throughout the state teacher assistants play a vital role in the success of our students but particularly in Scotland County and other low wealth districts across the state the other 77. In Scotland County, 30% of our citizens are illiterate. Many of those parents have students in our system right now. For those children and for those parents, having a teacher and a teacher assistant in the classroom provides that additional layer of support which often times it's the difference between a child experiencing success or failure in the classroom. Unfortunately, in Scotland county we're already seeing the difference from having teacher assistants removed from the classroom with the recent funding we've had to remove teacher systems from our second grade classes over the year from 13 14 to 14, 15 we have seen a 2% decrease in our second graders in reading proficiency although we see the value of having teacher assistants in our classroom for us in Scotland County is not as easy as saying if you want them then you fund them locally. Currently we provide a $180, 000 locally to keep our teacher assistants in grades K-1 at 88%. If the funding is removed from the budget it will cost Scotland County and additional $750, 000 to keep our TA's are currently employed at 88%. Now for some districts that may not be a big deal, but for Scotland County we have a fund balance of $2 million so you can see over the course of two years that would be devastating. I also respectfully request that driver education as provided in the House budget be restored. Removing this allocation from the state budget would put a financial hardship on families, students, and overall community.coming from Scotland County where 32% of our citizens live below the poverty level that's a that's a big burden that we will be placing on him. Many believe that having a drivers licence is a luxury have an access to car is a luxury, and for some it really is. But for many of the students that I serve it's a necessity. I recently had the opportunity opportunity to meet with 15 young men who are from single parent families. All of them had fathers absent from household. And as I talked with him, he had a candid conversation about their life and their day to day struggles. I asked them about education and how important it was for them to have a licence. Some of them have license now, and they shared with me that having a license enables me to get back and forth to work and to get to school. And going to work is not about having extra money in my pocket. It's about providing income to my household to help

my mother or my grandmother support the family and I ask him what would they do if I didn't the average casing would be taking for those student who don't who currently don't have there licence, and they shared with me that the hard way' I would have to drive and that's frightening to know that if access to driver education at a local LEA[sp?] it has taken away, that we'll have students that will be forced to make the decision to get behind the wheel of a car not having that classroom education setting not having that training and decide to drive to work, and or to drive to school.  In Scotland county we have been number one in a lot of areas. And some of those who are not very pleased about. We've been number one in high taxes. We've been number one in unemployment. We've been number one in crime rate. We've been number one in illiteracy. Please don't eliminate funding for drive-way education in the course of this budget. A program that has been proven over the years and we know it works. Help me to help the Scotland county not to become number one, and another statistical category, and that is teenage fatalities. Thank you for your time, thank you for again allowing me to come, and I urge you to include funding for TA's and driving education in the final state budget. Mr chairman, may I make a comment? Chairman Johnson.  I want to thank you Dr [xx]. There's something in this room that the people don't know that you're number one in that I want to remind them. Scotland county happens to be the number one community tax-wise that spends more money according to their wealth on education and any other system in North Carolina. That's something your county can be proud of. Superintendent Moore? Good morning Thank you, Mr chairman and members of the committee. I'm Lory Morrow and I'm superintendent of Davidson county schools I'm here this morning like my colleague Dr [xx] to speak on several of your budget issues. First, let me say thank you for making education a priority in your budget, and thank you for recognizing the importance of compensation our teachers accordingly. I'd like to speak to you this morning with regards to a few other areas of school employees and remind you of their essential roles and responsibilities and the importance of rewarding them, our schools employees whether they're bus drivers, custodians, teachers assistants, school administrators all play an important role in the organization. They all work together from the minute they start the bus in the morning to the teacher in that classroom to the administrator to helping us accomplish our mission in North Carolina making sure that all of us students are successful, but our school administrators now need some additional compensation and rewards, due to the change in the teachers salaries structure. If you're an administrator, an assistant principals or principals depending on your years of experience and degrees, its no longer beneficial to you to make that leap into leadership, and our principals, our assistant principals play a very important role in our schools. They set the tone, they create that family, they establish that positive culture, they also serve as mothers and fathers, as judge and jury, as detective, as counselors, as social workers. So its important that we respond to them and I urge you to consider the financial rewards for principals and assistant principals in your proposed budget. In Davidson county schools unfortunately this year we have lost six principals that have left us and gone to other counties. counties contiguous to us pay a higher supplement that is two times what we can pay in Davidson County and unfortunately trying to retain and retract high quality leaders becomes very challenging when they too are looking at their financial future of their families and supporting their children. Another area I would like to discuss with you is urge you to restore the masters pay for teachers as they use those degrees in their classrooms. We ask for our teachers to model life long learning we also require them as part of their license to take professional development session and courses. By restoring the master's pay

that would show our teachers that as a state we're committed to their profession and we are still committed to their learning because again they are entrusted with our most precious commodity, our students each and every day. Locally this year I had a chance to meet with six teachers that were all graduates of North Carolina Institution and unfortunately they chose not to take a job in Davidson county schools, they were leaving us to go to other states where they to be compensated due to their Master's Degrees and they needed to pay back those and loans and they also wanted to feel like a professional and be compensated. We're proud of the work that we've accomplished in Davidson county and we're proud of education in North Carolina, I urge you as you work towards your budge proposal to consider this points that we raised this morning and I thank you for allowing me the opportunity to speak to you. Thank you Dr. Moore thank you for your support for your listing the house position on all of those matters, so we appreciate that. Members of the committee, we're almost right at ten we have one other person that is a mayor that's not far from out of town but if we could indulge Mayor Liz or mayor pro tempore Liz Johnson from Mooresville and then we will pick up with some others folks next Wednesday morning, mayor Johnson they're all itching beliefs if you can be brief but thank you for being with the committee. Thank you for not cutting me from the speaking list today, I appreciate that and thank you for the promotion, it's mayor pro temp[sp?] not mayor but thank you.  I don't want to start any controversies. No, no, no, no, so thank you again for allowing me to be here this morning. I'm Liz Johnson mayor pro tempore in the town of Mooresville here in the triangle, I'm also a member of the board of directors for the North Carolina League of Municipalities. The leagues membership consists of over 540 cities and towns across our great state of North Carolina. Provisions included in this years budget bill will accomplish a number of keys priorities for North Carolina cities and towns and we're appreciative if this measures. We know that house members share our goal of restoring a version of the historic preservation tax credit, a provision that is vital to economic development projects across the state. We urge you to fight for this provision and to only Agree to a conference report that includes it. Cities and towns are also grateful that house members chose to include a key utility line relocation measure that'll reimburse many more municipalities, when state road projects force water and sewer lines to be moved. And of course the house efforts backing infrastructure investment and job recruitment to our cities and towns have been, and will continue to be supported by league members. A key aspect of municipal investment in infrastructure which support economic development is the funding that goes to city maintained streets. While cities appreciate continuing legislative support of power bill funding, we urge house members to tweak your chambers current approach the highway funding, so that the shift from the motor, fuels, tax to more vehicles fees doesn't negatively affect funding for city streets. Without applying the revenue sharing consistently to our highway funding sources cities won't be kept tall. We also urge you to consider some of the good things that your colleges in the senate did using [xx] increased power billed dollars for city maintained streets and providing cities in towns with flexibility regarding municipal vehicle fees. Finally it's important to note that cities in towns have seen their revenue options severely limited in recent years. A strong government tax and finance policy is one that relies on diverse funding sources yes, cities primarily exercise real control over just one tax source, the property tax. At the same time, we know that businesses often look at property tax rates first when making decisions about where to locate or expand. North Carolina's modest property tax rates have served our state well we urge you to consider the damage that would be done to the states economy if more pressure continues to fall on to local property taxes to fund the services that citizens of the state have come to expect and demand and that are critical to helping establish the quality of life that we all enjoy we urge you to seriously look at the revenue flexibility that municipalities need to avoid rapturing up the pressure of the property tax space. North Carolina cities and towns are making vital investments, that are allowing the states larger economy to grow, help us continue to do that with flexible revenue options thank you for your time, thank you for

your services, and most importantly thank you for your consideration of these issues that are so critical to all North Carolina's. Thank you Mr. Chair. Mayor pro tempore, with no further business in our time out for this morning, the committee's adjourned, thank you.