RALEIGH UPDATE March 6, 2015

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1 Representative Chris Whitmire NC House District 113 Transylvania, Southern Henderson, & Polk RALEIGH UPDATE March 6, 2015 This week in Raleigh the Governor released his Biennium Budget. The budget starts with the Executive Branch and then the Legislative Branch formulates its version. This Session, the House has the lead. Key points follow Governor McCrory Releases Budget Released from the Office of The Governor Thursday, March 5, Raleigh, N.C. - Governor Pat McCrory s biennium budget continues his focus on job creation, education and infrastructure. It also increases help and protection for those that cannot help themselves while maintaining fiscal discipline and increasing government efficiency. There are no tax increases in the governor s budget. This budget builds on our hard-earned successes and lays the foundation for a bright future for all North Carolina families, Governor McCrory said. This budget recommits us to the basic values that make our state great. When we unleash our potential in education, transportation, energy and technology, and commit to greater government efficiency and affordability, North Carolina will be second to none. Job Creation Separate from the budget, the governor is supporting legislative measures that will allocate $45 million for NC Competes and $20 million for the Site Infrastructure Development Fund, a fund designed to attract major manufacturing projects, such as an auto production plant.

2 Governor McCrory s budget restores and reforms the Historic Preservation Tax Credit to continue to revitalize main streets across North Carolina while ensuring that the credits are used wisely and where they can have the most impact. The Innovation to Jobs initiative was created to convert more university research dollars into products and services that are patented and introduced into the marketplace. To support this initiative, the governor s budget invests $15 million in each year of the biennium in the Venture Multiplier Fund. This capital will be invested alongside private sector dollars in early stage commercial ventures. It also provides $2.5 million in recurring money for the Rallying Investors and Skilled Entrepreneurs, a program that will develop and leverage existing entrepreneurial management talent and recruit world-class investors and skilled entrepreneurs to the state. Governor McCrory s budget creates the University Innovation Commercialization Investment program, funded at $7.5 million during the next two budget years and recommends $5 million for the One North Carolina Small Business Program to provide early-stage funding for small, high-growth and high-tech businesses across the state. It also appropriates $10 million in each year of the biennium to encourage the production of long-term, sustainable film projects and to further develop the film-making industry within the state. Education North Carolina taxpayers have historically made a tremendous financial commitment to education, and this budget continues that legacy. More than $12 billion of General Fund monies will be spent on K-12 education in each year of the biennium. It allocates $235 million more in K-12 funding than the budget a 2.8 percent increase in spending. As promised, $111.4 million in each year of the biennium will be spent for teacher salaries to increase teacher base pay to $35,000 a year. This allocation also funds increases for teachers eligible to move to the next tier on the salary schedule. To support enrollment growth, this budget provides for the hiring of more than 1,400 new teachers over the biennium as well as provides $128 million to maintain teaching assistant positions over the same time period. The budget also rewards high-performing teachers by appropriating $15 million over the biennium to implement teacher pay for performance plans. More than $70 million over the biennium will be spent to buy textbooks, instructional supplies and equipment. Additionally, North Carolina s Pre-K program will expand to accommodate 26,800 at-risk four-year-olds.

3 The governor accelerates the talent pipeline by funding community college classes year-round, including in the summer, just like North Carolina businesses. The budget also invests $5 million for community colleges to purchase current, up-to-date equipment and technology used to prepare students for STEM careers. Critical Infrastructure The budget commits nearly $4.8 billion to lay the foundation for Governor McCrory s 25-year transportation vision, which focuses on connecting small towns and economic centers to simplify citizens commutes for work, school and recreation. This includes: an increase of $135 million for critical infrastructure investments; $51 million for road preservation and improvements; $36 million for capital repairs and renovations under the Capital Improvements plan and $10 million to ease congestion in rural and small urban areas. As the governor noted in his State of the State address, he will request a transportation bond of $1.2 to $1.4 billion for quicker construction of projects in the 25-year vision plan. He will also request a $1.2 to $1.4 billion general obligation bond to revitalize blighted state buildings that can be saved and build new, workable and efficient facilities for the National Guard, community colleges and other agencies that will help create economic development opportunities for their communities. Help and Protect Those in Need To support the well-being of our most vulnerable citizens, Governor McCrory s budget commits more than $10.8 billion to the Department of Health and Human Services over the biennium, or more than 24 percent of the General Fund annually. Included in this allocation is an estimated need for $287 million in additional Medicaid funding in the first year of the biennium and $460.6 million in year two, taking into consideration forecasted changes in enrollment, anticipated costs per recipient, and utilization of services, as well as federal matching funds. Additionally, it supports the Healthy NC reform plan which puts patients first and controls costs for the taxpayers, while incentivizing health care providers to coordinate care. This budget also prudently allocates $175 million over the biennium to the Medicaid Risk Reserve to provide a buffer against financial uncertainty in one of our biggest cost drivers. The budget provides nearly $82 million over the biennium in new funding for mental health and substance abuse services and increases funding for foster care, adoption support and the collection of child support payments. The budget also provides funds to modernize and replace equipment for the Office of the Chief Medical Examiner.

4 It also continues the state s substantial commitment to the North Carolina Families Accessing Services through Technology (NC FAST) and NCTracks information technology platforms, which are replacing legacy information technology systems to efficiently serve our citizens and pay health care providers. This budget fully funds the HOME match program with more than $1.5 million in each fiscal year. These dollars leverage federal matching funds of $20 million and enable the state to collaborate with local governments and nonprofits to serve 340 additional households, create over 400 jobs and generate an additional $1.7 million in state and local revenue. Additionally, $1 million each year is committed to the Housing Trust Fund to help alleviate the shortage of safe, affordable housing for low- and moderate-income citizens. The governor s budget also recognizes the dedication of law enforcement officers who protect us daily and corrections officers who confront the most violent people in our state every day. Governor McCrory s budget includes $21 million in funding to help compensate and retain our corrections officers and their supervisors and funds the full five percent step increase for eligible State Troopers in each year of the biennium. There is additional funding to improve crime lab operations and reduce criminal case backlogs as well as funding for the Highway Patrol, State Bureau of Investigation, and Alcohol Law Enforcement to replace aging law enforcement vehicles to improve safety and reduce maintenance costs. Find Efficiencies and Streamline Operations The North Carolina Government Efficiency and Reform (NCGEAR) initiative will save more than $14 million in year one and more than $57 million in year two of the biennium. NCGEAR savings over 10 years are conservatively estimated at more than $615 million in today s dollars. To continue customer service improvements at the Division of Motor Vehicles, $30 million is budgeted for technology and equipment modernization. The budget carries out government operations efficiencies called for by the Governor in his State of the State address. Future workers compensation costs will be reduced through consolidated reporting and an overall improvement in case management to protect against fraud and abuse. Attractions such as the North Carolina Zoo, state aquariums, museums and state parks will be transferred from the Department of Environment and Natural Resources to the Department of Cultural Resources, which manages attractions as part of its mission. Advocacy groups will be moved from the Department of Administration to the Governor s Office. To strengthen the Veteran Affairs and the Office of the Military Advisor, the budget proposes

5 the creation of the Department of Military and Veterans Affairs. This budget streamlines state information technology operations, making them more accountable and coordinated by creating a Department of Information Technology. The members of my administration and I are honored to submit this budget to the General Assembly on behalf of the people of this great state, Governor McCrory said. Click here for a copy of the Governor's Recommended Budget. Click here for a copy of the Budget PowerPoint. Chris Note: The aforementioned is the Governor s intent and the budget the House and Senate derive will likely include many differences. Sometime this Summer we will know the final outcome. Rest assured I will endeavor to be effective and efficient with your tax dollars. North Carolina Climbs to # 4 Ranking in Site Selection s Governor s Cup Released from The Office of The Governor Monday, March 2, Raleigh, NC Governor Pat McCrory announced that North Carolina jumped to fourth place among all states in Site Selection magazine s 2014 Governor s Cup, a closely-watched ranking of economic development success. North Carolina moved up three spots as compared to last year s ranking. The Governor s Cup is awarded annually based on the number of new and expanded corporate facilities as tracked by Conway Data Inc. s New Plant Database. North Carolina ranked number one in the South Atlantic region. National rankings draw attention to North Carolina s outstanding business climate, said Governor McCrory. In today s competitive world, companies are on the lookout for locations that deliver clear advantages, such as North Carolina s tremendous workforce, transportation

6 links, plus lower taxes and business costs. The magazine s Governor s Cup also features state rankings by region as well as a ranking of metro areas. For 2014, North Carolina ranked first in the number of facility projects in the South Atlantic region, on both an overall and per capita basis. The Greensboro-High Point metro area ranked first in the country among areas with populations between 200,000 and one million. The Durham-Chapel Hill metro area ranked sixth in the same size classification. Both our state and local economic developers attracted more than 300 businesses in the past year to create jobs, invest more capital or expand here in North Carolina, said N.C. Commerce Secretary John Skvarla. We will continue to work hard to create the best business environment in the nation. In the national rankings, North Carolina trailed only Texas, Ohio and Illinois. Georgia ranked fifth. Conway Data s New Plant Database focuses on new corporate location projects with significant impact. New facilities and expansions included in the analysis must meet at least one of three criteria: involve a capital investment of at least $1 million, create at least 20 new jobs, or add at least 20,000 square feet of new floor area. Click here for more details. House Passes Economic Development Package to Create Jobs, Invest in North Carolina Released from The Speaker s Office Thursday, March 5, Raleigh, NC Today, the House passed the HB 117 The NC Competes Act, marking the first major jobs bill this session. HB 117 will now move to consideration in the Senate. Much of North Carolina recent job growth can be attributed to pro-business policies of reduced taxes, regulatory reform, and strategic investments: The North Carolina Unemployment Rate improved from 5th worst in 2012 (8.9%), to 23rd best in 2015 (5.5%). 200,000 new jobs have been created in the private sector since North Carolina is one of the fastest growing economies in the country, ranked 15th best by Business Insider.

7 The NC Competes Act accomplishes the following: 1) Renames the current JDIG (Job Development Investment Grant) and the One NC discretionary incentive programs to more accurately describe them. Job Growth Reimbursement Opportunities: Job GRO People replaces JDIG and Job GRO Capital replaces One NC. The Job GRO program is performance-based, accountable and effective. No money is disbursed to a company until the Secretary of Revenue certifies the amount of state withholdings from the newly created jobs. 2) Makes $22.5M available for new commitments in 2015 to invest in growing jobs in North Carolina. The bill Increases the amount of Job GRO People funds available for new agreements by making $7.5M that would otherwise become available beginning in July, available now, and by adding $15M of additional capacity in Currently, the fund has been depleted and we have $25,000 available for projects until July 1. 3) The Authority to make new Job GRO People commitments is extended until 1/1/2020. Currently, commitments are set to expire 1/1/2016. Extending these commitments provides companies with confidence that North Carolina intends to remain a business-friendly environment for years to come. 4) Transfers $20M that was appropriated last year for the Job Catalyst Fund into the Site Acceleration Fund the fund that has proven results: utilized successfully to recruit Merck Pharmaceuticals. The Site Acceleration Fun has been inactive and depleted since the Merck Pharmaceuticals project. The Site Acceleration Fund provides grants or forgivable loans to state agencies, nonprofit corporations, locals, or businesses for acquisition and/or improvement of land and to lease property to a business that (i) will invest at least $100M in private funds in a project and (ii) will employ at least 100 new employees at the project. The process for approval includes application to the Economic Investment Committee, performance criteria and remedies. It provides additional Economic Development Tools for strategic projects with appropriate controls and accountability. 5) Modifies the current statute for Single Sales Factor Apportionment for qualified capital intensive corporations. Single Sales Factor is one method of apportioning the business income of multi-state corporations for state income tax purposes. Most states use an apportionment formula based on a composite of three factors: property, payroll and sales. NC uses a double-weighted sales factor apportionment formula. Currently NC has adopted the single sales factor for qualified capital intensive corporations that invest at

8 least $1B in a single facility in a Tier 1 or Tier 2 county over a 9 year period. HB 117 maintains the $1B investment threshold but eliminates the location requirement and the exclusion of coupling with other Job GRO programs. 6) Extends the sales tax refund for passenger air carriers. Currently passenger air carriers are allowed a sales tax refund of sales tax paid on fuel in excess of $2.5M. This is set to expire 1/1/2016. HB 117 extends the current tax benefit for 4 years to 1/1/2020. Without legislative action North Carolina will have the 5th highest jet fuel tax in the country next year, putting the state at a competitive disadvantage to retain and/or expand air services. Thirty five states already exclude commercial jet fuel from tax. 7) Data Center Infrastructure Act: Under current law, data centers pay 1% ($80 cap per article) privilege tax in lieu of a sales tax on certain equipment purchases if certain conditions are met: (i) $150M investment in Tier 1 or (ii) $225M investment in Tier 2 area over a 5-year period; $250M investment over 5 years to be exempt from sales tax on electricity. HB 117 creates an additional sales tax exemption for data center equipment and electricity if $75M is invested over a 5-year period. 8) More help for Tier 1 and Tier 2 Counties: Depending on the tier of the county where a project locates, a portion of the Job GRO reimbursement is used to fund the Utility Account for infrastructure improvement projects that are reasonably anticipated to create jobs in Tier 1 and Tier 2 areas. If a new project locates in a Tier 3 county, 30% is automatically diverted to the Utility Fund to benefit our most economically distressed communities. If a new project locates in a Tier 2 county, 15% is automatically diverted to the Utility Fund. So, while companies are encouraged to invest in lower wealth areas, the program has built-in benefits regardless of where a new project chooses to locate. House Advances Bill to Stabilize Gas Tax, Safeguard Major Transportation Projects Released from The Speaker s Office Thursday, March 5, Raleigh, NC Thursday, the House passed SB 20 - IRC Update/Motor Fuel Tax Changes, with two bipartisan amendments added: A1 and A3. The bill will now return to the Senate for consideration. Today, the House took action to stabilize our State s infrastructure funding, and ensure we can

9 continue to invest in our roads and bridges, Speaker Moore said on Thursday. I m thankful for the thoughtful debate among colleagues this issue deserves careful scrutiny. However, we understand that keeping our roads safe is the right thing to do. North Carolinians want stability in their financial future, both at home and in Raleigh. We are working to make those tough decisions, to protect the safety of our citizens and repair the damage left by decades of failing to address our decaying infrastructure, stated Majority Leader Hager on Thursday. I am confident that our caucus will put together a comprehensive plan to fix the system and place our state on firm financial footing. Chris Note: This is the Bill that also includes provisions to fine tune the State s Tax Code. Until this Bill passes and is signed into law by the Governor, please be advised that if you file your state taxes before it becomes effective, you may have to file an amended return. Reminder: Local bill requests are due to me by Monday March 16 th. Please reply to Chris.Whitmire@ncleg.net with Questions or Concerns In addition to , Representative Chris Whitmire can be reached via the following: Facebook Once you get to Chris page, please hit the like button at the top of the page and you ll start getting updates during the week. Then tell your friends and neighbors who might want to know what Chris is doing in Raleigh for the folks in Transylvania, S. Henderson, and Polk Counties. Website Chris' Website Twitter REPRESENTATIVE CHRIS WHITMIRE 537 Legislative Office Building 300 N. Salisbury Street Raleigh, NC Phone: To unsubscribe, please chris.whitmire@ncleg.net with unsubscribe in the subject line.

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