September 2014
Practice Group(s):
Public Policy
By Amy Fullbright and Marissa Farrell
Historically, the “Short Session” of the North Carolina General Assembly focuses on state budget corrections and adjustments. Frequently, legislators will also work on additional legislation while they are in Raleigh. This Short Session, lawmakers passed legislation regarding economic development, energy, environment, insurance, healthcare, tax law, and more. On August 20, 2014, the General Assembly adjourned sine die, officially closing the
2013–2014 Legislative Session. Even after months of hard work and compromise, the House and Senate were not able to find common ground regarding Medicaid. For legislation passed during Short Session, the Governor has 10 days, until August 30, to sign or veto a bill; otherwise, taking no action allows the bill to automatically become law. After adjournment of the General Assembly, the Governor has 30 days, September 19th, to act on a bill. The
Governor is required to reconvene the General Assembly if a bill is vetoed after adjournment, unless a written request is received and signed by a majority of the Members of both houses that it is not necessary to reconvene.
On Thursday, November 4th, North Carolinians will vote to elect or re-elect many state-level positions, including state Senators and Representatives. Out of 120 House Representatives,
34 Republicans and 27 Democrats are running unopposed. In the Senate, 12 Republicans and 9 Democrats, out of the total 50 Senators, are running unopposed. No statewide races will be on the ballot this fall.
At the conclusion of this Short Session, many legislators will seek higher office or retire, including: Representatives Alma Adams (D-Guilford), Marcus Brandon (D-Guilford), Robert
Brawly (R-Iredell), Mark Hollo (R-Alexander, Wilkes, Yadkin), Annie Mobley (D-Bertie, Gates,
Hertford, Pasquotank), Ruth Samuelson (R-Mecklenburg), Thom Tillis (R-Mecklenburg), Joe
Tolson (D-Edgecombe, Martin), Andy Wells (R-Catawba), Winkie Wilkins (D-Granville,
Person), and Roger Younts (R-Davidson). Senate members include Senators Austin Allran
(R-Iredell, Catawba), Thom Goolsby (R-New Hanover), Neal Hunt (R-Wake), Clark Jenkins
(D-Bertie, Chowan, Edgecombe, Hertford, Martin, Northampton, Tyrell, Washington), and
Michael Walters (D-Columbus, Robeson).
The North Carolina Public Policy Team advocates for client interests before the North
Carolina General Assembly as well as regulatory and rule-making bodies in state agencies and boards, and closely monitors and reports on the activities of the Legislature and the executive branch. This report summarizes key legislation addressed in the Short Session of the North Carolina General Assembly. For questions on this report or for more information about our public policy services, please contact Amy Fullbright .

Senate Bill 744 / S.L. 2014-100 “Appropriations Act of 2014” was signed into law by the
Governor on August 7, 2014. The $21.25 billion state budget took months of negotiations and compromise between the House, Senate, and Governor in order to find middle ground.
The spending plan includes $282 million in teacher raises; adds $18.7 million for salary supplements of teachers with advanced degrees; and cuts the Department of Public
Instruction budget by 10%.
It eliminates eight positions—four vacant and four filled—in the Department of Insurance, funds three new investigators at the State Board of Elections to investigate possible cases of voter fraud and pursue other violations of election laws, and pays for two new special agents in the Department of Revenue to pursue individuals and businesses with overdue tax debts.
It transfers a few departments around, including the State Bureau of Investigation from the
Department of Justice to the State Department of Public Safety, and the Alcoholic Beverage
Control Commission to the Department of Public Safety.
In Health and Human Services, the budget cuts $16 million in contracts and administrative expenses across the department, except to programs that provide direct services. It reduces rates for some health care providers by 1 percent effective January 1, 2015, for a projected
$7 million in savings. The rate reduction applies to all fee-for-service providers with some exceptions, such as hospital in-patient services, nursing homes, and private duty nurses.
Appropriated funds for environment include establishing the N.C. Commercial Fishing
Resource Fund to help develop sustainable commercial fishing, directing state park officials to solicit proposals for a private business that would take over operation of the state-owned marina at Carolina Beach State Park, and authorizing the Governor to purchase or condemn federal land in Dare County to create an Oregon Inlet State Park, incorporating a Senate bill aimed at building jetties to help stabilize the inlet’s navigation channel.
Lastly, Special Provisions include a special oversight committee on the lottery, a 14-member board of House and Senate members to examine lottery operations and recommend changes; prohibits the use of drones by state and local governments until Dec. 31, 2015, without special permission; establishes the intent of the General Assembly to work on
Medicaid reform during a special legislative session in November 2014; creates a grant program for film production companies in the Department of Commerce to replace existing film tax credit legislation, and provides $10 million toward the grant program in the first half of
2015; provides 1% cost-of-living increases for retirees of the Teachers’ and State
Employees’ Retirement System, the Judicial Retirement System, and the Legislative
Retirement System, and establishes a three-judge panel to hear lawsuits challenging the constitutionality of laws the General Assembly passes.
House Bill 201/S.L. 2014-90 “Building Reutilization for Economic Development Act” was signed into law by the Governor on July 30, 2014. The bill amends the applicability of the
Energy Conservation Code to certain existing nonresidential buildings. Additionally, it clarifies Stormwater Program impervious surface calculations for redevelopment, creates an exemption from the North Carolina Environmental Protection Act for the reoccupation of
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existing buildings or facilities, and amends the statute governing the Department of
Commerce Rural Economic Development Division.
House Bill 1031/S.L. 2014-18 “NC Economic Development Partnership Modifications” was signed into law by the Governor on June 24, 2014. This legislation authorizes the state
Department of Commerce to partner with a newly-formed private non-profit organization and contains a number of safeguards to strengthen transparency and accountability in the use of tax dollars and requires greater private investment on joint economic development efforts.
These measures will allow for greater collaboration of the public and private sector in job recruiting and strengthen our state’s competitiveness in attracting jobs and investment.
Senate Bill 648 / S.L. 2014-110 “NC Commerce Protection Act” was signed into law by the
Governor on August 6, 2014. The legislation includes provisions to create transparency in the Attorney General’s office, and amends successor liability laws and protects businesses from “patent troll” abuse. In this legislation, a patent troll, also called a “patent assertion entity,” is identified as a person or company who enforces patent rights against accused infringers in an attempt to collect licensing fees, but does not manufacture products or supply services based upon the patents in question, thus engaging in economic rent-seeking.
Senate Bill 403/S.L. 2014-111 “Omnibus Election Clarifications” was signed into law by the
Governor on August 6, 2014. This legislation amends and clarifies various provisions of the
North Carolina Election Laws. The bill requires that any candidate for state office who raises or spends more than $10,000 must file an electronic campaign report. Additionally, the bill amends the rules governing when counties may hold special elections regarding new sales taxes, bond issuance, and other similar measures. Current law allows the counties to hold these elections in either even or odd years. This bill changes it to only during elections.
Senate Bill 786/S.L. 2014-4 “Energy Modernization Act” was signed into law by the Governor on June 4, 2014. This legislation makes a variety of changes to modernize and streamline oil and gas exploration processes. It moves North Carolina toward domestic energy production by authorizing the Department of Environment and Natural Resources (DENR) and the
Mining and Energy Commission to begin issuing permits for natural gas exploration and development 60 days after the rules are developed and approved by the General Assembly.
The bill requires that all rules mandated by prior legislation be adopted by January 1, 2015.
Once the rule set has gone through the Rules Review Commission process, the General
Assembly then has 30 days to introduce a bill disapproving any rules, and another 30 days to ratify such a bill. If those items do not occur during that 60-day time frame, the rules will automatically become final and effective. The bill creates two separate commissions by splitting the current Mining and Energy Commission and adding the Oil and Gas
Commission. The Trade Secret provision of the bill states that all information will be reviewed by the state geologist for compliance and chemical release standards and prohibitions before any hydraulic fracturing or drilling can being. Local governments are not allowed to prohibit oil and gas exploration, development, or production activities. In order to protect the environment, the bill prohibits injection wells, requires each applicant to supply an environmental compliance history, and requires all oil and gas developers to post at least a
$1 million bond to cover any damage costs.
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Senate Bill 163 / S.L. 2014-113 “Reclaimed Water as a Source Water” was signed into law by the Governor on August 6, 2014. This legislation encourages the adoption of programs to expand and facilitate the increased use of reclaimed and recycled water.
Senate Bill 729 “Coal Ash Management Act of 2014” was ratified by the General Assembly on August 20, 2014, and presented to the Governor for action on the same day. This bill manages the removal of coal ash from 33 unlined pits throughout North Carolina and is the first of its kind in the nation. The legislation requires that all ponds affected must be defined as high, medium, or low priority. High-priority ponds must be cleaned up immediately. The bill creates a Coal Ash Management Commission with six legislative appointments and three gubernatorial charged with overseeing Duke’s deadlines and work on removing and containing coal ash. Any rate increases by Duke associated with the cleanup have a moratorium of January 15, 2015.
House Bill 1069 “Unemployment Insurance Law Changes” was ratified by the General
Assembly on June 23, 2014, and presented to the Governor the next day. On June 24, 2014, the Governor vetoed the bill and it was re-referred to the House Committee on Rules,
Calendar and Operations of the House. The bill clarifies the confidentiality of unemployment insurance, sets the duration of unemployment benefits based only on unemployment rates, requires a photo identification to receive unemployment insurance benefits, and establishes a Board of Review.
Senate Bill 477/S.L. 2014-43 “No Set Fee/Noncovered Vision Services” was signed into law by the Governor on June 30, 2014. The bill prohibits insurers and health benefit plans from limiting or fixing the fee an optometrist may charge patients for services or materials unless the services or materials are covered by reimbursement under the plan of insurer contract with the optometrist.
House Bill 1220/S.L. 2014-53 “Hope 4 Haley and Friends” was signed into law by the
Governor on July 3, 2014. This bill is an act to create an intractable epilepsy alternative treatment pilot study program and registry for the scientific investigation of the safety and efficiency of hemp extract treatment for intractable epilepsy. Much of the future discussions for this bill included looking into the potential involvement of many of the universities in North
Carolina.
House Bill 1133 / S.L. 2014-115 “Technical and Other Corrections” was signed into law by the Governor on August 11, 2014. This legislation makes technical corrections to the
General Statutes and the Session Laws, as recommended by the General Statutes
Commission. Included in these technical corrections are the elimination of the Child Fatality
Task Force, how to dispose of an unclaimed firearm, safety and health programs of State agencies and local governments, issuance of commercial drivers’ license, identification of a
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lien agent, columbarium requirements, controlled substance reporting requirements, and public record exemptions.
Senate Bill 58/S.L. 2014-44 “Clarify Statute of Repose” was signed into law by the Governor on June 30, 2014. The bill strictly makes technical corrections to Session Law 2014-17, an act clarifying that certain civil actions relating to groundwater contamination are not subject to the 10-year statute of repose in G.S. 1-52.
Senate Bill 853 / S.L. 2014-102 “Business Court Modernization” was signed into law by the
Governor on August 6, 2014. This bill seeks to modernize the business court through some technical, administrative, and clarifying changes to procedures for complex business cases.
Additionally, it streamlines the corporate reorganization process by utilizing holding companies. Lastly, it establishes a Business Court Modernization Subcommittee of the Joint
Legislative Economic and Global Engagement Oversight Committee.
House Bill 201/S.L. 2014-90 “Building Reutilization for Economic Dev Act” was signed into law by the Governor on July 30, 2014. This bill is an act to amend the applicability of the
Energy Conservation Code to certain existing nonresidential buildings. Additionally, it clarifies Stormwater Program impervious surface calculations for redevelopment, creates an exemption from the North Carolina Environmental Protection Act for the reoccupation of an existing building or facility, and amends the statute governing the Department of Commerce
Rural Economic Development Division.
Senate Bill 734 “Regulatory Reform Act” was ratified by the General Assembly on August 15,
2014, and sent to the Governor the same day, where it awaits action. This legislation is intended to clarify certain state regulations. It makes various administrative changes, and eliminates outdated or unnecessary statutes and regulations by modernizing and simplifying them. The vast majority of the provisions focus on environmental regulations. These include banning state regulators from passing, without General Assembly approval, rules more stringent than minimum federal standards. Additional provisions include easing coastal develop permitting processes, simplifying isolated wetland protections, and eliminating regulations on septic systems. Non-environmental sections of the bill include allowing community colleges to set up beer brewing training programs, adjusting speed limits in state parks, and clarifying regulations regarding Venus flytraps.
House Bill 1193/S.L. 2014-97 “Retirement Technical Corrections Act of 2014” was signed into law by the Governor on August 1, 2014. The act strictly makes technical corrections to the General Statutes governing the State Retirement Systems. It modifies dates of benefit commencement, adds clarifying details and definitions to the Special Retirement Allowance provision, and allows the General Assembly to make annual transfers instead of quarterly transfer of funds to the Department of the State Treasurer.
House Bill 1194 / S.L. 2014-112 “Retirement Administration Changes Act of 2014” was signed into law by the Governor on August 6, 2014. The bill makes changes to the administration of the State Retirement System. Most include due dates, the Board’s
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authority to waive penalties, replacement of Board members, and a new requirement for an annual report covering supplemental offerings to be made available to retirees.
House Bill 1195/S.L. 2014-88 “Fiscal Integrity/Pension-Spiking Prevention” was signed into law by the Governor on July 30, 2014. This bill enacts anti-pension-spiking legislation by establishing a contribution-based benefit cap, to allow members of the teachers’ and state employees’ retirement system and the local governmental employees’ retirement system that leave employment within five years to receive a return of their contributions with accumulated interest. It also returns to a five-year vesting period for members of the Teacher and State
Employees’ Retirement System and the Consolidated Judicial Retirement System who became members on or after August 2011.
House Bill 1050/S.L. 2014-3 “Omnibus Tax Law Changes” was signed into law by the
Governor on May 29, 2014. This legislation would replace the net economic loss with a state net operating loss (NOL) deduction that is more comparable to the federal NOL calculation.
Additionally, the bill would repeal the existing authority for cities to levy a privilege license tax on July 1, 2015. For the 2014–15 fiscal year, the measure would allow cities only to tax businesses physically located in the city. Currently, cities can tax businesses that operate in the city but don't have a physical location there.
Senate Bill 794/S.L. 2014-77 “Disapprove Industrial Commission Rules” was signed into law by the Governor July 22, 2014. This legislation repeals several workers’ compensation rules adopted by the Industrial Commission that are unfavorable to the original intent of the workers’ compensation reform law passed in 2011.
Any bills that are not passed upon the sine die adjournment will die and need to be reintroduced for consideration during the next biennial Session beginning January 15, 2015, for organizational purposes and then returning on January 28, 2014, for opening day.
Legislation that did not pass during Short Session but will most likely be filed again next year includes the following:
House Bill 1181 “North Carolina Medicaid Modernization” creates the Medical Department of
Benefits, which would oversee health care systems. The Board would have broad authority to operate the Medicaid and NC Health Choice programs, including duties to make mid-year corrections to stay within budget and submit to the General Assembly a five-year forecast of expected changes in enrollment numbers and enrollment mix. A Senate version includes a measure that shifts Medicaid to a managed-care model in which hospital and doctor networks and private insurance companies receive only a fixed amount for each patient. In contrast, the House plan proposes regional coverage through the state led by medical providers. Lastly, the bill combines mental health and mental treatment of Medicaid recipients, which are currently separate.
House Bill 1224 “Local Sales Tax Options/Economic Development Changes” expands eligibility for the state’s Job Maintenance and Capital Development Fund, a program
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designed to retain jobs in rural North Carolina. In addition, it would create the Job Catalyst
Fund (JCF), a new closing fund to assist the Department of Commerce in bringing major manufacturers and economic development projects to North Carolina. The measure would also add $14 million to the Job Development Investment Grant (JDIG) cap for the 2013–1015 biennium. In combination, these changes would expand flexibility for JDIG programs by allowing JCF funds to be factored into cost/benefit calculations for JDIG grants. Additionally, measures have been added that are necessary to keep state law in conformity with federal unemployment compensation law. Leadership tried to pass the bill through the House and
Senate on the final days of session; however, even with the Senate’s support, the House did not pass. Even though the bill was defeated by the House, the Governor could call the
General Assembly back for a special session to reconsider the vote. Due to the high priority this bill had within leadership, there is a good chance the General Assembly will see this legislation again in the future.
Senate Bill 38 “Amend Environmental Laws 2014” makes various amendments to North
Carolina environmental laws. The House and Senate were not able to work out their differences. Provisions in controversy are a new environmental audit privilege and immunity for self-reported violations. The Senate version of makes the results of an environmental audit confidential and gives the company immunity from civil penalties for environmental violations voluntarily reported to DENR as a result of an audit and places limits on citizen appeals of air quality permits. The Senate proposed to limit citizen appeals to circumstances involving violation of a national ambient air quality standard, authority for the Governor to waive environmental impact statements, and Coastal Area Management Act permit review for projects to protect, maintain, or rebuild Highway 12 on the Outer Banks and elimination of air quality monitors not required by the U.S. Environmental Protection Agency.
Authors:
Amy Fullbright amy.fullbright@klgates.com
+1.919.743.7352
Marissa C. Farrell
Marissa.farrell@klgates.com
+1.919.831.7003
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This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
©2014 K&L Gates LLP. All Rights Reserved.
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