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NC Capitol at Dusk 01

The second half of the historic legislative session that followed an historic election in 2010, which saw Republicans gain control of both chambers for the first time since Reconstruction, came to a close this week. At 3:04 P.M. on June 3, the General Assembly adjourned its seven-week “Short Session” portion of the two-year legislative session “sine die.” House members took up about 10 final bills before adjourning, while the Senate finished its official business in the wee morning hours.

Veto Overrides

Over the course of the 2011-2012 session, Governor Perdue vetoed a record 19 bills. The Legislature met the necessary supermajority vote (60 percent of present members) requirement in both the House and Senate to override 11 of those vetoes, five of them this year. Prominent in the rush of late activity to adjourn the Short Session, legislators mustered historic override votes of three gubernatorial vetoes. Supermajorities of both the House and Senate voted to reject Governor Beverly Perdue’s veto of HB 950—Modify 2011 Appropriations Act, SB 416—Amend Death Penalty Procedures, and SB 820—Clean Energy and Economic Security Act.

Budget. The Short Session is primarily tasked with amending the state’s two-year budget that is passed during odd-numbered-year Long Sessions. In the event that an adjusted budget is not approved, the state continues to operate under the existing budget, which often includes automatic, and sometimes drastic, cuts in the second year. The $20.2 billion plan in HB 950 includes pay raises for teachers and state employees, a cap on the state’s gasoline tax, additional Medicaid funding, funds for substantial education reforms proposed by Senate President Pro Tem Phil Berger (R–Rockingham), higher education scholarships and financial aid, and a requirement that government funding for family planning services may only be directed to local health departments, which eliminates such funding for groups like Planned Parenthood. Missing from the budget are funds for compensation of victims of the State’s former forced sterilization program, funds for a scholarship funding corporate tax credit promoted by school choice advocates, and funding for the North Carolina Teaching Fellows Program. This year’s budget battle often mirrored the contentious battle last year between the Republicancontrolled Legislature that campaigned in 2010 on not raising taxes, and Governor Perdue’s desire to extend a temporary sales tax increase. In 2011, Governor Perdue became the first governor in state history to veto a budget, which was subsequently overridden by the Legislature. In June, a similar historical battle ensued, with the Legislature ultimately garnering the necessary bi-partisan support in the House to put the new budget into effect without the Governor’s signature.

Racial Justice Act. Despite Governor Perdue’s veto, the 2009 Racial Justice Act has been significantly limited as a result of SB 416—Amend Death Penalty Procedures. The Racial Justice Act allows judges to reconsider death penalty sentences given for cases in which it is found that “race was the basis of the decision to seek or impose the death penalty.” After the Act passed, nearly all death row inmates in North Carolina asked for a review of their case. The changes clarify that statistics alone are insufficient to prove racial bias. Under SB 416, inmates who claim racial bias in their case would be limited to only citing statistics from the area where they received their sentence, rather than across the state, and for “the period from 10 years prior to the commission of the offense to the date that is two years after the imposition of the death sentence.” SB 416 was the new Legislature’s second attempt to scale back the Racial Justice Act. In 2011, legislators were unable to override Governor Perdue’s veto of SB 9—No Discriminatory Purpose in Death Penalty.

Fracking. North Carolina has taken the first step toward opening the state to hydraulic fracking. Late in the evening on July 2, legislators voted to override the Governor’s veto of SB 820—Clean Energy and Economic Security Act. The bill sets up an Energy and Mining Commission to study and set up regulations governing mining of natural gas using hydraulic fracturing, also known as fracking, that could begin as early as 2014. Once the Commission’s preparation work is complete, the Legislature would have to vote to approve the Commission’s work before drilling rigs and derricks could be set up and begin the actual process of tapping into the State’s natural gas reserves.

Gambling

It is now nearly a foregone conclusion that a session of the North Carolina General Assembly is not complete without some effort to expand gambling in the State dominating at least a portion of the festivities. This year was no exception with several attempts to legalize a variety of expanded gambling opportunities receiving consideration, and, sadly, one of the most egregious receiving approval.

Cherokee Casinos. North Carolina has now legalized Las Vegas-style gambling on the Eastern Band of Cherokee Indians reservation in Western North Carolina. The Governor, who negotiated a new gambling Compact with the Cherokee in November 2011, but needed the General Assembly to change current law in order for it to take effect, signed SB 582-Authorize Indian Gaming/Revenue about an hour after the Senate voted 35 to 11 on June 6 to concur with House changes to the bill.

The measure amended North Carolina law to allow the Cherokee to offer Class III gaming activities on Indian lands to include gambling machines, live table games such as craps, roulette, blackjack, and poker, raffles, and video gambling. The Cherokee have operated a casino in Western North Carolina since 1997 with limited gambling activities (such as bingo, raffles, and video-based games), but the Tribe has been pushing for the ability to offer Class III gambling, which has been illegal in North Carolina, for years. “It’s been a long trip for us,” Cherokee Chief Michael Hicks told the media after Governor Perdue signed SB 582 into law. “I don’t think any of us realize what the impact is going to be in North Carolina.”

The Cherokee had hoped to begin offering Class III gambling activities as early as July 4, but the Compact is not official until the U.S. Department of the Interior approves it, which could take up to 45 days.

Video Poker. Despite repeated whack-a-mole attempts over the last several years to outlaw a variety of video poker activities, many legislators joined the Governor in nearly throwing up their hands in frustration this year. HB 1180—Video Sweepstakes Entertainment Tax ultimately died a quiet death late in the session, but not before making waves in the halls of the General Assembly and in newspapers across North Carolina. The bill sought to legalize the existing video sweepstakes gambling establishments across North Carolina, sometimes known as “sweepstakes cafes” or “internet cafes.” It would have also authorized an unlimited number of new establishments with an unlimited number of gambling machines, most of which allow access to video poker. These gambling parlors have been popping up across the state and operating under a legal cloud over the last half-dozen years. Two lawsuits challenging a 2010 law that prohibits video sweepstakes gambling are currently pending before the North Carolina Supreme Court. If the State Supreme Court upholds the law, these establishments could be shut down for good.

Casino Nights. Rep. Bill Owens (D–Pasquotank) and Rep. Michael Wray (D–Northampton) also filed HB 1188—Casino Night for Nonprofits this session. HB 1188 sought to allow nonprofit organizations to host “Casino Nights” that include live table dealers and the consumption of alcohol. Similar bills have been presented in the past, but rejected because of a recognition that the alleged benefits of legalizing expanded gambling in the State are far outweighed by the harms to the players and families who will suffer from compulsive gambling addictions and the increased crime that comes with gambling activity. “Casino Nights” in a state where casino gambling is otherwise illegal, opens the door for legalization and also serves as a training ground to teach various forms of gambling to unwary participants. HB 1188 failed to gain any traction this session.

Education

With Republicans in control of the Legislature, school choice advocates were able to make their largest strides in nearly 20 years. Last year, legislators eliminated the state’s arbitrary cap on the number of charter schools allowed to operate in the state and implemented a tax credit for special needs students whose parents seeks to meet their children’s needs outside the public school system. This year, Senate leader Phil Berger (R–Rockingham) proposed sweeping reforms to the public school system, many of which were ultimately incorporated into the budget. Additionally, the House considered establishing a corporate tax credit to encourage companies to make donations to certified education scholarship organizations that help low income students attend nonpublic schools.

Public School Reforms. The Senate spent several committee meetings and several hours of floor debate adjusting SB 795—Excellent Public Schools Act. The bill proposed changes to improve K-3 literacy, assign school performance grades, adjust the school calendar, strengthen teacher licensure requirements, repeal the prohibition on teacher prepayment, provide a tax deduction for educational supplies, establish teacher contracts, and eliminate public financing for the Office of Superintendent of Public Instruction. In the end, the state budget included many of the reforms proposed in SB 795, as well as $47 million to implement the reforms.

Corporate Scholarship Tax Credit. Twelve members of the House of Representatives co-sponsored HB 1104—Scholarship Funding Corporate Tax Credit. The measure proposed creating an “Equal Opportunity Scholarship Tax Credit” for taxpayers that make donations to education scholarship organizations that give scholarships to low income students to attend private or religious schools of their choice.

According to a press release from House Majority Leader Rep. Stam, one of the bill’s primary sponsors, the scholarships cannot “exceed $4,000 per year per student to cover tuition and fees for books, transportation, equipment, or other items required by the school.” To be eligible for the scholarship, a student must “belong to a household with an income level not in excess of 225 percent of the federal poverty level,” and must meet at least one of the following criteria: have been a full-time student at a public school during the previous semester, or have received a scholarship from an eligible scholarship-funding organization during the previous school year, or be entering kindergarten or first grade. HB 1104 would cap the corporate tax credit “at $40,000,000 beginning on January 1, 2013, with provisions to expand the cap.”

According to Rep. Stam’s office, the proposed corporate tax credit for educational scholarships would pay for itself. “The Legislative Fiscal Research Division estimates combined savings to the government (state and local) of $53,000 in the first year, $16 million in the second year, and $12 million in the third year,” the press release states.

Similar education scholarship tax credit programs exist in eight states, including Florida, where that state’s scholarship program received $118,000,000 in donations in 2009, which provided scholarships to over 23,000 students. In 2011, the U.S. Supreme Court dismissed a lawsuit against Arizona’s 13 year-old education scholarship tax credit program. The program provides a dollar-for-dollar tax credit on state income taxes for taxpayers who make a voluntary donation to any of more than 50 private nonprofit School Tuition Organizations in the state.

The bill to establish such a program in North Carolina could not get traction during the Short Session, so supportive legislators will have to consider whether to file a similar attempt when they return in January 2013.

Empty Seats

As the gavels fell on Jones Street and legislators headed home, many were preparing for four months of campaigning in anticipation of the November 6 general election. All 170 seats in the legislature are up for election this year. However, 48 current occupants of desks in the legislative building will not return to their current position, regardless of the election outcomes. Almost one-third (17 Democrats and 20 Republicans) of the members of the House of Representatives are retiring from their current seats, while nearly one-quarter (six Democrats and five Republicans) of the members of the Senate have opted not to seek another term there. Several of these members are running for higher office, but many more are opting to leave their jobs in government. The North Carolina Free Enterprise Foundation calculates that departing legislators take with them over 450 years of legislative experience.

Restarting

The Legislature will convene the 2013-2014 session at noon on Wednesday, January 30. On that day, the 170 citizens who are elected on November 6 will begin a new two-year session governing North Carolina along with a newly elected governor, in the wake of Governor Perdue’s decision to forego a second term. Before officially kicking off the new session, the General Assembly will convene for a daylong organizational session on the second Wednesday in January.

Every legislative session has its own flavor and tenor, but it is unlikely that any session in the near future will boast the historic significance of the 2011-2012 session. Republicans seized their opportunity to show North Carolinians how they would lead and govern, and the public policy of the state shows the results of those changes—from the passage of a marriage protection amendment to enhanced regulations to protect unborn children and their mothers to budgets balanced without tax increases or the support of the governor, to expanded energy exploration and educational choices. Now, the people of North Carolina, who gave the Republicans a chance to govern after the 2010 elections, must decide whether they approve or whether they want a return to the Democrat policies long a mainstay in North Carolina state government.

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