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NC Legislative Update – 2/23/2017
02/27/2017

2017 Session Overview

In North Carolina, all 170 legislative seats were on the ballot in November, along with all constitutional officers, members of Congress and one U.S. Senate seat. Notably, Democratic challenger and then Attorney General Roy Cooper unseated the Republican incumbent, Governor Pat McCrory. In the legislature, Republicans maintained their super-majorities in both chambers, thus giving them enough votes to override any gubernatorial vetoes without the need for any Democratic votes.

The 2017 legislative “long session” convened in earnest January 25, 2017, following an earlier organizational session two weeks prior. The North Carolina General Assembly does not have a constitutional or statutory adjournment date or number of legislative days, but the long session traditionally adjourns in July or August. The determining factor for adjournment is typically the conclusion of the appropriations process—that process, which has just begun, results in adoption just prior to adjournment of a biennial budget beginning July 1, 2017 and running through June 30, 2019. Continuing budget resolutions are adopted should June 30 come and go without a new budget. The Senate begins the appropriations process this year.

For all other legislation, the crossover deadline is currently set for April 27, 2017. Crossover is the date by which a non-appropriations/finance bill must pass the chamber in which it originated and “crossover” to the other chamber in order to remain eligible for consideration through the remainder of the session (and the short session in 2018). During the long session, there are no limitations on what types of legislation can be filed, only introduction deadlines.

Litigious Atmosphere

The legislative session convened in a more litigious atmosphere than in previous sessions. The legislature, the Governor and others are currently involved in a number of lawsuits. Pending matters include HB 2 (local non-discrimination ordinances), legislative redistricting, Medicaid expansion, the confirmation process for the Governor’s cabinet, and reallocation of powers from gubernatorial appointees to other elected officials. Below are more details regarding some of these lawsuits.

Confirmation of Governor’s Cabinet

During a special session in December of last year, the legislature enacted H 17, Modify Certain Appointments/Employment, which drew on a state constitution provision specifying “advice and consent” to require the NC Senate to confirm the Governor’s cabinet secretary nominees, in a manner similar to what the US Senate does. Governor Cooper filed a lawsuit in January asserting that H 17 was unconstitutional interference with the duties of his office. Republican lawmakers argue that the constitution gives them the power to review nominees.

In early February, the NC Senate presented a schedule for confirming Governor Cooper’s nominees. Under the process, nominees would first go to the committee on the subject matter their agency oversees before a final review by the Senate Nominations Committee. Then, the full Senate would approve or reject the nomination.

Following the Senate’s announcement to begin confirmation hearings, Governor Cooper’s attorney filed suit and requested a restraining order to halt the Senate proceedings pending injunctive relief. A three-judge state court panel issued a temporary restraining order that prohibited the NC Senate from beginning confirmation hearings. The panel then heard arguments from Governor Cooper for a preliminary injunction to block the approval process on Friday, February 10. The following Tuesday, it issued an order denying the injunction. The full trial on the lawsuit is currently scheduled for March 7.

Redistricting

The General Assembly may also have to review legislative redistricting again this year. Last August, a three-judge federal district court found that the state’s legislative district maps constituted an unconstitutional racial gerrymander in 28 House and Senate districts. The panel ordered the General Assembly to redraw the maps by March 15 and hold special elections in 2018 to supersede those just held in 2017. Legislative leadership appealed this order. On January 10, 2017, the US Supreme Court overturned the lower court order pending further of the full appeal. The Supreme Court has yet to take further action so it is becoming more unlikely that there will be a special 2017 election, although the redrawing of maps for the 2018 elections is likely.

Medicaid Expansion

In January, Senate President Pro Tempore Phil Berger (R-Rockingham) and House Speaker Tim Moore (R-Cleveland) filed a federal lawsuit against the federal and state Departments of Health and Human Services challenging Governor Cooper’s plan to expand Medicaid. During his campaign, Governor Cooper listed Medicaid expansion as one of his top priorities and in early January, he submitted a letter and draft plan to CMS to expand Medicaid. However in 2013, the General Assembly passed legislation (S.L. 2013-5) prohibiting expansion without legislative approval. U.S. District Court Judge Louise Flanagan granted Berger and Moore’s motion for a temporary restraining order against Cooper’s expansion efforts. On January 27, that injunction was extended for another 60 days to give the new federal administration a chance to review all submissions and act accordingly.

2017 Session Policy Overview

Below are some of the issues that will be addressed by the General Assembly this session based on specific policy areas.

Healthcare

Significant healthcare policy issues this session are expected to include behavioral health reform, potential adjustments to the Medicaid reform bill, and an attempt by the Senate to repeal the state Certificate of Need law. We also expect to see bills filed to address opioid abuse, step therapy, oral chemotherapy parity and drug pricing transparency. Scope of practice battles will also consume some of the legislature’s attention, with H 36 expanding the types of procedures optometrists can perform and H 88/S 73 addressing advanced practice nurses, and likely more to come.

Regulatory Reform

Last session the legislature was not able to pass a regulatory reform bill, as it had in recent years. Those efforts will continue this session, and will likely include matters left on the table plus new ones. We also anticipate seeing changes in insurance rate and form filing, such as H 43, Auto Insurance Regulatory Modernization. H 43 would allow auto insurers to write insurer-specific driver incentive plans and opt-out of the current Safe Driver Incentive Plan (SDIP) set forth in statute. Other areas of reform will involve response to any federal “Repeal and Replace” legislation for the Affordable Care Act, further permitting reform, and likely proposed changes to beer wholesaler laws affecting small breweries.

Tax Reform

Since taking over control of the legislature in 2011, the Republican majority has enacted a series of tax policy reforms. We expect further debate on tax reform this session. Discussions may include changes to the tax credit/incentive system, lowering individual and corporate income tax rates, and mechanisms for economic development. The House Finance Committee recently held a meeting to give an overview of tax issues. The elimination of the franchise and mill machinery taxes were specifically mentioned, but changes need to avoid significant disruption the state revenues.

Education/Higher Ed

During the legislative interim, several committees met and discussed reforms to the state’s education policies. The legislature will likely consider changes to the community college funding formula and the pay structures and schedules for teachers and school administrators.

Legislation this session that has already seen action includes H 13, Class Size Requirement Changes, and H 39, Amend Appointments/UNC Board of Governors. H 13 is an attempt to address issues regarding class size requirements in earlier legislation. Schools would be able to return to the previous flexibility offered for the teacher student allotment ratio. H 39 would decrease the number of members appointed to the UNC Board of Governors by the General Assembly from 16 to 12.

HB 2 Repeal

During the 2017 long session, we expect there to be a number of attempts to repeal the measure. Already several bills have been filed which would repeal the law with or without other provisions. Governor Cooper has said repeal of H 2 is one of his top priorities and offered a compromise proposal. H 107 and S 93, Common Sense Compromise to Repeal HB 2, would repeal HB 2 and call for stricter penalties for bathroom crimes. These bills would also require cities to notify the legislature 30 days before adopting any nondiscrimination ordinance. It is unclear at this point what will transpire during the 2017 session on this highly politicized issue.

From Here

As we are only a month into the 2017 regular session, and we have not even reached the first bill introduction deadline, it is difficult to predict all of the interesting twists and turns ahead. We are on the ground, working every day on issues affecting our clients in virtually every industry. Please feel free to contact us if this outlook spurs questions or if you need additional information or detail.