On Monday evening, the North Carolina Senate tentatively passed compromise bills on economic development and Medicaid reform with bipartisan support, fulfilling two of the biggest goals of the session while adopting a number of provisions supported by members of the North Carolina House and Gov. Pat McCrory.
To encourage progress toward a final budget agreement, Senate Republicans removed these two issues from budget negotiations last week and introduced standalone, compromise bills to address House and executive branch concerns that the Senate budget contains too much policy.
“By working in good faith with our House and executive branch colleagues, we’ve taken real steps to encourage economic development across the entire state, give Gov. Pat McCrory tools to recruit and retain jobs and finally help get Medicaid costs under control,” said Senate Leader Phil Berger (R-Rockingham.) “We hope the House will join us in the spirit of compromise and support these very important goals.”
The compromise economic development plan:
- Answers the governor’s call for additional job recruitment dollars and moves to the middle of the original House and Senate proposals, by extending the state Job Development Investment Grants (JDIG) program for an additional three years and increasing the fund for grant awards to a maximum of $20 million per year.
- Creates a new economic development tool for attracting major manufacturing projects, like automobile and aerospace manufacturers.
- Establishes more generous grants to companies that locate in poorer counties – which have received little support from state incentives programs – but eliminates the hard cap on incentives directed to urban counties found in previous proposals.
- Moves to calculating corporate income tax on the basis of a single sales factor over three years, removing the existing penalty on businesses that hire North Carolina workers or invest in local property and infrastructure.
- Incorporates a number of House ideas, including the Datacenter Infrastructure Act and exempting passenger air carriers from business-to-business sales tax costs.
- Compromises on efforts to reform the state’s unfair system for allocating sales tax dollars by returning to a fair system in place for a quarter of century prior to 2007, where 50 percent of sales tax revenues would be allocated based on where people live, with the remaining 50 percent allocated based on the county where a sale takes place.
The compromise Medicaid reform plan:
- Achieves better budget predictability and sustainability by moving to a “capitated” system where a flat fee is paid to cover all physical, mental and long-term care services for most Medicaid recipients.
- Reduces the risk of cost overruns by allowing this system to be covered by both provider-led health plans (supported by the House and administration) and managed care plans (supported by the Senate).
- Creates a new Department of Medicaid managed by a cabinet secretary appointed by the governor and confirmed by the General Assembly.
- Moves closer to the House position by funding mental health service organizations (LME-MCOs) longer during a transition to single entities that provide “whole person” care for both physical and mental health.
“With tonight’s compromise on a number of major policy items, the last remaining impediment to passing a state budget is agreeing on a spending target,” said Senate Majority Leader and Appropriations Committee Co-Chairman Harry Brown (R-Onslow.) “We encourage our colleagues on the House Appropriations committee to accept the governor’s proposed target of $21.65 billion so we can reach agreement on the budget and adjourn as quickly as possible.”