Commentary, Education, Governor Roy Cooper, Legislature, News

After budget passes, Gov. Cooper goes on the offensive in promising a veto

Gov. Roy Cooper announced his plans to veto the budget bill Friday.

Facing, for the first time in his term, some hope of sustaining a veto of Republican lawmakers’ budget, Gov. Roy Cooper wasted little time Friday.

Cooper — flanked by teachers, health care officials, influential progressives and, perhaps, a few key swing votes in the Democratic caucus — slammed legislators’ $24 billion spending plan as a “failure of common sense and common decency” at the Executive Mansion in Raleigh.

A few blocks away, Senate President Pro Tem Phil Berger — perhaps the most powerful Republican in the state — held a press conference in the legislative building, chiding the governor for his decision. Berger argued that Cooper is holding up the state’s spending plan over Medicaid expansion.

“If (Cooper) says he’s willing to compromise, I’m more than happy to have our members engage with him,” Berger said. “I will tell you I’m not optimistic about his willingness to compromise based on his track record.”

It’s as if, eight months ago when Democrats broke Republicans’ veto-proof majority in both the state House and Senate, we could have written this contrived script out entirely then.

Cooper demands Medicaid expansion, a mostly federally-funded initiative expanding health care access for low-income North Carolinians.

And Republican lawmakers, who’ve rarely faced even a fleeting necessity for compromise in the last decade, scoff.

It’s only a matter of resolving whether the remaining negotiations last days, weeks or, gulp, months.

“Overall, this budget is bad, it prioritizes the wrong things,” Cooper told reporters Friday. The budget values tax breaks over public schools, he insisted, and “political ideology over people,” likely a reference to Medicaid.

Cooper was joined at the mansion Friday by Mandy Cohen, secretary of the N.C. Department of Health and Human Services. Cohen has urged lawmakers to adopt Medicaid expansion since Cooper appointed her to the role in January 2017.

The governor’s budget also breaks sharply with Republicans on K-12 spending, teacher raises, and school construction. Facing an $8 billion tab for school infrastructure, Cooper, like House Speaker Moore, has supported a statewide bond committing billions. Berger and Senate legislators emphasized a “pay-as-you-go” approach, pledging to spend more than $4 billion on school buildings in the next decade.

Ask a teacher whether they’re willing to trust lawmakers’ promise of future action, particularly given the infrastructure bill owes to years, not months, of neglect from state leaders.

Overriding the governor’s veto will require a two-thirds majority in both the House and Senate. And while a handful of Democrats voted with Republicans on the budget bill this week, it’s unclear whether any would go so far as to join Republicans in the override.

Case in point: Sen. Floyd McKissick, a Durham Democrat awaiting confirmation for an appointment to the state Utilities Commission, stood directly behind Cooper Friday. McKissick voted with the GOP to approve the budget Thursday, but it seems most unlikely he’d support the override.

Senate President Pro Tem Phil Berger

Berger repeated his assertion Friday that lawmakers were open to a conversation about Medicaid expansion, provided it’s held in a special session, something of a ludicrous delaying tactic given the issue’s front-burner position for most of the decade.

Republicans leaders are expected to woo Democrats to their side with “pork” spending on local projects in the budget, a point Berger seemed to hint at Friday.

“I believe every member should vote on this bill based on what they believe is best for their districts and their constituents,” he said. “And not what is best for their political party.”

Berger claimed that he has not asked for nor received any pledges from Democrats to vote with the GOP.

Still, the Senate leader acknowledged there may be lawmakers in his party willing to consider expansion, but not enough to pass it. Berger added that he would not support the expansion, repeating the claim that the increased Medicaid spending could “blow a hole in the budget” if the federal government reneges on its promise to pay the lion’s share of the tab.

Far-right Republicans have made that argument for years now — even if moderate conservatives saw the innate logic and humanity in expansion — and that provision of Obamacare seems no more likely to be scrapped today than it did when the GOP first rebuffed expansion in 2013.

The House is expected to consider an override vote first. The haggling, I assure you, is already underway behind closed doors.

What happens from here on out is decidedly less predictable.

Environment, Legislature

Pork fattens the environmental budget while necessities get chopped

From the ‘New York World,” 1848

The NC Department of Environmental Quality can’t always get what it wants. It can’t even get what it needs.

DEQ had requested 37 new positions in the state environmental budget to address the crisis of perfluorinated compounds in drinking water supplies. The House tepidly responded with seven positions; the Senate, always financially brutal toward DEQ, eliminated the appropriation. The conference budget settled for just five additional full-time positions, but only two of them are devoted to PFAS sampling and analysis. The others are for permitting and administration.

DEQ Secretary Michael Regan criticized the conference budget, saying in a prepared statement that it “does not allow DEQ to keep pace with the demands of a growing economy or the critical water quality issues facing North Carolina. The lack of funding negatively impacts the communities dealing with PFAS contamination and aging water infrastructure. It asks them to go without necessary resources.”

A $2 million PFAS Recovery Fund initially was to be used to provide alternate water supplies to households whose drinking water had been contaminated by Chemours. But a consent order between Chemours, DEQ and Cape Fear River Watch requires the company to pay for and supply the water, either through filtration systems or connections to public supplies.

Freed up, those recovery funds could have been used to add staff in the Division of Water Resources for PFAS work. Instead, the conference budget divvies the money among several earmarks, including general wastewater and water projects for Benson (represented in the Senate by Republican Brent Jackson, an appropriations committee chairman) and Kenansville (also represented by Jackson and Rep. Jimmy Dixon, a Duplin County Republican who chairs appropriations in the House).

Neither town has documented PFAS contamination in its water supply.

Maysville does have a PFAS problem. The town would receive $500,000 to replace its only well, which has been contaminated with PFAS by firefighting foam. It’s unclear, though, if a new well is prudent. Granulated carbon filters can remove PFAS. And the Maysville well taps draws from the Castle Hayne aquifer; if the aquifer itself is contaminated, a new well might not consistently provide clean water.

Five towns with friends in high places secured earmarks, cutting in line to grab a slice of the way-too-small money pie for water and sewer improvements:

  • Four Oaks (again Sen. Jackson territory): $200,000
  • Wilson’s Mills (ditto, Jackson): $100,000
  • Salemburg (Jackson again delivers): $150,000
  • Midland (represented by Sen. Paul Newton, an appropriations subcommittee chair): $500,000
  • Bethel (represented by Democrat Don Davis, who’s on two appropriations committees): $150,000

The State Water Infrastructure Authority estimates at least $17 billion in improvements are needed in North Carolina over the next 20 years. Since the needs are so great and so numerous, the infrastructure authority accepts grant applications from municipalities and then scores them before awarding any money — independent of the state budget earmarks.

Of the seven cities and counties that received infrastructure earmarks in the state budget, only two — Maysville and Sampson County — received funding approval from the Water Infrastructure Authority last fall, according to DEQ documents. Bethel received a small grant for “assessment.” The other four towns didn’t even apply.

Another year, another earmark for the Charlotte Motor Speedway, which is in the pole position to receive as much as $2 million from the pot of money to clean up old dumps, known as pre-1983 landfills because they were built before that year, when liners began to be required. There are more than 800 sites statewide with unlined landfills, none of them apparently with as much cachet as CMS. [Update: A reader noted that this is not new money.
However, the provision does change the required match from 2:1 two private dollars for every one State dollar to 1:1, still a great deal for CMS.]

This is the second consecutive such appropriation for CMS. The infield sits atop one part of a landfill, which extends beyond the gates. The landfill was built in 1980 and closed in 1992, although dumping reportedly occurred there since the 1940s. Groundwater monitoring from 2018 showed spikes of barium, cobalt, benzenes, nickel, toluene, and acetone — all of which can cause health problems and in some cases, cancer.

Budget-writers also inserted a controversial provision to delay by a year the implementation of the general swine, cattle and some poultry operating permits. The new regulations, announced by DEQ after several months of public comment, are scheduled to go into effect on Oct. 1.

This language essentially uses a legislative cudgel to hammer a judicial challenge to the new rules. The Farm Bureau filed a contested case hearing with the Administrative Office of the Courts, alleging DEQ overstepped its authority. The state Board of Agriculture recently voted to support the Farm Bureau’s litigation.

And this week, the NC Environmental Justice Network intervened in the case, arguing the opposite viewpoint: The rules aren’t strong enough.

University Energy Centers, perennially positioned beneath the guillotine, would receive no money, according to the conference budget. The House had funded NC State ($400,000), NC A&T ($200,000) and Appalachian State ($200,000); the Senate, again, excised the funding, and none of it was restored.

Read more

Environment, Legislature

After coastal towns complain about Resource Institute, lawmakers could rescind its $5 million windfall

The Atlantic Reefmaker is a wave-breaking technology used in inlets, but not oceanfronts. After receiving $5 million from the legislature last year, the Resource Institute proposed using the technology — sold by one of its primary contractors — for hurricane resilience. North Topsail Beach, Surf City and Topsail Beach officials have objected to both the Reefmaker and the Resource Institute, the latter of which they say has little expertise in coastal projects. (Photo: Atlantic Reefmaker)

[Update: On Tuesday afternoon the Senate passed this bill, the bulk of which deals with veterans’ memorial funds, but includes language to revoke funding for the Resource Institute beach projects. The measure now goes to Gov. Roy Cooper.]

One year you have $5 million, the next year — poof — it’s gone.

Funding for the politically connected Resource Institute is on the brink of being eliminated in Senate Bill 95 after several coastal towns complained to lawmakers that the Winston-Salem nonprofit didn’t have the expertise to tackle hurricane resilience and recovery projects.

If the bill becomes law, the money would be divided equally among Topsail Beach, North Topsail Beach and Surf City for hurricane recovery projects.

Squeak Smith, chairman of the Resource Institute board of directors, told Policy Watch he is waiting for the final bill language to determine the next steps.

The Resource Institute, Smith said, “will continue to advocate for additional funding for the coastal communities to help address resiliency after future storm events. We are fully prepared and qualified to carry out projects in conjunction with future funding sources and communities wanting our assistance and services.”

The Senate was scheduled to vote on the bill last night, but the measure was pulled from the calendar and rescheduled for 4 p.m. today.

The $5 million appropriation for the Resource Institute originated in last year’s budget bill, ostensibly to work with coastal governments on alternatives to beach nourishment. But as Policy Watch reported at the time, the appropriation occurred after leadership at the Resource Institute, as well as several of its contractors, contributed more than $115,000 to key lawmakers. Later contributions increased that total to $150,000.

After Hurricane Florence hit the coast in September, a subsequent bill changed the funding purpose to storm recovery.

Earlier this year, North Topsail Beach officials successfully lobbied their legislator, Sen. Harry Brown, a Republican from Onslow County, to redirect $1.6 million to them. According to emails obtained under the Public Records Act, North Topsail Mayor Dan Tuman also objected to the Resource Institute’s 12 percent administrative fee.

“$600K to folks who don’t do or know anything, who will insert meaningless pet projects that they promote for consideration …” Tuman wrote. The pet project he referred to is the Atlantic Reefmaker, a wave attenuator that has been used in inlets but not ocean fronts. One of the Resource Institute’s contractors, North State Environmental, markets, sells and installs the technology.

Subsequently, Topsail Beach and Surf City officials asked another lawmaker, Sen. Bill Rabon, who represents four coastal counties, to divert the remaining money to them.

The Resource Institute also received scrutiny in March from the legislative Program Evaluation Division. Similar to the federal Government Accountability Office, the PED analyzes and investigates the effectiveness of state programs. The PED found that the Resource Institute had duplicated more than 50 invoices to the Clean Water Management Trust Fund and the NC Department of Environmental Quality. The duplication resulted in a $20,000 overpayment to the Resource Institute for stream restoration in the western part of the state.

The Clean Water Management Trust Fund administers grants for the streams program.

In 2013, the Resource Institute, with the backing of the US Department of Agriculture, pitched the idea of a Western Stream Restoration program to former lawmaker Mitch Gillespie, then the assistant secretary of the environment. Since then 96 percent of the funding — $8.16 million — has been awarded to the Resource Institute. Of the 67 grants, the group received 65 of them.

Commentary, Governor Roy Cooper, Legislature, News

We haven’t seen it yet, but North Carolina’s budget has veto written all over it

As of this moment, we — the huddled people, press and politicos of North Carolina — haven’t seen a draft of lawmakers’ agreed upon budget, but given the latest dispatch from Gov. Roy Cooper’s office, this one has veto written all over it.

Which is to say that our turgid budget process, which was supposed to wrap before the July 1 beginning of the fiscal year, may last weeks and even months.

Stated Cooper spokesperson, Ford Porter, Monday morning:

“We want a budget that invests in teacher pay instead of more tax cuts for corporations, that has a school and infrastructure bond instead of a slush fund, and that includes Medicaid expansion to insure 500,000 more North Carolinians. Right now, legislative Republicans are not interested in serious negotiations on these issues, but we hope they will change their minds and agree to put everything on the table as Governor Cooper has.”

Cooper’s office spoke out, with many expecting a proposed budget from House and Senate conferees in a matter of hours. Of course, no one’s seen the thing, a trademark of North Carolina’s surreptitious budget “process.” But the stagecraft squabbling by lawmakers and Cooper’s reps leaves little reason for optimism.

As The Insider‘s Colin Campbell reported, even a sausage biscuit confab Friday at the Capitol with Cooper, Senate President Pro Tem Phil Berger, and House Speaker Tim Moore, was a blunt failure.

From The Insider:

On Friday morning, House Speaker Tim Moore and Senate leader Phil Berger walked to the old Capitol building to meet with Cooper and House Democratic Leader Darren Jackson, D-Wake. Berger was spotted carrying a bag of Bojangles’ sausage biscuits, while both legislative leaders were carrying binders labeled “budget compromise options.” One of those proposals involves agreeing to a special legislative session “to address health access issues, including Medicaid expansion,” according to a joint statement from Berger and Moore.

“The governor previously proposed a ‘two-track’ solution and wants Medicaid to be ‘part of the conversation,'” the joint statement said. “This meets both of those requests. The governor rejected the proposal. We’ve asked for concrete compromise proposals from the governor for nearly two weeks now. He has refused to provide them.” Cooper spokesman Ford Porter said Friday that during the meeting Cooper and Jackson “made clear to Republican leaders that they oppose corporate tax cuts, unaccountable school vouchers and the SCIF slush fund and said that any budget compromise has to include discussion of Medicaid expansion, a school and infrastructure bond and significantly higher teacher salaries. Gov. Cooper indicated today that these items are negotiable, but Republican leaders have nearly completed their budget and are unwilling to discuss all of these important priorities that benefit our state.”

With legislators’ veto-proof majority torpedoed last year, this is the first time Cooper and legislators have been forced to haggle over the budget. Which is to say that we’ve never seen this negotiation before. Which is to say that the only thing we know is what we don’t know.

Every indication is legislators are intractable on Cooper’s biggest prize, Medicaid expansion, a damnably durable position for GOP legislators that’s as cold-hearted as it is illogical. But it’s clear that another round of GOP-authored tax cuts, school choice spending and a K-12 bond are on the table too.

The latter may be a key wedge in these deliberations. Moore’s already specified his tardy support for a statewide bond, while Berger retains his trademark acerbity on the subject. To recap, North Carolina faces billions in school facility demands. Moore has been willing to create a bond for at least a portion of those needs, but Berger’s more conservative Senate is loathe to take on the debt.

The tit-for-tat deliberation is just beginning. Miles to go, it seems.

Environment, Legislature

House Finance green-lights Duke Energy ratemaking bill; would allow utility to increase annual profits

Rep. David Lewis is running the bill in the House. (Photo: NCGA)

A controversial bill that would allow Duke Energy to increase its annual profits through alternative methods of ratemaking cleared another hurdle today, despite opponents’ objections.

The House Finance Committee introduced an amended version of Senate Bill 559 to ostensibly appease the state’s industrial and retail customers, such as Walmart. But the bill still sounded several alarms among lawmakers who view part of it as a gift to the energy industry.

Rep. David Lewis, a Harnett County Republican who is running the bill in the House, said this section of the bill “has been misunderstood from the get-go. Modern needs and modern challenges require modern tools. … We need to start talking about what our power situation is going to look like in 2025, ’30 and ’50.”

The measure would allow utilities, primarily Duke, to apply for “multi-year” rate plans that the would provide flexibility for the utility. Under these plans, a variation of which are used in 35 other states, the Utilities Commission could — but is not required to — grant periodic rate changes for as long as three years without holding traditional base-rate hearings. Those hearings are lengthy quasi-judicial proceedings during which the utility, the public staff and ratepayers testify under oath about the effects of a proposed rate increase. The bill language would allow Duke to sidestep that process in lieu of a 120-day public comment period. The company would have to file a public annual report. Base-rate cases would still provide for traditional public testimony.

The Utilities Commission also would have more time to rule on Duke’s ratemaking plan. The original bill set a nine-month limit; the new version extends it to a year.

Rep. Deb Butler, a New Hanover County Democrat on the Duke Energy ratemaking legislation: “The bill seems unilateral” — for Duke. (Photo: NCGA)

The banding portion of a multi-rate plan would allow the Utilities Commission to establish a return on investment — a profit — for the utility that acts as a midpoint; from there, the commission also would set a low- and high-end range — a band — for profitability. This provision would require Duke Energy to refund to customers any profits above 1.25 percent on its rate of return.

But Rep. Graig Meyer, an Orange County Democrat, noted if that provision were law today, Duke Energy could earn an extra $425 million over three years before issuing such a refund. If Duke earned below 1.25 percent, the Utilities Commission would hold a rate case to allow Duke Energy to recover its losses.

Peter Ledford, general counsel for NC Sustainable Energy Association, told the committee that his organization is concerned with the multi-year plan and the rate-banding. “If a new tax collected $140 million a year, it would draw extreme scrutiny.”

John Burnett, deputy general counsel for Duke Energy said he’s never known the commission to call in the utility “for over-earning.” He dismissed the suggestion that a utility can “manipulate” its rate of return.  The Utilities Commission bases the profitability rates on variations beyond the utility’s control, like weather, taxes and the number of customers. Burnett said customers would benefit from the bill, in part to “avoid expensive utility commission hearings.” (Duke often deploys an armada of paid attorneys to these hearings.)

There are no environmental performance goals associated with the multi-year plans or the rate-banding. Rep. Deb Butler, a Democrat from New Hanover County, said other states incorporated such standards into these alternatives. “There are no increases in renewable energy, energy efficiencies or clean ups of environmental contamination,” Butler said. “The bill seems unilateral.”

Another contentious provision remained from the original Senate version. Duke Energy could file for alternative ratemaking and a traditional base-rate case at the same time. If the Utilities Commission rejects Duke’s proposal for the alternative version, the utility could withdraw it and merely settle for a base rate.

“We feel like the utilities have a guardrail,” said Sharon Miller, executive director of the Carolina Utility Customers Association, which represents the state’s manufacturers. “If you trust and acknowledge the Commission experts, why do the utilities need this” — the ability to withdraw their alternative plans.

Martin asked lawmakers to split the bill between the benign Section 1, which allows for bonds to pay for storm recovery costs and the second section, which she suggested should be sent to a study committee. “Part 2 cherry-picks a rate mechanism that benefits utilities,” Martin said. “There are no quantifiable customer benefits.”

The House Finance Committee voted 16-12 to send the bill with a favorable report to the Public Utilities Committee.

The Senate version of the bill was sponsored by Sens. Dan Blue, a Wake County Democrat, and Republicans Bill Rabon and Ralph Hise, who represent several coastal and mountain counties, respectively. It passed that chamber on May 2.

Note: The original version of this story incorrectly identified Sharon Miller of the Carolina Utility Customers Association as “Sharon Martin.” We regret the error.