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NC Chamber Reacts to State Budget

This legislative session has lived up to its title as the long session of the biennium with the budget being the defining policy vehicle. As our legislative leaders begin to finalize the budget, we are pleased to see a number of our issues make it into the final version, thanks to the hard work of the NC Chamber’s Government Affairs team. Read on to review the line-item wins based on the NC Chamber’s 2023 Legislative Agenda.

Child Care
A critical issue impacting workforce and our state’s economy, the NC Chamber has been vocal in its support of child care policy changes.

  • The state will allocate $525,000 annually for the 2023-2025 fiscal biennium to establish a pilot program that provides business and financial assistance for the creation and sustainability of in-home childcare programs across the state. The program aims to create and sustain more in-home child care programs across the state.
  • Increased capacity for family childcare homes from no more than five to eight preschool aged children, including the operator’s own preschool children.
  • The Division of Child Development and Early Education shall establish a two-year pilot program to implement the Tri-Share Childcare program, a program that creates a public/private partnership to share the cost of child care equally between employers, eligible employees, and the state to address affordability and accessibility, create stability across the state, and help with employer retention efforts.
  • Child care stabilization grants for workforce compensation would be extended with approximately $100 million in federal one-time funding that was initially allocated in the last two-year state budget but remains unused, meaning it can be used to increase or maintain wages and benefits for staff until June 30, 2024. This is essential to providing high-quality care for children under five years old.

The budget established the Short-Term Workforce Development Grant Program, a state-funded financial aid program for North Carolina residents who enroll in noncredit, short-term workforce training programs that lead to an industry-recognized credential in fields with employer demand and competitive wages.  The STWD Program’s state board determines the eligible programs of study, based on the occupations that are in the highest demand in North Carolina, which currently include, but are not limited to architecture and construction, health sciences, information technology, electrical line worker, and manufacturing. The STWD Program provides grants of up to $750 per course to eligible students and is used to cover the cost of tuition, fees, books, supplies, credentialing tests, transportation, childcare, and other components of the total cost of attendance.

Environmental/Regulatory Reform
This session has had the most regulatory wins for manufacturers and the business community since Chamber-backed SEPA Reform in 2015. The NC Chamber is proud to have delivered numerous regulatory wins for job creators in the state budget this year, from Administrative Procedures Act Reforms, Permitting Reform for Air, Water, and Erosion Control and prohibitions on anti-jobs rule packages moving at the NC Environmental Management Commission. Thank you to both the House and Senate for their commitment to providing substantial regulatory reform for job creators and manufacturers in North Carolina.

  • Top Regulatory Win of the Decade: Administrative Procedures Act Reforms
    We are extremely pleased that our two-plus year efforts to reform the Administrative Procedures Act are in the budget. The NC Chamber delivered these reforms to protect the business community from evasive and un-lawful rulemaking tactics that state agencies have been successfully attempting in the rulemaking space. This APA reform is a generational win and strengthens job creators’ ability to ensure that any future rulemaking adheres to the clear procedures of APA and the Rules Review Commission. There has not been substantial reform to the APA for decades. We applaud House and Senate leadership for focusing on this reform package to protect job creators from often-unseen strategies to deploy burdensome regulations on business outside of the legislative process.We will provide a detailed line-by-line analysis and summary once the budget becomes law. This reform is not retroactive but would apply to the unlawful permanent Wetland Rules Package and require it be returned to the NC Department of Environmental Quality and the temporary rules sunset.
  • Prohibition on Cap-and-Trade Requirements for CO2 Emissions 
    Currently the Environmental Management Commission is considering rules to require the state to join the Regional Greenhouse Gas Initiative (RGGI). This provision would prohibit the state from joining such a program. This regulatory scheme would guarantee a cost increase on our electric rates and would also harm our business climate for manufacturing, many of which produce their own power for their operations. 
  • Prohibition on Adopting the Advanced Clean Truck Rules (ACT) 
    This section in the budget would prohibit North Carolina from adopting the Advanced Clean Truck Rules. The NC Environmental Management Commission is in the process of rulemaking to adopt California emission standards for new heavy-duty vehicles. Our state’s business community and its manufacturers are already making significant investment in alternative fuels and zero-emitting technology for trucks. Government mandates and intervention into the market would stifle this innovation and investment, as well as increase costs in new trucks, on which nearly all of our members rely. We are proud to be the #1 state in the country for heavy duty vehicle manufacturing, investment, and jobs, and we want to keep it that way. 
  • Right to Apply for and Obtain a Permit
    This provision would prohibit the Department of Environmental Quality or a local government from denying a permit based on an applicant not yet obtaining other state/local/federal permits for a project. Unfortunately, NC DEQ denied the critical MVP Southgate Pipeline project’s permit in 2021, citing that the project leads had yet to obtain a permit in another state as a reason for denial. This will ensure that this situation cannot be repeated, and actions of another entity cannot be leveraged against an applicant. 
  • Sedimentation and Erosion Control Permitting
    This provision would prohibit the state or a local government from denying a Sedimentation and Erosion Control permit if the applicant has not obtained other permits for a project. It would require that the permit be issued with a construction prohibition until all necessary permits are received.
  • Title V Air Permitting Efficiency 
    This provision would require DEQ to issue, deny, or issue a permit for public notice within 90 days of receipt of an administratively complete application for a minor modification, and 270 days of receipt of an administratively complete application for a major modification. It would also allow an aggrieved applicant to seek a contested case at the Office of Administrative Hearings. 
  • Title V Research and Development Exemption 
    This provision would direct the NC EMC to create a Title V air permit exemption for research and development to promote in-state research at our manufacturers and businesses. Currently, some R&D activities are considered major or minor permit modifications to test a new line or product, and these regulatory delays disrupt and stifle in-state research.
  • Pre-Permitting Activities for Air Permits
    This provision would expand approved applicant pre-permitting activities for projects while their air permit is being reviewed. This change will speed up project timelines for certain projects not subject to strict state and federal requirements with existing construction prohibitions. It will also increase our attractiveness for new and expanding sites due to additional activities a business can undertake to speed up economic development and job creation. 
  • Stormwater Permitting Revisions
    This provision would shorten shot-clocks for stormwater permits to 70 days and add a 10-day administrative completeness shot clock for the department to request additional information. This permitting efficiency reform is sorely needed for housing and all commercial development. State stormwater permits are incredibly delayed, upwards of nine months in the Wilmington region.
  • Title V Air Permit Bonus Pilot Program
    This provision would implement a performance incentive program for NC DAQ permit engineers, supervisors, and administrative staff based on pre-determined shot-clocks for Title V Air Permitting. This pilot program will incentivize permit writers to speed-up decisions and hold regulators accountable for their quality of work on New Permits, Minor Modifications, and Major Modifications for Title V Air Quality Permits.

The tax changes outlined in the proposed budget amount to $134 million in tax cuts in year one of the biennium and $652M in year two.

  • Franchise Tax Reduction
    This provision would cap the franchise tax at $500 for the first $1M of C Corporation’s tax base. The current franchise tax is already capped at $200 for the first $1M of an S Corporation. This reduction is really a win for smaller C Corps in North Carolina, but the amount is small.
  • Personal Income Tax Rate Reduction Triggers
    This budget provision would accelerate the personal income tax reduction from 4.99% to 3.99% in 2025. This is one year earlier than the schedule outlined in previous budget bills, which scheduled the tax to be reduced to 3.99% after year 2026. If triggers are met, the tax would then begin reducing to 2.49%. The personal income tax rate triggers require certain revenue targets to be met before reducing the rate further from 3.99% down to 3.49%, 2.99%, and finally 2.49%. The first revenue target of $33.042 billion in FY 2025-26 would trigger a rate reduction in year 2027, and so on. If the trigger isn’t met one year, it can be met the next year, or the next year, and so on. The budget provides for 8 years of triggers in an effort to eventually reach a personal income tax rate of 2.49%.
  • Aviation Fuel Tax Exemption
    The aviation fuel tax exemption sunset is extended from 2024 to 2029.
  • State Privilege Tax on Professionals
    This tax would be repealed under the proposed budget. Currently there is a $50 fee. 

The NC Chamber continues to lead in advocating for diversified, sustainable investment in our state’s transportation networks to maintain our competitiveness.

  • Partial Access User Fee
    The electric vehicle registration partial access user fee increased from $140.25 to $180 annually. A new hybrid vehicle registration partial access user fee will now be imposed at $90 per vehicle per year. The quadrennial inflation index for DMV fees is 2024, so these partial access user fees will be adjusted upward significantly, getting us closer to leveling the playing field for all users of the network. It’s imperative that we continue this work so that the maintenance of our transportation network continues. Learn more here.
  • For-Hire Ground Transport Services
    This provision would introduce a new tax on for-hire ground transportation services, including transportation network companies like Uber and Lyft. The tax would be 1.5% for an exclusive ride and 1% for a shared ride.

Workplace Issues

  • Workers’ Compensation Reforms Protected
    The NC Chamber, North Carolina Homebuilders Association, North Carolina Retail Merchants Association, and expert attorneys in workers compensation law successfully negotiated a fix to re-instate the 500-week cap on lifetime benefits for workers’ compensation benefits in the state. This section re-defined “Total Loss of Wage-Earning Capacity” after the NC Court of Appeals repealed the 500-week cap in the Sturdivant Decision.This critical fix—which is also retroactive—will ensure North Carolina continues to see the cost and exposure benefits of the historical 2011 Workers Compensation reforms in the Chamber-backed “Put North Carolina Back to Work Act.”To put it into perspective, the estimated cost to the state of North Carolina’s workers’ compensation, via a Fiscal Note, was over $500 million dollars for under 800 claims. That figure would have multiplied for the business community and employers would have faced guaranteed rate hikes since the 500-week cap was completely obliterated and lifetime claims were back on the table for trial attorneys. This critical fix ensures that the workers’ comp system remains stable, fair, and predictable for employers and workers moving forward.
  • OSH Issuance of Citations
    In 2021, the six-month Statute of Limitations for NC DOL Occupational Safety and Health violations was inadvertently repealed by the legislature. This change meant that regulators could theoretically issue an employer a violation dating back to an incident that occurred in the 1980s. The NC Chamber successfully revised the Statute of Limitations back to six months from the date of the violation, putting us back in-line with the majority of states which have a six-month S.O.L. for offenses.
  • Preemption of Certain Local Government Actions
    This section prohibits local governments from requiring any employer in a contract with a local government to pay their employees a specific wage. This will ensure employers engaging in contracts with local governments have flexibility to make decisions on staffing and operations without burdensome government intervention.

We appreciate the opportunity to advocate on your behalf and we are pleased with the policies our team has advanced this legislative session. The NC Chamber will continue its work until the session adjourns so stay tuned for continued updates!