There is increased certainty on the political landscape in NC as the 2012 calendar year progresses into its fourth month.  Since the closing of the election filing on February 29, the attention in North Carolina political circles is now laser-focused on the month of May for two reasons: the May 8 primary election and the May 16 convening of the NC General Assembly.

Elections

First-term incumbent Governor Bev Perdue (D) announced just weeks before the opening of NC's candidate filing period that she would not seek a second term, causing rampant speculation of potential candidates until the close of the election filing period on the last day of February.  Of the six candidates on the Democratic primary ticket, three are widely considered front runners: NC Lieutenant Governor Walter Dalton, former NC Congressman Bob Etheridge, and NC Representative Bill Faison.   The winner of this primary will challenge the likely Republican nominee, Pat McCrory, in November.

Other competitive North Carolina races to watch on May 8 include primaries for Lieutenant Governor and many U.S. House, N.C. House and N.C. Senate seats.   Complete and detailed information about all candidates in every state race on the ballot can be found on the election tracker link below:

2012 ELECTION TRACKER
COURTESY OF THE NC FREE ENTERPRISE FOUNDATION

N.C. General Assembly

Although the 2012 short session does not officially convene until May 16, the legislature has been busy preparing in the interim with an aggressive, session-like meeting schedule.  Legislative committees, including oversight commissions and various short-term issue-specific working groups, are beginning to wrap up their work after a period of significant information gathering in the last few months.   These study committees will soon begin to vote on final recommendations to present to the full legislature for potential consideration in May.  Legislative leadership has sent the clear message that they intend to adjourn for the year prior to Independence Day.  The highest priority item they will address is the 2012-2013 budget.

The latest report from the N.C. General Assembly's fiscal research staff shows that General Fund revenues through February are tracking $145 million above the $11.1 billion revenue target.  Key collections including sales tax and withholding income tax continue to outperform the budget forecast, however, the positive trend is not yet translating into employment.  Fiscal Research does not anticipate the state unemployment rate dropping below 9% until 2013.  Click here to read the latest complete economic outlook report.

There has been increased attention on the issue of utilizing North Carolina's untapped natural gas resources through a shale rock extraction method known as hydraulic fracturing, or fracking.  Currently, a state statute established prior to the development of this technology bans the method.  The legislature called for the N.C. Department of Environment and Natural Resources (DENR) to conduct a study of shale gas exploration. DENR unveiled their draft report this month, which supports hydraulic fracturing in North Carolina with the necessary safety precautions in place.  Fracking legislation will likely be introduced in the short session establishing a comprehensive process including ongoing studies and permitting requirements.

 The Environmental Review Commission reviewed proposed reforms to the state air toxics program that would eliminate duplicative state/federal regulations and reporting requirements.  The North Carolina manufacturing industry group expressed their support for the business-friendly legislation, while an environmental group voiced concerns, citing benefits of regulation to the economy.  Commission members also received a status update on the implementation of a law passed in 2011 that allows for risk-based remediation, or clean-up of contaminated industrial sites.

The U.S. Supreme Court began hearing arguments regarding the constitutionality of the federal Affordable Care Act this week, a challenge backed by over half of the states in the nation, including legislative leaders North Carolina.  Because national certainty on this front is lacking, several states have been hesitant in proceeding with legislation involving the Affordable Care Act, including the establishment of a state-run Health Insurance Exchange.  If states do not elect to set up the exchange on their own (receiving federal grants to do so), the federal government will step in and do this for them.  A measure establishing the NC Health Insurance Exchange passed the N.C. House in 2011 but remains stalled in the Senate.  The U.S. Department of Health and Human Services recently released newly established policies that offer states increased flexibility in establishing the exchange, including leniency of grant deadlines.  A Supreme Court ruling is expected on the matter in mid-June.

Meanwhile, North Carolina's Department of Health and Human Services is facing several difficulties of their own, including the Medicaid budget shortfall (additional document here), overseeing the statewide implementation of a managed care model for the delivery of Medicaid behavioral health services (via 1915 b/c waivers), and the precarious streamlining of two Personal Care Service models (in-home and adult care).  The full Joint Legislative Commission on Health and Human Services will meet next on April 10 to discuss these and other issues and potential action the legislature may take to address them in May.

The special committee formed to explore various matters with regard to hospitals in North Carolina has begun their final recommendation process.  The House Select Committee on the Certificate of Need Process and Related Hospital Issues is scheduled to meet next on April 19 and again on May 10.  Members will continue to discuss and vote on recommendations to bring forward to the full legislature. The House Select Committee on State-Owned Assets heard from UNC Health Care President Dr. Bill Roper this month, largely regarding the equity of a state-owned hospital competing in the public marketplace and potential legislation to downsize their 22-member board.   WakeMed CEO, Bill Atkinson, spoke before this committee in January.  WakeMed made an offer to purchase Rex Hospital, which is operated by UNC Health Care, in 2011.

Two Legislative Research Commission study committees continued their work in the month of March.  The Automobile Insurance Modernization Study Committee met on March 6 and considered the issues of compensation for diminished value of automobiles after an accident and a proposal to use technology in identifying uninsured motorists.  The Committee will meet again on April 10 to adopt its report that will authorize the continued study of the issues surrounding auto insurance modernization. 

The Property Insurance Rate Making Committee met on March 21 and heard from several speakers, including the Commissioner of Insurance Wayne Goodwin who addressed what he called a pending crisis in homeowners insurance.  The Commissioner made several recommendations for changes in the rate making process for homeowners insurance.  The Committee also heard remotely from Nancy Watkins, an actuarial consultant with Milliman, Inc. who updated a 2008 study she had done on the Beach Plan.  She, too, made several recommendations for changes in the rate making process.  The Committee will meet again on April 12 to adopt its report of proposed legislative changes and authorization for further study. 

The Joint Legislative Study Committee on the Modernization of North Carolina Banking Laws met twice in March, on the March 6 and March 27.  The Committee continued its work of studying needed changes to North Carolina banking laws.  One change the committee considered and will recommend for legislative action is the adoption of a funding mechanism for regulation of the mortgage industry through an assessment program on the industry.  The Committee's next meeting is scheduled for April 12, and a final meeting is scheduled for April 26. 

Click here to find the complete legislative calendar for a schedule of all upcoming meetings.

George M. Teague
Leon M. Killian
Zebulon D. Alley
Allison Waller

Nelson Mullins Riley & Scarborough, LLP