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A hike in local sales taxes could go before the voters in November under a new plan that emerged last week in the state Senate.
The tax provisions would allow local governments to hold a referendum to raise the local portion of the sales taxes by as much as one-half cent. The money could be used to cover transportation infrastructure or for a wide range of education costs, including construction, debt service, teaching assistants and local teacher supplements.
As it’s written now, the bill requires counties to designate the funds for either transportation or education, not both.
Critics of the plan said the measure needs a closer look and questioned the either/or requirement for the use of the funds.
“The practical effect of these changes combined is a shift of the one-quarter sales tax from general use to education or public transit uses only, limiting flexibility for counties,” Johanna Reese, director of government relations for the Association of County Commissioners, and David Thompson, the group’s executive director, wrote in their weekly legislative briefing. “However, it does open a quarter-cent tax previously only available for transit to education purposes.”
The tax plan was tacked on to an economic development bill reviewed last Wednesday by the Senate Finance Committee in a meeting also attended by several House members.
The bill — H1224 — was pulled before a final vote on Thursday and sent back to the Senate Rules Committee for another look. The committee is scheduled to review the bill late on afternoon of Monday, July 21.
Currently, the state allows local governments to collect up to 2 1/4 cents in sales taxes. The new legislation would raise that to 2 1/2 cents.
Counties already at the 2 1/4 rate would be allowed to hold a referendum raising 1/4 cents and counties still at 2 cents would be allowed to raise another 1/2 cents under the plan.
In Western North Carolina, only Buncombe and Haywood counties collect 2 1/4 cents.
If the controversy over the tax provision winds up scuttling the bill, that could jeopardize a separate provision designed send state economic development funds to Haywood County.
The provision, sponsored in the House by Rep. Michele Presnell, R-Yancey, and in the Senate by Sen. Jim Davis, R-Macon, changes funding caps and rules for the state’s Job Maintenance and And Capital Development Fund grants to help Evergreen Packaging in Canton convert two of its five coal-fired boilers to natural gas.
The company is putting $50 million into making the change to comply with new EPA air quality rules calling for a reduction in CO2 by 2016. The provision would allow up to $10 million in JMAC grants for the Evergreen project.
Budget talks continue
Last week saw progress and retreat on developing a final version of the state budget, with a compromise over teacher pay moving forward but a hardening of positions on Medicaid, the other major impasse in the House and Senate negotiations.
The Senate, led by Sen. Ralph Hise, R-McDowell, pushed hard for its plan to create a separate state agency outside of the Department of Health and Human Services. The new department would be up and running by July 2016 under the plan.
Hise said the change would ensure greater certainty in the Medicaid budget, which has been a steady concern for decades and was well off target in the past two budget cycles.
The plan, similar to a proposal in the Senate’s version of the state budget, has been criticized for relying on a managed care solution to Medicaid and for setting up an new oversight panel that would exclude physicians and other service providers.
Another consequence of the struggles over the budget is the growing rhetorical rift between the Senate leadership and Gov. Pat McCrory. Last week, the governor stepped up his criticism of Senate leaders, saying Senate President Pro Tem Phil Berger is running the chamber like his Democratic predecessors, Tony Rand and Marc Basnight, and U.S. Senate leader Harry Reid. Berger responded tersely, saying that while there are serious policy differences on the budget, there’s no need to get personal.
Both chambers reconvene today. The House has scheduled a skeleton session. The Senate has a full calendar, including floor debate of its restructuring plan for Medicaid.