State Budget Update - April 22, 2019

The House of Representatives was on furlough last week and did not meet in regular session. The Senate met Wednesday and Thursday to debate the budget so this update will focus solely on that. SCAC will resume issuing the Friday Report this week.

State Budget and Capital Reserve Fund — H. 4000 & H. 4001

The full Senate debated the budget and approved $9,511,285 in additional funding to the LGF. The House-passed version of the budget included $11.1 million in additional funding to the LGF over last year’s funding amount. The $1.6 million difference between the two was allocated by the Senate to fund a coroner’s mandate to establish county-level child fatality review committees. Attached is a chart showing the county-by-county breakdown of what counties would receive under each proposal. They also discussed several provisos of interest, which are discussed below.

Proviso 50.21 – CMRC: Development – Funding for Rural Infrastructure. This proviso authorizes the Department of Commerce (DOC) to use the Rural School District and Economic Development Closing Fund for economic development, water and sewer infrastructure, and school building infrastructure. The economic development projects must be in counties that contain a school district with a poverty rate greater than 86 percent as determined by the Department of Education. The DOC must develop a plan to deploy these funds in Tier IV counties first. Funds distributed pursuant to this fund must only be used for projects which don’t qualify for the closing fund. No funds may be used for water and sewer projects if the taxpayer that benefits from the project is under a fee-in-lieu of taxes agreement and the school district does not receive its pro rata share. Proviso 112.1 provides $50 million in funding for this proviso.

Proviso 50.__ – CMRC: Rural Broadband Access. This proviso requires the Department of Commerce to conduct a report on the accessibility of broadband and internet service in rural areas of the state. The report is due to the President of the Senate, Speaker of the House, Chairman of Senate Finance Committee, and Chairman of House Ways and Means Committee by December 31, 2019.

Proviso 108.__ – PEBA: Small and Medium Employers. This proviso, a SCAC Policy Position, changes the threshold for determining in which category county governments participating in the state health plan belong. A county that has less than 150 covered lives will qualify for the “small employer” category. “Medium employers” are those with 150 – 500 covered lives.

Proviso 109.14 – Business License Tax Collections. This proviso prohibits a private third party entity from assessing or collecting business license taxes, or requiring a business entity to remit confidential business license tax data to the third party entity on behalf of counties or municipalities. A county or municipality may still contract with a private third party entity to assist in collection of the taxes. Assisting is defined as identifying businesses that do not have a business license, providing that identification to the appropriate county or municipality, and/or providing appropriate forms to the business on behalf of the municipality or county. The county or municipality may also contract with the private third party for payment services. The proviso further creates a study committee to study reform and implementation of a third party collection system.

Proviso 113.__ – County Preemption. This proviso, which was not adopted, would prohibit a political subdivision receiving money from the Local Government Fund (LGF) from enforcing a regulation regarding the use, purchase, sale, or transfer of consumer goods enacted on or after April 1, 2019. A political subdivision would be further prohibited from adopting new regulations. If a political subdivision was found to be in violation of this proviso, then it would lose its entire next quarterly distribution of the LGF. After lengthy discussion this proviso was tabled.

Proviso 117.__ – Intrastate Motor Carrier Fee Collections. This proviso requires the Department of Motor Vehicles (DMV) to consult with the Department of Revenue (DOR) and any association representing taxpayers subject to, or entities imposing, the road use fee to determine the most efficient manner to implement a standardized system for the DMV to collects all fees owed by commercial motor vehicles operating solely intrastate, including fees imposed by local government. The system must allow a payment plan option to allow these commercial motor vehicles to pay the infrastructure maintenance fee in multiple installments. The plan must include a fiscal impact statement, prepared by the Revenue and Fiscal Affairs Office, detailing the costs associated with the plan. The DMV shall submit the plan by December 1, 2019, to the Chairman of the Senate Finance Committee, the Chairman of the Senate Transportation Committee, the Chairman of the House Ways and Means Committee, and the Chairman of the House Education and Public Works Committee.

Proviso 117.__ – Nonprofit Disclosures. This proviso applies to any nonprofit entity organized under Internal Revenue Code Section 501(c)(3), (4), (6), (7), (8), (10), (19), or 501(d). If a nonprofit receives a contribution from an entity receiving state money in the budget, then it must disclose to the Executive Budget Office and Revenue & Fiscal Affairs Office a report on how it spends that state money. A contribution must not be made to a nonprofit until it agrees in writing to allow the State Auditor to audit the contribution of state funds. The proviso cannot lead to the disclosure of proprietary or confidential information by the nonprofit.

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