Legislative Update: COVID-19 Dominates Legislative Process and Policy

Scott Mooneyham, NCLM Director of Political Communication and Coordination

The 2020 legislative session may have been surreal in some respects – committee meetings by Zoom, in-person meetings sometimes devoid of lobbyists and other observers (still listening remotely, of course), and nightly protests down the street. But it was very real in terms of what was at stake: the health of North Carolinians and the future of state’s economy in the wake of the COVID-19 pandemic.

The pandemic overwhelmingly dictated process and policy – with very little room for any other topics as legislators dealt with the necessities facing residents and government due to the virus.

Initially, at least, during a four-day start to the session prior to a two-and-a-half-week break, partisanship was put aside as legislators quickly adopted some early steps and sent out portions of federal relief dollars aimed at combating COVID-19. A $1.6 billion spending plan included $150 million sent to local governments, but through counties and with no guarantees that money would reach municipalities.

Meanwhile, once that four-day session was over, any détente between Republicans and Democrats ended as well. After all, it is an election year, and the pandemic had placed Gov. Roy Cooper front and center in leading a response that called for an initial shutdown of large segments of the economy, and only partial reopening steps moving forward as both public health and political leaders gained a somewhat better grasp of how to respond.

Legislative leaders, without a vetoproof majority, sent a number of bills Cooper’s way calling for quicker re-openings of certain businesses and activities, taking the position that he was moving too slowly. In early May, Senate leader Phil Berger noted that many counties at that time had only a small number of confirmed COVID-19 cases. “Why is a blanket, one-size-fits-all statewide order justified?” he asked. Cooper, not surprisingly, vetoed the bills, and legislative leaders were unable to muster the votes to overturn those vetoes, with his fellow Democrats standing solidly behind him. “Several other states reopened their economies too soon and are now dealing with a surge of COVID-19 cases,” said Senate Minority Leader Dan Blue.

After the General Assembly sent out that initial round of funding, the League and member representatives made a strong case that the earlier $150 million sent to local governments – without a guarantee that counties share dollars – was not an equitable or effective approach to address the needs across communities in the state. At one point, at least 25 percent of North Carolina counties had failed to share any of that initial appropriation with cities and towns. Those decisions were being made against a backdrop of new U.S. Treasury guidance that allowed for more expenses to be paid from that funding.

As a result, legislators approved HB 1023 Coronavirus Relief Funds/ Additions and Revisions, which released another $150 million in federal CARES Act funding to local governments and mandated that 25 percent of the total $300 million, be shared with municipal governments.

Legislators also pushed roughly $2 billion toward state programs facing various challenges due to the virus, as well as another $200 million toward business grants and infrastructure incentives.

There also were other COVID-related measures affecting municipalities. State law affecting remote meetings was clarified so that local governing boards could safely meet amid the virus without running afoul of public meeting requirements. There was an extension of authority for remote notarizations, necessary for land-use permitting and other governmental functions. Special obligation bond authority was reinstated, improving borrowing capacity for local capital projects. A measure delaying motor vehicle property tax payments by months meant yet another hit to municipal revenue, delaying as much as $200 million in revenue for cities.

While all of these actions were occurring, League lobbyists and members held meetings with legislative leaders, called legislators and sent letters making clear that North Carolina’s cities and towns faced substantial challenges caused by declining sales and occupancy tax collections and delinquent utility payments. Discussions were also held with Governor Cooper and his staff about the effects of his executive orders on those customer delinquencies. By July, the governor had agreed to allow the provisions affecting those water, sewer and electricity utilities expire.

That the General Assembly spent so much focus on spending measures related to COVID-19 did not mean that a larger budget stalemate between the governor and legislative had ended. After Cooper vetoed legislators’ annual spending plan last year, and legislators could not override the veto, it was back to piecemeal spending bills for 2020.

Despite the focus on the COVID-19 virus and its effects, the legislative session did include consideration of other measures affecting municipalities.

Most important may have been the approval of a new Viable Utility Reserve fund in legislation that focused on addressing financially struggling water and sewer systems. Legislators set aside only $9 million for the fund. But HB 1087/SB 810 Water/Wastewater Public Enterprise Reform sets up a framework for a statewide approach to find solutions for dozens of rural municipal water and sewer systems across the state that too have seen erosions of customer base and, consequently, maintenance and upkeep.

Elsewhere on the utility front, legislators tweaked the law dealing with system development fees to change the timing of some fee payments. That change came only after input by the League.

With the state Department of Transportation facing major financial issues, the General Assembly also placed the spotlight on state agency and road construction. Coming into the legislative session, a state audit had found hundreds of millions in overspending. The economic effects of COVID-19 also meant less driving and less gas tax collected. “We’ve seen some crises before. This one is probably the worst one we’ve ever seen,” said new DOT Secretary Eric Boyette.

In response, DOT furloughed hundreds of employees and stopped a number of construction projects. Legislators made their own reform path, approving cash management reforms as well as providing additional funding. That legislation, HB 77 DOT 2020-21 FY Budget/ Governance also set a temporary floor on the state gas tax to shore up road construction revenue and made cuts including all funding for public transit. A total of $300 million in federal CARES Act dollars could also flow to the department should Congress eliminate restrictions on how those dollars can be spent.

The General Assembly, though, failed to pass a major bond referendum that would have pushed hundreds of millions more at transportation needs, as the Senate failed to take up the bill after it overwhelmingly passed the House.

Other legislation that failed to pass included several proposed local unfunded mandates that could have affected local government employee retirement and workers compensation benefits.

As legislators worked through those issues, Governor Cooper – in response to widespread protests calling for racial justice in the wake of the death of George Floyd at the hands of Minneapolis police – created The Task Force for Racial Equity in Criminal Justice, which started meeting almost immediately. The state House formed a separate Task Force on Justice, Law Enforcement and Community Relations to begin exploring policy approaches to policing issues raised by the death of Floyd and others.

The General Assembly concluded much of its business in July. But with Congress considering another round of COVID-19 relief, legislators were set to return to Raleigh in early September. The scope of the legislation to be taken up was far from certain. In that regard, the pending session is very much like the times that we now face, with a future and the virus dictating it very difficult to predict.