Summer 2003
2003 Final Legislative Wrap-Up

The N.C. Poverty Law Monitor is a free, electronic newsletter that is designed to assist Legal Services advocates and other providing legal assistance to low-income North Carolinians. To receive a free e-mail subscription, to unsubscribe, or if you have suggestions or comments to offer or articles or announcements to submit, contact Rob Schofield, editor and chief writer at: rob@ncjustice.org or 919-856-2153

Contributors to this issue of the Monitor include: Elaine Mejia, Rebeca Gomez Palacio, Al Ripley, Bill Rowe, Sorien Schmidt, Adam Searing, Anne Winner and Paula Wolf.

2003 Final Legislative Wrap-Up --BUDGET OVERVIEW

After several months of gridlock and several incarnations of proposed budgets, lawmakers adopted a budget only hours before the new fiscal year began on July 1st. The final budget provides for $14.7 billion in general fund spending for the 2003-04 fiscal year. The final budget agreement relied heavily on spending cuts, federal aid, debt financing and one-time revenue enhancements to fill the $2.2 billion shortfall. The final budget will increase spending 3 percent in 2003-04 and 5 percent in 2004-05 - far less than the amount needed to reach the continuation budget spending level ($550 million and $500 million less, respectively).

This year’s budget process was driven by continuously dropping revenue estimates and debates over what to do with the one-time $512 million in federal aid. For the second year in a row, lawmakers relied heavily on spending cuts to balance the budget (nearly $1 billion on top of the more than $1 billion cut last year). Those cuts include reducing Medicaid edibility for workers transitioning off of work-first cash assistance to employment, more cuts to the Smart Start program, and cuts to funding for at-risk student programs in public schools, to name just a few. On top of the spending cuts detailed in the budget, agencies and school systems are now in the process of making $80 million in “management flexibility” cuts. On top of that, the Governor has notified agencies of another two percent across the board cut as a safeguard in the event that revenues come in lower than projected. In addition to the spending cuts, the budget also raises university and community college tuition. Non-teaching state employees received no pay raise and will be required to pay 17 percent more for dependent health care coverage.

Federal Funds Provide Relief -- Were it not for the $512 million in federal aid ($442 million after accounting for revenue losses from conforming to tax changes), lawmakers might still be haggling over the budget details. The federal money was critical in avoiding some of the extremely harmful cuts that had been proposed such as reducing eligibility for pregnant women, infants and 19 and 20 year-olds under the Medicaid program. In order to make up for the loss of the federal aid in the second year, the budget uses optimistic revenue growth, projected leftover funds from the current year, and shifts repair and renovations funding from pay-as-you-go to debt financing.

Sales and Income Tax Increases Extended Again – The final budget agreement relies on $811 million in revenue enhancements. Almost half of the revenue comes from extending the sales and income tax increases enacted in 2001. Unfortunately, there was little chance of replacing the sales tax increase with a progressive alternative. The remainder of the revenue package came from using the last of the Hurricane Floyd relief funds, intercepting a portion of the master tobacco settlement receipts, strengthening tax collection efforts, and borrowing from other funds such as the 911 Emergency Fund. The Senate did release a version of the budget that included tobacco and alcohol tax increases, but the House leadership was adamant that the votes were not available for any such increases, and so the proposed tax increases were squelched.

Outlook for 2004 is Bleak – A preliminary analysis of the 2004-05 budget performed by the NC Budget and Tax Center shows that there is likely to be a shortfall of approximately $773 million. This includes a projected revenue gap of $278 million in accordance with the Governor's latest estimates plus $495 million typical high priority expansion items such as higher education enrollment growth and ABC school bonuses.

House Bill 397, Session Law 2003-284
Most provisions effective July 1, 2003

Link to the August 11, 2003 BTC Reports

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PASSED

The Budget:

Health Choice and Medicaid Preserved (with one major exception) -- Most major cuts to health services were avoided with the one exception of health coverage for very low-income families who have just left the Work First program rolls to enter the workforce (transitional Medicaid coverage). Their coverage was reduced from 24 months to 12 months. NC Health Choice for Children was funded adequately to keep the program open through the year and provider reimbursement rates were kept at state health plan levels. In summary, major service cuts to health did not happen this year because of the one-time infusion of federal money as part of the emergency aid package for all states. Unfortunately, that money will not be available next year when new revenue will be even harder to raise given that 2004 is an election year.

US Congress Fixes CHIP (Health Choice) Federal Funding Gap -- $92 million in new federal money will now be available to North Carolina for Health Choice. This fixes the worry of federal funding running out for this program in the near future. This federal action also eliminates the state’s argument that capping the program is necessary because of limited federal funds and shows that state funding for Health Choice is the critical factor. Finally, the congressional action shows the continuing political popularity of this program and the virtual certainty that federal funding will be continued. For more information see www.familiesusa.org.

Federal Government Paying More to NC for Medicaid -- In addition to the emergency fiscal relief coming to North Carolina in 2003-04 for Medicaid, the federal government is also increasing North Carolina's "FMAP" -- the percentage of the Medicaid program paid for by the federal government. In federal fiscal year 2005, North Carolina should receive about $70 million more. This will help with Medicaid funding in the coming year.

Medicaid Dental Suit Finalized by Budget Bill -- In November of 2000, Womble Carlyle Sandridge & Rice, a major private law firm based in North Carolina, the Justice Center, and the National Health Law Program, a national public interest law firm, joined forces to sue North Carolina's Medicaid program. Dental services were, effectively, not available to many on Medicaid and the suit sought to change that. After protracted litigation that reached the US Supreme Court (the state wasn't interested in early settlement), an agreement was finally reached. When the General Assembly adjourned last month the changes became finalized. Specifically, rates for dental procedures children need most (although adults need many of them as well) were raised to 73% of usual and customary charges. This is a substantial increase of about $12 million in new reimbursement a year in addition to other basic reforms like compiling and making available a list of dentists who accept Medicaid.

For more information on the impact of the budget on health care, contact Adam Searing, head of the Justice Center's Health Access Coalition.

FAILED

"Repeal Health Insurance Rate Protections for Small Business" -- This bill would allow insurers to "cherry-pick" small businesses to just insure the ones with all healthy employees. This would likely lead to higher rates for most very small businesses and more people uninsured. It passed the Senate, but stalled in the House. It may, however, be considered next year.

Senate Bill 758

Mental Health/Chemical Dependency Parity – This bill would have required health insurers to provide coverage for mental illness and chemical dependency. This issue is a perennial controversy in the General Assembly whose supporters have yet to overcome the powerful institutional opposition arrayed against it. It remains eligible for consideration in 2004.

House Bill 654

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EDUCATION

PASSED

Assistance to “LEA’s” on the Implementation of “No Child Left Behind Act” -- This new law directs the State Board of Education to assist local school administrative units on the implementation of the federal “No Child Left Behind Act of 2001.” Provisions require the State Board to: identify which schools are meeting their prescribed “adequate yearly progress,” study the practices of successful schools, create assistance models based on those practices, and offer technical assistance to local school administrative units that are not meeting their progress objectives. The State Board and the Department of Public Instruction are to report on the results of this process in June 2004 and December 2005.

House Bill 797, Session Law 2003-419
Effective July 18, 2003

State Competency Test Program Amended – This bill makes clear that the State Board of Education is to adopt an alternative test that may be administered to students who do not pass the standard competency test and requires the adoption of a policy for identifying which students and under what circumstances the tests shall be given. A second provision clarifies the availability of the alternative test to students with disabilities.

House Bill 801, Session Law 2003-275
Effective July 1, 2003

State Budget Provisions -- Legislators and other public officials almost universally profess strong support for public schools, but four years of budget deficits make it difficult for them to adequately support the quickly growing needs of the public schools. Enrollment is projected to grow rapidly for several more years resulting in the need for as many as 8,000 more teachers per year. Officials have ensured that public school funding will reflect this growth and the Governor has continued to lobby hard to reduce class size – through the hiring of new teachers at the elementary school level. Nonetheless, other programs for students with special educational needs continue to be at risk.

Cuts of particular concern include:

• At-Risk Student Services -- Funding for programs serving students who are at risk of failing end of grade tests was cut by just over $1m. These cuts were made based on census data showing a 1% decrease in this population. Many advocates, however, think the census data may be erroneous.

• Discretionary Cuts by local school systems (Local LEA’s) ­-- $44.3m must be cut by local school systems in ways of their choosing. This is likely to take more money from programs for at-risk students.

• Vocational Education -- 173 positions were eliminated as a result of an $8m cut in funds to local school systems. Another $448,038 was cut for Vocational Education Program Support.

Important public education items that received additional funding include:

• Second Grade Class Size Reduction $25m -- Additional funding will be enough to hire 571 teachers to reduce size of second grade classrooms across the state. Because of the methodology/formula used to distribute and use this money, class size reductions may not actually impact all second-graders.

• Low Wealth Supplemental Money -- $5m more to low-wealth school systems.

• More-At-Four ­-- Governor Easley began More-at-Four to help better prepare pre-schoolers who are at risk of not doing well in public school. This year’s budget increases funding by $7.4 million for each of the next two years. This will allow another 2,400 children to participate. An additional $1.2m was allocated for the first year of the budget for start up expenses as new local programs join. This program is actually included in the Department of Health and Human Services budget but is jointly implemented with DPI.

NOT CUT: Services for Students with Limited English Proficiency. This budget item was NOT CUT as proposed in some earlier versions of the budget.

FAILED/PENDING

Education Instead of Long-Term Suspension -- This bill would have required the state to develop a meaningful and effective plan for assuring that children who receive long-term suspensions are still provided with a free and appropriate education. The lack of such programs in most areas of the state plays a large contributing role in the state’s abysmal dropout rate. Though passed unanimously in the House, the bill was transformed by the Senate into a mere study proposal. In turn, the General Assembly adjourned without voting on the study. The issue remains eligible for consideration in 2004.

House Bill 1135, House Bill 674

Restraints and Seclusion Amendments – Like the long-term suspension bill, this proposal was transformed into a mere study proposal (in this case, by the House) after a promising start. As introduced, the bill would have required those who engage in the physical act of restraining or secluding a child to be properly trained. The current lack of such a requirement has been cited by experts as a contributing factor in a series of troubling incidents in recent years. The proposed study would have focused on the number of occurrences, the cost implications for providing the necessary training, and how schools would manage to implement this type of restriction. Because the omnibus studies bill did not pass, the issue is likely to resurface in 2004.

Senate Bill 977, House Bill 674

Elimination of the High School Exit Exam – This measure would have eliminated the high school exit examination and restricted the State Board of Education from developing any further standardized tests not required to fulfill the federal “No Child Left Behind Act” or other federal law. The bill passed the House, but stalled in the Senate. It is eligible for consideration in 2004.

House Bill 678

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PASSED

Budget Changes -- Facing a major deficit for the fourth year in a row, legislators again made numerous cuts to the Department of Health and Human Services, which includes all major public assistance programs and social services. The single largest cut was the elimination of a year of transitional Medicaid provided to families who have worked their way off of Work First (North Carolina’s welfare or cash assistance program) but do not have health insurance. This will save the state over $21m per year when fully implemented and North Carolina will lose an additional $40m in federal dollars that was brought in by this program. Most children in these families will be able to get Health Choice coverage, but the newly working parent will be uninsured.

Again this year, several small but effective programs were eliminated. In most cases, these programs had achieved great success for clients and their communities, but were unable to garner adequate political support to obtain the funding needed to expand to more regions of the state and now are gone altogether.

Cuts include (this is not a complete listing):
•	Elimination of three child welfare programs -- Intensive Home Visitation eliminated this year; Intensive Family Preservation eliminated last year; and Families for Kids matching money eliminated two years ago.
•	Teen Pregnancy Prevention and Out-of-wedlock Birth Prevention funding cut by about 1/3 over last two years;
•	Smart Start local partnerships cut $7.7m. -- this is the fourth cut in as many years and will result in about a 20% cut in the overall funding total;
•	Child Fatality Task Force staff eliminated;
•	WIC Farmers Market program eliminated; and
•	Welfare Automation Fund eliminated ($5.4m), just over $1m is allocated to maintain current automation, which is outdated and struggling to keep up with needs.

The above cuts (and others) allowed the legislature to expand a few existing programs:

•	Foster Care and Adoption rates increased by $50/month -- this is first expansion in over ten years;
•	Personal Needs Allowance for recipients of State/County Special Assistance increased $10/month from $36 to $46.
•	Fifteen additional Abuse and Neglect staff members in the Division of Child Development -- these folks investigate licensed and unlicensed childcare facilities, close illegal facilities and enforce state regulations;
•	Funding allocated to conduct statewide folic acid campaign to improve birth outcomes; and
•	More-at-Four expanded ($7.4m) to add 2,400 new slots for pre-kindergarten children who are at-risk of not doing well in public school.

Many fee increases are implemented throughout the budget and will directly or indirectly affect users and providers of services. Some specific HHS fee changes include:

•	Pap-smear fees charged to local Departments of Public Health for the processing of pap-smears, nearly doubling the cost the departments. With no additional funds to pay for this, local departments of Public Health will likely struggle to meet this cost and may be forced to reduce staff or services further as a result.
•	Licensed childcare facilities will begin paying new fees, but the fees will not be levied against unlicensed religious childcare facilities.

TANF Block Grant Changes -- The TANF block grant is the primary federal funding source for cash assistance and services to help low-income families with children. Work First -- North Carolina’s welfare cash assistance program -- has seen its caseload hold steady at around 47,000 cases since 2001 (when the recession helped bring an end to several years of declining numbers).

•	Cash Assistance and Work First Block Grants: For the 2003-04 fiscal year, legislators maintained the slightly elevated cash assistance funding allocated last year and slightly increased the Work First county block grants.
•	Child Care Subsidy: TANF funding for child care subsidies was increased about $7m, but state funding for child care subsidies was reduced $15m from last year leaving a net loss of $8m.
•	No More Federal Repayment: Many programs that had received TANF funds previously, but that did not last year, were funded again through the TANF grant. This reflects the fact that the state was forced last year to use nearly $5m TANF dollars to pay a fine to the federal government. This year those funds again could be used for programs.

For more information check the Justice Center web site for the chart “TANF Block Grant Spending Plan 1999 to Present”.

Federal TANF Reauthorization -- In 1996, Congress passed the Personal Responsibility and Work Opportunity Restoration Act (PRWORA), which created the TANF block grant, altered the Child Care and Development Block Grant and implemented many other changes collectively known as “welfare reform.” The TANF and Child Care block grants were authorized and funded until September 30, 2002 at which time they would have to be reviewed and reauthorized by Congress or expire. Congress has been in gridlock over how and whether to change these programs and how much additional funding (if any) to provide. Because it has been unable to agree on a renewal law, Congress has been reauthorizing the program (and it’s funding) a few months at a time with no changes. The current authorization expires September 30, 2003. Some ongoing issues of contention include:

•	Work Requirements -- The Bush administration proposed, and the House endorsed, an increase in the number of hours per week a parent must work in order to receive assistance and to restrict the types of activities that count toward the work requirements. Given the state of the economy this seems particularly unrealistic.
•	Funding -- Funding for childcare subsidies and TANF were set in 1996 and have remained essentially the same ever since. Costs of childcare have increased with inflation and the demand for childcare subsidies has increased with the recession, yet Congress has only passed small increases in funding for this area.
•	Immigrant Eligibility -- PRWORA restricted immigrants from receiving assistance in many programs. Since 1996, eligibility has been restored to some immigrants in some programs but so far President Bush and the House have not been willing to even give states the option of serving more immigrants with TANF funds.
•	Marriage Promotion -- Substantial new resources are provided for untested and narrowly defined marriage-promotion programs. Many feel this money could be better spent elsewhere and that states should be given much more authority over the funds.

While the House passed HR4, its version of welfare reauthorization, it is now expected that the Senate will not pass the bill in 2003 and that Congress will agree to continue the current PRWORA for another year after it officially expires again on September 30. For more information about TANF reauthorization visit the Center on Budget and Policy Priorities at www.cbpp.org and the Center for Law and Social Policy (CLASP) at www.clasp.org.

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PASSED

Changes to Banking and Finance Company Laws -- The powerful banking industry secured the passage of a bill that largely deregulates the interest and fees that may be charged on credit cards and home equity loans. As a part of the agreement, however, legislators agreed to the demands of consumer advocates that home equity loans be subject to North Carolina’s groundbreaking anti-predatory lending law – thus assuring that consumers be provided independent counseling before they can agree to extremely high cost equity loans that feature exorbitant “points” and other charges. Eliminating interest rate and fee restrictions on credit cards and equity lines of credit will have little effect on North Carolina consumers since banks use the National Banking Act and Federal preemption of states’ laws to avoid the limitations of North Carolina law. Lawmakers were also persuaded by Bank of America’s promise to create jobs in North Carolina to staff call centers for exporting loans to other states.

House Bill 1182, Session Law 2003-401
Effective October 1, 2003

Local Telephone Deregulation Okayed -- A significant defeat for consumers came when North Carolina’s three powerful local telephone companies (BellSouth, Sprint and Verizon) rammed through a new law that dramatically reduces state Utilities Commission oversight of rates and charges imposed by local telephone service providers in the names of “deregulation” and “competition.” Though the Commission already had authority to deregulate various prices if it found such a move to be in the “public interest,” the companies were not satisfied with the generally pro-consumer Commission’s pace. In an impressive display of lobbying power, the companies were able to force through a change that became law within a month after it was first proposed.

Senate Bill 814, Session Law 2003-91
Effective May 30, 2003

“No Call” Up and Running -- An important win for consumers came with the passage of the “no call” anti-telephone solicitations law that has already received substantial media attention. Despite a number of exemptions, this new law will place a large dent in the practice of unsolicited telemarketing calls. Consumer advocates at AARP of North Carolina deserve special credit for assuring the passage of this important new law.

Senate Bill 872, Session Law 2003-411
Most sections effective October 1, 2003, and apply to telephone solicitations made on or after that date.

Pilot Consumer Ed Program for Public Schools – Lawmakers appropriated a small amount of funds and included a directive for a limited number of school districts to launch pilot programs that teach personal financial literacy.

House Bill 397, Session Law 2003-284
Most provisions effective July 1, 2003

FAILED/PENDING

Payday Lending Still On-Hold -- One of the biggest victories of the 2003 session for low and moderate-income consumers came when the Senate failed to pass an industry supported bill that would have brought back state approved payday lending. North Carolina made the predatory practice illegal under state law in 2001 after it was revealed that the vast majority of these loans were abusive “debt treadmill” transactions that simply trapped borrowers in a continuous cycle of debt without providing any real benefit. Typical $300 loans feature interest rates approaching 400%. Though many payday shops have stayed in business by hooking up with out-of-state banks and claiming to be exempt from state law, this practice is under attack at the national level. The defeat of the industry bill was not a perfect solution (consumers are still in need of a law that establishes an affordable and non-predatory small loan product), but it does send a clear message that North Carolina will not simply revert to the old, failed payday model.

House Bill 1213

Finance Company Fee Increase Vetoed -- In the waning hours of the 2003 session, lawmakers passed a bill that permits consumer finance companies to increase origination fees on first home mortgages by 300 percent and dramatically increase other kinds of fees they can charge on first home mortgages. Unlike the Banking industry bill, this measure offered no benefit for consumers and advocates urged a veto. Using his third veto, Governor Easley obliged stating, “This legislation has no economic benefit to North Carolina or our working families. It would simply increase the cost of loans for North Carolina citizens at a time that they can afford it least.”

House Bill 917, Ratified 7/20/03, Vetoed 8/19/03, Re-referred to House Rules 8/27/03

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PASSED

Manufactured Housing Reforms Adopted -- A big win for affordable housing and consumer advocates came with the passage of a bill to reform state laws governing manufactured housing. This new law attacks unfair dealer practices such as the misuse of customer deposits and last minute changes to sales contracts. The law mandates the development of new regulations governing deposits and clarifies that a buyer gets a new three-day right to cancel a purchase when the dealer changes the terms of the agreement. The bill also includes a change that makes it possible for manufactured homeowners who site their homes on property subject to a long-term lease to obtain loans similar to regular mortgages. Finally, the law ups the tenant notice requirement when park owners convert a park to different use from 30 to 180 days.

House Bill 1006, Session Law 2003-400
Various effective dates

Landlord/Tenant Amendments – Legislators gave approval during the waning days of session to a proposal that clarifies the late fees that may be charged of tenants. In particular, the bill makes clear that the general provision of G.S. 42-46(a) that permits a late fee of $15 or 5% of the rent (whichever is greater) applies to leases in which the rent is due in monthly installments. Tenants who lease by the week (such as is the case for many very low-income people) may not be charged a fee in excess of $4 or 5% of the weekly rent. Late fees imposed on tenants in subsidized housing shall be calculated only with respect to the tenant’s share of the rent. A controversial provision in the bill that provided reassigned military personnel with an easier exit from their leases was deleted.

Senate Bill 847, Session Law 2003-370
Effective August 1, 2003

Housing Trust Fund/HOME Match Funding -- A combined appropriation of $4,750,945 was appropriated for both years of the 2003-’05 biennium.

House Bill 397, Session Law 2003-284
Effective July 1, 2003

Lead Poisoning Control Amendments – Several substantive and technical changes were made to the state law governing lead poisoning, including: adoption of a much more detailed definition of “lead poisoning hazard” and a clarification of permissible remediation methods.

Senate Bill 519, Session Law 2003- 150
Effective July 1, 2003

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PASSED

Groundbreaking Unemployment Insurance Changes Adopted -- An important win for vulnerable people came with the passage of a measure that will expand eligibility for unemployment insurance in a number of ways, including:

•	Making it easier for those who become unemployed because they are the victims of domestic violence to obtain benefits without seeking a formal protective order;
•	Changing the definition of “family hardship” to make clear that it covers persons forced to leave work in order to care for a close family member who has become ill or disabled;
•	Making it clear that unemployed part-time workers may receive benefits without being forced to look for full-time work; and
•	Helping so-called “trailing spouses” who are forced to leave work because their husband or wife has been transferred.

Senate Bill 439, Session Law 2003-220
Effective June 19, 2003

Improved Unemployment Insurance Eligibility for Victims of Industrial Disasters – In response to the Kinston factory fire, this new law removes the one-week waiting period for unemployment insurance (UI) benefit claimants who are unemployed due directly to a major industrial disaster that destroys substantially all of the physical facilities of a manufacturing plant. Under the previous statute, an unemployed person seeking UI benefits from the Employment Security Commission was required to wait one week after an initial claim was filed before receiving benefits.

Senate Bill 8, Session Law 2003-1
Effective February 27, 2003

Unemployment Insurance Surtax Delayed – Throughout the 1990’s the General Assembly adopted a number of tax reductions that brought North Carolina’s unemployment insurance (UI) tax rate to the lowest in the country. Indeed, many employers continue to pay no tax at all. Because the UI Trust Fund is now effectively empty, the rate was scheduled to automatically increase this fall. This new law suspends the scheduled tax increase while the Employment Security Commission does its best to get a handle on the Fund’s problems through other methods.

House Bill 1241, Session Law 2003-405
Effective August 12, 2003

Crackdown on Unemployment Tax Avoidance Passes – This bill seeks to deter the practice of state employment tax avoidance (SUTA Dumping) by clarifying two statutes. The law makes it clearer that an employer cannot avoid an unemployment insurance tax rate based on its history in the system by creating a dummy company and shifting employees there. The bill adds a new subsection (b1) to current G.S. 96-18, and extends certain current taxation penalties to unemployment insurance contributions. The bill makes it a Class H felony for anyone who willfully attempts, or aids and abets an attempt to defeat or evade an unemployment insurance tax if the employing unit has more than 10 employees, a tax of more than $2,000 has not been paid, and an experience rating account balance has been overdrawn by more than $5,000. The bill also adds graded felony penalties for willful assistance in filing false or fraudulent returns (whether or not the employer or chief financial officers knows it is false). It is a Class C felony if the defendant is a contribution tax return preparer and the amount of the tax evaded is $100,000 or more. It is a Class F felony if the defendant is a contribution tax return preparer and the amount evaded is less than $100,000. It is a Class H felony if the defendant is not a contribution tax return preparer.

Senate Bill 326, Session Law 2003-67
Effective May 20, 2003 and December 1, 2003

FAILED/PENDING

Workers’ Compensation for Farmworkers Defeated Again -- A proposal advanced by worker advocates, Hispanics and the state public health community to extend coverage of the state’s workers’ compensation law to agricultural workers was rejected by legislators due to the opposition of the state Farm Bureau. The bill did, however, receive an extensive hearing in a Senate committee. Supporters remain optimistic about the bill’s long-term prospects.

Senate Bill 632, House Bill 922

Living Income, Pay Equity Studies in Limbo – One result of the sharp divisions between the House and the Senate was that the two bodies were unable to agree in the last days of the session on passage of the “omnibus” studies bill that ordinarily passes overwhelmingly. This bill is usually very important because it sets up a variety of legislative “study committees” that have the power to make formal recommendations for the passage of new bills next year. Without such a recommendation, many ideas for change are not eligible even to be introduced as a bill during the second year of a legislative session (like 2004) because of strict legislative rules. Unless action is taken in the fall, this may well mean that several important studies advanced by the Justice Center and other advocacy groups – such as proposed studies of “living income” issues and “pay equity” issues for state employees – will not take place.

House Bill 674

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PASSED

“ Homicide Prevention Act” Wins Approval – This important new law, which has long been sought by domestic violence advocates, provides for the surrender and possible disposal of firearms in the possession of abusers subject to a 50-B protective order. It also clarifies the state criminal law governing the purchase of a firearm by a person subject to such an order.

Senate Bill 919, Session Law 2003-410
Effective as to offenses committed on or after December 1, 2003

Protective Order Statute Clarified – This new law makes several changes to G.S. 50B. Section 1 amends 50B-1 to define the term “protective order” to include “any order entered pursuant to this Chapter upon hearing by the court or consent of the parties.” Section 2 amends 50B-3 to remove the references to consent agreements and clarifies the grounds and terms for renewal of an order. The bill makes other technical changes as well.

Senate Bill 630, Session Law 2003-107
Effective May 31,2003

Child Welfare Laws Amended -- This bill makes a number of changes to child welfare laws, including: placing a limitation on continuances in termination of parental rights cases; clarifying grounds under which public schools must review a student’s unexcused absences; amending the training requirements for child welfare services workers; requiring the maintenance of a register of foster home applicants; and enhancing the ability of the State Child Fatality Review team to access records.

Senate Bill 421, Session Law 2003-304
Effective July 4, 2003

Child Support Enforcement Changes – This year’s child support enforcement legislation makes a number of changes. These include: new language clarifying that payments shall continue after the obligation ends in order to pay back arrearages; a provision that clarifies rules governing access to payment history of the obligor; an amendment to the health insurance section to permit a court to order the responsible party to obtain health insurance “when (it) becomes available at a reasonable cost”; a new subsection governing the imposition of a lien on an obligor’s account with financial institutions doing business with the state.

Senate Bill 423, Session Law 2003-288
Most provisions effective July 4, 2003

Criminal Penalties Enhanced for Assaults in the Presence of a Minor – This law amends G.S. 14-33 to specify that persons who commit an violent assault on a person with whom he or she has a personal relationship as defined in G.S. 50B-1 in the presence of a minor shall be – at a minimum – placed on supervised probation. A second offense will result in active punishment of no less than 30 days.

House Bill 926, Session Law 2003-409
Effective December 1, 2003

Family Law Arbitration Act Clarified -- This act simply adds language to allow the parties to agree not to confirm the arbitration award in family law arbitration.

House Bill 952, Session Law 2003-61
Effective May 20, 2003

Collaborative Family Law Procedures -- This bill adds a new section to Chapter 50 of the General Statutes to establish collaborative law procedures so that parties to a divorce and their attorneys may settle disputes by written agreement with limited court intervention. The bill defines collaborative law and establishes that a validly executed collaborative law agreement tolls the time periods pertinent to legal action. The bill also sets out other guidelines for collaborative law regarding notice of a collaborative law agreement when an action is pending, entry of judgments when a collaborative agreement is reached, a withdrawal requirement for attorneys who have participated in collaborative law, but the case ends up in court, privileged evidence as a result of collaborative law and the right of a personal representative to continue in a collaborative law action for the decedent with respect to equitable distribution.

House Bill 1126, Session Law 2003-371
Effective October 1, 2003

Groundbreaking Unemployment Insurance Changes Adopted – See discussion under “Employment” above regarding access to benefits for victims of domestic violence.

FAILED/PENDING

Domestic Violence Custody Changes -- This bill would remove the current limitations under which courts may address the issue of custody ex parte, require courts to consider custody as part of an ex parte or permanent order hearing, and create a presumption that it is in the best interest of the child to be placed in the custody of the non-offending caregiver. This bill passed the Senate, but stalled in the House. It is eligible for consideration in 2004.

Senate Bill 718

Abolish Alienation of Affection and Criminal Conversation -- A perennial proposal in recent years, this measure passed the House, but stalled in the Senate. It is eligible for passage in 2004.

House Bill 1047

Clarify Post-Separation Support Laws – This Bar Association proposal would have both clarified the terminating events for post-separation support and the fact the fact that such support is a temporary measure. The bill did not pass either house.

House Bill 877

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ADMINISTRATIVE LAW/CIVIL PROCEDURE

PASSED

APA Amended to Revise Rulemaking Procedures -- Lawmakers adopted a lengthy rewrite of the state Administrative Procedures Act that: makes several changes to the process for adoption of temporary and permanent rules; creates a process for the adoption of emergency rules; clarifies the role of the Rules Review Commission; and makes clear that the State Medical Facilities Plan is excluded from the definition of a rule.

The procedure for adopting a temporary rule requires agencies to give notice to interested parties and hold at least one public hearing. The Rules Review Commission (RRC) will review temporary rules, using the same standards used for permanent rules including a review of both the statement of need and the rule. Agencies are authorized to seek judicial review via the Wake County Superior Court when a temporary rule is rejected by the RRC. “Emergency rules,” are authorized for cases of serious and unforeseen threat to public health or safety. These rules are adopted using the same procedure used currently for adopting a temporary rule. Emergency rules are to be reviewed by the Codifier of rules (Chief Administrative Law Judge, Office of Administrative Hearings) and then entered into the Administrative Code. Agencies are to simultaneously commence the new process for adopting a temporary rule when it adopts an emergency rule. The Department of Health and Human Services (DHHS) is authorized to adopt emergency rules under certain conditions to provide for new or increased services and benefits to children and families. Changes to the rulemaking process for permanent rules include: decreasing the time for a permanent rule to go into effect (permanent rules would go into effect on the first day of the month following the month they are approved by the RRC, unless the RRC receives written objections from ten or more people); reducing the substantial economic impact threshold from $5 to $3 million, thereby triggering a fiscal note; and authorizing judicial review via the Wake County Superior Court when a permanent rule is rejected by the RRC.

House Bill 1151, Session Law 2003-229
Effective July 1, 2003 (and as to permanent rules adopted on or after October 1, 2003)

Validate Certain Notarial Acts -- This bill validates instruments that were notarized by a notary public, but where the notary was not properly qualified at the time because of the expiration of the qualifications or some other problem after commission. Other errors in the notarization such as recording the wrong date of the expiration of the notary’s commission on an instrument are forgiven. This bill validates notarial acts with these type of problems that were performed on or before March 1, 2003.

House Bill 58, Session Law 2003-38
Effective May 14, 2003

Conform Evidence Rule 103 -- Rule 103 of the Rules of Evidence is amended to conform with the Federal Rule. The change states that once a ruling is made on the admission or exclusion of evidence, there is no need to continue to renew objections in order to preserve the issue for appeal.

House Bill 689, Session Law 2003-101
Effective October 1, 2003, and applies to evidence rulings made on or after that date

Nurse Testimonial Privilege -- Chapter 8 of the General Statutes is amended by adding Section 8-53.13 to establish a privilege for nurses how are properly licensed and who acquire information in the rendering of their professional duty. A district or superior court judge may compel disclosure if the testimony is necessary to the proper administration of justice and is not prohibited under other statute or rule.

House Bill 743, Session Law 2003-342
Effective October 1, 2003

Rewrite of Rule 45 of Rules of Civil Procedure -- This bill totally strikes the existing rule governing subpoenas and substitutes a new rule. The new language requires that the issuance of a subpoena include:1) the title of the action; 2) a command to those to whom it is directed and instructions if documents are to be provided; 3) any protections provided to the person subject to the subpoena; and 4) any requirements for responses required by Rule 45. The rules for the manner of service are the same as under current law. The new law specifies that a service of a copy of the subpoena shall be served upon all parties. The new rule gives grounds for objecting to a subpoena. If an objection is made, it must be overruled by an order of the court (as in current law). A new paragraph is added to the rule that outlines the duties of a person responding to a subpoena.

House Bill 785, Session Law 2003-276
Effective October 1, 2003, and applies to actions pending or filed after that date

Clarify Legal Filing Law -- This bill clarifies which days are "legal" holidays for the purposes meeting court deadlines. A legal holiday is one on which the courthouse is closed for transactions.

House Bill 394, Session Law 2003-337
Effective October 1, 2003, and applies to any act required or permitted by law on or after that date

Modernize Judgment Docketing Laws -- This bill modernizes the law on entry of judgment to include electronic judgment dockets. The law is also changed to make clear that money judgments in actions other than contract actions bear interest from the date of the entry of the judgment as specified in Rule 1A-1, Rule 58.

House Bill 636, Session Law 2003-59
Effective September 1, 2003 and applies to all judgments entered, docketed or indexed on or after that date

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