NC Legislative Update – 4/30/20

Provided by Connie Wilson

The NC legislature is on its third day of the COVID session.  The two chambers are several hundred million dollars apart in their COVID bills and it will probably take well into next week to reach a compromise.  Where they aren’t in disagreement is on emergency funding for DOT.  Both bills, H1038 Omnibus COVID-19 Response Funds and S704  COVID-19 Recovery Act, set aside $300,000,000 in reserves from federal funding for DOT at the NC Office of Budget and Management.

Current federal legislation prohibits the use of COVID federal funds to be used for the replacement of lost revenue, which is the problem that NC DOT is having.  The money can only be transferred to DOT when the US Treasury or Congress revises the purposes for which the federal funding can be used.  This restriction on federal funds is also impacting cities, counties and water departments who are also seeing reduced revenues.  There is heavy lobbying at the federal level to allow lost revenue as one of the prerequisites to receiving federal COVID funds.

Another DOT problem is if they don’t maintain a $300M available cash balance, no further transportation project contracts can be entered into until the cash balance is regained.  Both chambers have provisions in their relief bills to lower the threshold to $150M and maintain that lower level requirement for a year to help keep some projects flowing. Garvee bond projects are not impacted by this threshold requirement.

This short session both chambers are only appropriating federal COVID funds and purposefully not using state General Fund revenues.  Legislative staff  anticipate somewhere between a $2.5-$3 billion shortfall next year due to delayed federal and state tax filing deadlines — and those numbers could be even worse when the state finalizes its projections in July.

Sen. Harry Brown mentioned in Senate Appropriations that they could be back in session again in just a few weeks.  There are more federal funds that need to be appropriated, hopefully additional guidance will come from DC on how to spend the money and more details will be available to the legislature on the full impact of COVID-19 on the state and economy.