Legislators Work on State Budget Negotiations

On Wednesday, the NC House of Representatives voted unanimously to reject the NC Senate version of the state budget for FY2023-25 (H.B. 259). The Senate approved the budget last week after the House passed its own version of the state budget last month. Legislators from both chambers will now work together to negotiate a final version of the budget to send to Governor Roy Cooper. Legislative leaders hope to have the state budget in place before the start of the new fiscal year on July 1, 2023.

To help your nonprofit better understand the differences between the two competing versions of the state budget, the Center has prepared an analysis of the nonprofit provisions and appropriations in the House and Senate budgets. Some key differences for nonprofits include:

• The Senate budget includes much steeper cuts to individual income tax rates. Overall, the tax cuts in the Senate budget are projected to reduce state revenue by about $1.2 billion over the next two years and by $7.1 billion per year once they are fully implemented in 2030. This revenue loss could mean significant cuts to state funding for nonprofits in the future. It could also force state legislators to look to new taxes or fees on nonprofits to offset the loss of income tax revenue. Additionally, it would likely result in greater needs for services provided by nonprofits as a result of decreases in state funding for public sector services.
• The House budget includes more overall appropriations to nonprofits, although a few individual nonprofits would receive more funding (or new funding) in the Senate budget.
• The Senate budget includes several provisions that could create financial and operational challenges for nonprofit hospitals.
• The Senate budget increases the limit on administrative costs for Smart Starts to 10% of total funding. The current limit is 9%, and the limit had been 8% until last year. This change would bring state law into better alignment with the operational realities of Smart Starts (and nonprofits in general).
• The Senate budget would significantly increase funding and eligibility for the Opportunity Scholarship program, which provides financial assistance to families with students in private (mostly nonprofit) K-12 schools. The House passed separate legislation (H.B. 823) last week that would make these changes outside the context of the state budget.

The Center also has prepared a tutorial video on the state budget to help your nonprofit better understand the state budget process and how to navigate through the budget documents.

Federal Debt Limit Negotiations Could Have Implications for Nonprofits

According to the U.S. Treasury Department, the nation could default on its debts as soon as next week if Congress doesn’t pass legislation to increase the federal debt limit. This could cause a global economic crisis. To prevent the federal government from defaulting on its debts, leaders in Congress and the White House have been negotiating a plan to increase the debt limit. Even if they can reach an agreement this week, congressional leaders will need to navigate through a variety of procedural and political hurdles to get both the U.S. House of Representatives and U.S. Senate to pass debt limit legislation in time to prevent a default.

Several of the spending provisions under consideration in the debt limit negotiations could affect nonprofits and the people they serve, including:

1. Freezing federal spending at its current levels – or even reducing overall federal spending – despite increased need for many services. Reduced funding for federal agencies could shift more (unfunded) burdens for providing a wide variety of services onto nonprofits.
2. Language to claw back unappropriated funds from the American Rescue Act Plan and other COVID-19 relief programs; some of these unappropriated funds in North Carolina could still be used by the state and by local governments to support the work of nonprofits.
3. Repeal of a variety of green tax credits that were passed into law last year, some of which benefit nonprofits making energy-efficient upgrades to their facilities.
4. Provisions extending the work requirements for the Supplemental Nutrition Assistance Program (SNAP) from the current age range of 18-49 to an age range of 18-55 and adding work requirements for Medicaid recipients. These work requirements often include “mandatory volunteerism” provisions that require some individuals to volunteer with nonprofits in order to receive government services.

Of course, as the National Council of Nonprofits has explained, a federal default also could create significant challenges for charitable nonprofits.

Even though the debt limit negotiations and the prospect of the federal government defaulting on its debts could have significant implications for nonprofits, the Center is not asking you to reach out to our members of Congress on this issue. Unfortunately, there does not appear to be any action that North Carolina can take that will make a difference in the negotiations between the White House and Republicans in the U.S. House.

NC House Committee Scheduled to Consider Nonprofit Legislation Next Week

The House Judiciary 1 committee is scheduled to meet next Wednesday to consider a bill (H.B. 741) that would make important changes to two state laws affecting nonprofits. Specifically, the bill would reform to the state charitable solicitation licensing statute and would make a variety of changes to modernize the NC Nonprofit Corporation Act to bring it into closer alignment with best practices for nonprofits and with nonprofit corporation laws in other states. The Center has recommended this legislation based on input from nonprofits and from attorneys and accountants who represent nonprofit organizations.

NC State Board of Elections Provides Information on Voter ID Requirements

Last month, the NC Supreme Court issues a decision reinstating a 2018 law that requires North Carolinians to show photo identification when voting in elections. Many nonprofit organizations have expressed concerns that the voter ID law could make voting more difficult for many people served by nonprofits, particularly seniors, people with disabilities, and low-income citizens. Voter ID requirements will go into effect for this fall’s municipal elections.

This week, the NC State Board of Elections published information with more details about how the voter ID requirement will be implemented this fall. For nonprofits, some key details include:

1. Voters without photo IDs can currently get free IDs from the NC Department of Motor Vehicles and will soon have the option of getting them from their county board of elections.
2. There are several exceptions that would allow people to vote without a photo ID. Exceptions include disabilities, a lost or stolen ID, lack of transportation to get a photo ID, religious objections to being photographed, or a natural disaster within 100 days of Election Day.
3. Even though all voters will be asked to show an ID when they show up at a polling place during Early Voting or on Election Day, they will be allowed to vote through a provisional ballot even if they don’t have a photo ID. If they use a provisional ballot, they will still need to either present an ID to the county board of elections shortly after the election or complete an ID Exception Form.
4. Voters using mail-in absentee ballots will need to include a photocopy of their photo ID or an ID Exception Form when they mail in their ballot.

Nonprofit organizations have historically been among the most effective messengers for educating the people they serve about what steps to follow in order to vote because nonprofits are trusted by the people they serve. The nonpartisan organization You Can Vote provides excellent voter education resources, and the Center will be sharing information about how your nonprofit can help people in your community understand voting rules as we get closer to this fall’s municipal elections. 

NC Senate Committees Approve BCBSNC Restructuring Legislation

This week, two NC Senate committees approved a bipartisan bill (H.B. 346) that would allow the state’s two hospital service corporations – BlueCross BlueShield of North Carolina (BCBSNC) and Delta Dental Plans Association – to create “nonprofit holding corporations” to restructure some of their assets. Under existing law, hospital service corporations are regulated by the NC Department of Insurance, and these entities need state approval for many types of transactions. This legislation would enable hospital service corporations to move some or all of their operations to other nonprofits that are not regulated by the NC Department of Insurance, potentially cutting red tape that can undercut their ability to make investments or engage in certain transactions.

In 1998, the Center worked with a large coalition of nonprofits to help ensure that if a nonprofit health insurer were to convert to a for-profit that the full fair market value of the nonprofit would remain in the nonprofit sector by being transferred to a charitable foundation. The House revised its initial bill last month to help preserve this important protection of nonprofit assets if BCBSNC were to restructure and then convert to a for-profit. The Senate is considering the version of the bill that the House passed, so this important protection remains in the bill in the Senate.

The full Senate will vote on the bill next week. It passed the House with broad bipartisan support last month. 

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Nonprofit Policy Update is North Carolina Center for Nonprofits' weekly newsletter of state and federal policy issues that affect all 501(c)(3) nonprofits. Learn about the Center's public policy priorities and agenda, or contact David Heinen, Vice President for Public Policy and Advocacy, for more information.