- [Kelly] The State Senate approves its version of a state budget bill, conservatives want more teeth and laws to keep sexually explicit books out of public school libraries, and a move to remove health insurance pre-authorization between doctors and patients.

This is "State Lines."

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[inspiring music] ♪ - Welcome back to State Lines.

I'm Kelly McCullen, and we have a great panel today.

Joining me, senior political analyst of the John Locke Foundation and a fine chap, Mitch Kokai.

Hello, Mitch.

- [laughs] Good to see you, Kelly.

- [Kelly] Dawn Vaughan, fresh from the depths of the legislative bureau and all this budget chasing with the news on Observer.

Hello.

- Hello.

- [Kelly] Colin Campbell, WUNC Radio, in a room inside the basement of Chamber.

- I've got sub-basement of a sense.

- [Kelly] The Capitol Press, my old stomping ground, that old TV studio.

I'm glad you enjoy it as much as we did back in the day.

- Yeah, you gotta love no sunlight all day long.

- [Kelly] Yeah, look who's back.

Steve Rao, political analyst, he's a host.

- Yeah.

- [Kelly] He's all sorts of things.

Steve, we got a lot to talk about with you.

- Lot to talk about.

Great to be here.

- Good to see you as well.

Alright, Dawn, you are the one that reads the budget.

Every page, every amendment.

Let's talk about it.

The Republicans have approved their version of a 2025-'26 budget bill.

These are the very highest of highlights.

The Senate budget would restore the state's rainy day reserve to $4.75 billion.

That's noteworthy because that's the pre-Helene amounts.

The restoring the rainy day reserve.

Most state employees would get a 1.25% pay increase in year one of the two year budget.

And if you're a teacher and law enforcement officer, you could receive higher pay raises, even a few bonuses thrown in.

And our state income tax rate would drop to 3.49% beginning in 2027, continuing that downward trend.

PBS North Carolina is funded in part by North Carolina's budget.

And I should say also, Dawn, this bill's certain to be changed in the House to set up some negotiations probably sometime in June.

Am I right?

- Right, I mean, it's a step in the process.

So the Senate, this happens every time.

You know, the Democratic governor, Stein and Cooper, generally want, the Stein's budget was more moderate than than former Governor Cooper.

The House had already said that those raises were not as high as they would want in Stein's proposal.

Now the Senate's like, well, it's definitely too high for us.

So you mentioned the 1.25% for most state employees, a lot of different law enforcement state employees got raises in the Senate budget.

So these things could end up in the final budget.

But it's more like the Senate is saying, these are what our priorities are.

We wanna set these tax cuts in motion, get rid of some future triggers, and then the House will come out with their budget at the end of May is the plan.

And then they start talking about the middle ground.

What was interesting to me especially was that some Senate Democrats voted for the budget, and the point of that is that you get to usually get to become the conferees, which is means that Democrats and minority party get a seat at the table when that final budget is negotiated.

Maybe it'll actually happen in June, maybe not.

We've been fooled, you know, time and time again on that.

- What's the tone been for the Senate budget process this spring?

It is out and appears to still be April.

So that's seems early.

- Yeah, they're early in the process.

We still have, think, some revenue numbers to come back once tax season gets over.

So there was some dispute over whether this debate, bill actually adheres to the revenue forecast that came out, which was looking pretty austere due to the income tax cuts, which the Senate still wants to keep in there.

In general, this is a much tighter budget than what we've seen, both in terms of the amount of spending and the fact that you have a lot of budget cuts in there.

They're sort of sprinkled throughout the budget, positions, departments being eliminated.

A lot of things like the Innocence Inquiry Commission, which investigates wrongful convictions, that's getting eliminated in this budget.

Positions in the Stein administration that deal with environmental justice and environmental issues, including the state's chief scientist, that position goes away.

A lot of vacant positions are eliminated to kind of balance the budget on this.

So it's looking to be tighter times than we've seen and I think that's really reflected in that very small raise number that's in there.

- How far off from the Governor's budget, his vision, I mean, it's gonna be different, but is it way far off to the point we're worried about a veto if lots of this bill get approved by the House?

- I think we are looking at a potential veto.

I mean, the Governor's biggest concern is that these income tax cuts that are scheduled to go into effect are gonna lead to this fiscal cliff where the state can't sustain the services.

Berger doesn't buy that analysis at all.

So he's keeping the tax cuts in there.

In fact, he's going a little bit steeper with the tax cuts in the future, getting the rate even lower on the long-term future in this bill.

And I just don't see Stein going for that.

I think that's gonna be a big point of contention.

It'll be interesting to see if the House tries to find some sort of middle ground on that, where maybe they tweak the tax cuts a little bit, but don't fully repeal them the way Stein might want.

That's gonna be the one to watch in the future.

- And also, not just Stein, it's the House.

So Senate Leader Berger is like, he does not wanna change, like what he wants with the tax policy.

The House is maybe a little more in line with Governor Stein, I think on, so that could be what the House and Senate fight over throughout the summer.

- Mmm, I'll be listening.

- Yeah, for me, I think it's fair to say we're staring down the barrel of a recession and I think it's just a good short term for taxpayers to have a tax break.

But Les, I agree with Governor Stein on this.

I think, you know, this is time to stabilize our revenues and so if we fall 1 billion short, that's less money going into roads, schools, or infrastructure, rural communities.

And we're seeing this even in local governments.

People concerned about sales tax revenue dipping.

How's that gonna affect our quality of services, right?

Teacher pay, 1.5.

Well, there's teacher pay increases, which is good.

Still don't think high enough.

State employees 1.5%, don't think it's not during inflationary times.

And the one thing that I'll say, I could talk about the budget for an hour.

I'm really uncomfortable with them scrapping the 500 million from the Innovation Fund.

Last week was a Raleigh-Durham Startups Summit.

I talked to many entrepreneurs that are using this funding, early stage companies, universities for research, creating many high point jobs in advanced manufacturing, life sciences.

So I think, you know, when you talk about innovation in a very global economy, a competitive economy, I think you've gotta invest in it, come together.

And also scrapping community college funding because with AI and jobs being obsolete, then we need to be training people more and upskilling the workforce, and so.

- And that Innovation Funding was interesting because they originally put a lump sum, a pretty large amount of money towards this program to kind of monetize, - Explain that, what is- - Yeah, if you're looking to monetize university research that's happening and try to bring these sort of ideas to market.

So they put this, sort of, public private partnership together, put a ton of money behind it through an endowment.

Now they're clawing back that money, but gonna still give them an annual funding.

And that was interesting 'cause it was described as a way to find the funding for the new North Carolina Children's Hospital, which is a pretty big source of funding in the Senate budget.

So there's some interesting interplay on some of these sort of big ticket items that are potentially funded or not funded through the budget.

- Yeah, it was very interesting to see the NC Senate do what it did with NC Innovation because they were the ones who wanted to give this program a lot more money, maybe three times or more as what was actually in the final budget.

And it was on the House side where they said, wait a minute, And it was on the house side where they said, wait a minute, This doesn't seem to have a lot to do with the State's high priorities.

We already fund university research.

Is that really right for the taxpayers to be funding what's going to end up benefiting private businesses, to the extent that NC Innovation would do it.

So it's interesting to see that the Senate seems to have gotten on board with this idea that sticking $500 million into an endowment for this group with little accountability and no track record probably doesn't make sense.

So take that money back, but to give them a bone, they throw 'em some money for several years in the future that will be kind of like a one time injection into this program.

- Well, they're looking at big ticket items too.

And, you know, they added about $500 million more dollars for the private school vouchers last year.

And that's not gonna change, you know, this is a set Republican priority, but, you know, NC Innovation is one of those that Republicans argued about in the last budget too.

So, I mean, this is just, you know, something that's already been scrutinized for a while, and they thought they could make a change.

- And I don't know where Treasurer Briner, I mean, he manages the funds.

I've heard him talk about innovation.

They have an innovation fund, but, you know, would this help?

But maybe it can be streamlined.

I just, my point was I think innovation is important for our future.

- Why give up on that program or downscale it just a year or two after you've launched such an innovative program?

I mean, it's, I don't have a dog in the fight.

I was just saying, I remember the battle over that funding, so.

- It just caught a lot of-- - In two years.

It's just gone, I mean.

- You can't do everything in the budget, right, so.

- Well, and another thing to point out that we haven't talked about yet is that it's been alluded to, but this really is the Senate's opening argument for the negotiation, right?

I mean, they're not going to stick with all of the things that are in the budget.

This is, even when it comes to the raises, this is, they know that the house is gonna put in more, so they put in less, you get to bargain out, so they can get some of their priorities.

It's very interesting to see that among the things that's in this budget, as we see every time around, a lot of policy, it's not just the dollars and cents.

And the Senate decided to throw a lot of healthcare related things into the policy.

Get rid of the Certificate of Need program.

Have this Medicaid work requirement.

Throw in some other things in there.

And it'll be interesting to see whether that really ends up in the final budget because these are all things that the Senate has been interested in, and the House has not been particularly interested in in recent sessions.

- For, yeah, a couple cycles now.

So everything that they've been upset about the past, you know, like, you know, two, three budgets, it's like, well let's put this out there now, and this is what they're gonna, what they're gonna negotiate.

- Speaker Hall in the North Carolina House, everyone was excited on a bipartisan basis.

They had this nice, tight schedule to be outta there by June 30th.

As it comes to budget negotiations, Colin, will that be held against the Speaker as a pressure point.

- I think so.

I mean, I think part of that's why the Senate's coming out so soon and saying, hey look, we've done our part.

Here's a budget, and it's only April.

So that, you know, potentially that gets the timeline moved up to where you have the negotiations starting by June, and maybe you get them done.

But we've seen, you know, the past couple years, things dragging well into the summer if they come to a resolution at all.

I mean, last year, you know, it's the second year of the budget cycle, so it's a little bit less pressing to get something done 'cause the budget covers two years at a time, but they still didn't come up with anything in the end.

And, you know, I think that is a possibility given how far the chambers may be this year.

- I think someone asked him, and Hall said, well, the main, you know, the main legislating, not necessarily the budget.

- Yeah, I think he sort of held open the idea he might send everybody else home in July and then come back when they come up with a deal, which would make a lot of sense for lawmakers that wanna, you know, have some predictability in their schedule.

- We should put a bet on the table.

- We've been here.

- Are they gonna have a budget by.

[cross talking] - We usually, yeah.

- We usually bet every year.

- And that actually has been done in the past when there've been long drawn out negotiations that one chamber or the other or sometimes both will just say, okay, go home.

Do things back in your district.

When we have something to report, we'll bring you back.

I think another thing that's gonna be very interesting this time, and Don and Colin would know a lot better about this, seeing them every day, but just how well are Phil Berger and Destin Hall going to work together after 10 years of having Tim Moore on one side and Phil Berger on the other side they were Tired of each other.

And I think in some respects, we heard reports and sort of rumblings that they were kind of sick of each other and so that was one of the reasons why negotiations took longer.

Dustin Hall is new.

He's not completely new.

He's been part of the House leadership, but does Berger give him a little bit more of a break than he did for Tim Moore in his last couple years?

- On the other hand, Berger is the more powerful one where it would be Berger and Moore.

I mean, he just is.

- And Berger's got a primary challenger.

So like, anything where he is seen as caving on a conservative point, that's gonna be something he's gonna be resistant to, I think, this time around.

- Paul would have to bend to, you know, Berger's will in some ways, but I mean the chambers do right, have equal power, but totally different personality than Moore.

- Let's move on to a legislative discussion also about health insurance companies' roles in the doctor-patient relationship.

Doctors calling often need pre-approval from their health insurance company, from the patient's company, of course, before launching a treatment plan.

Republican representative Tim Reeder wrote an op-ed.

He says, seeking insurance approval prior to treating his patients, he's a doctor, has caused some negative outcomes.

His proposal would let doctors approve patient treatment without seeking health insurance company permission.

- I often wait days for a callback only to be pulled out of an already busy clinic to explain care decisions to someone outside of my specialty.

I recently had to justify a CT scan for a patient with suspected kidney stones to someone unfamiliar with those guidelines, that was inefficient and dangerous.

House bill 434 will bring fairness, efficiency, and accountability to this broken system.

- It would be a lot easier to ingest changes like this bill makes, if North Carolina was not the highest cost healthcare state in the nation, if not the world.

Our analysis shows unintended consequences to this bill.

It risks significantly increasing costs and jeopardizing patient safety despite some very positive elements.

- Colin, this is one of those issues that the populace and everyone goes, "Yeah, that that sounds like a great idea."

And then we go into the details, we go into the policy and you can see both sides of an argument.

With pre-authorization, it's only a problem when you need it.

- Yeah, certainly there's a lot of types of medications and treatments that you got go through this prior authorization process.

It can slow down your care.

Sometimes you can get rejected, end up fighting with the insurance companies over whether you get access to a treatment that your doctor says you need.

So this has become a really big point of contention.

As we look at, I think there's agreement across party lines, across the two chambers of the legislature that these rankings where North Carolina is the most expensive state in the country for healthcare.

You gotta do something about that.

The question is what, and so what you saw with this bill in the House, this is clearly something that you see doctors like Dr. Reeder who's a legislator, several other doctors in the House Republican caucus want to do because they see insurance companies as sort of the enemy in this process to try to make healthcare more affordable.

The Senate has a similar version of this bill.

It's not quite as draconian on what's making the insurance companies give into.

So what you tend to see in these issues, and is part of why we haven't seen reforms on this in the past couple sessions, is that the different healthcare lobbies align themselves with the leadership in either chamber.

So you've got the hospitals and the doctors that are on the NC houses side of this.

The senate tends to back the insurance company's position, which is more about take care of some of the regulations that would make the healthcare cheaper on the doctors and hospital side and whether they all get in the room and come up with some sort of grand compromise where everyone takes a little bit of a financial hit in the healthcare industry with this larger goal, I don't know if we'll get there or not, but we'll certainly see some interesting ideas along the way.

- Steve, what does it take to get a solution if there is such a thing as a solution to be found?

Because it's a whole lot easier to let those groups go to the leadership of each chamber or just stop any kind of progress, if you feel progress needs to be made here?

- Yeah, I mean, either side is entrenched in the issue, and as Colin has said very well, I mean, I think there's benefits to, you know, having it because it does reduce costs, you know, having prior pool for unnecessary procedures.

The challenge is, I've heard stories and read stories of people that aren't getting the care they need, and it could be very frustrating, pain, and anguish.

So I think you have to bring people together.

The policy argument is how do you produce better health outcomes while at the same time addressing the elephant in the room, healthcare costs?

And I think that's the problem we're all having is costs continue to go up.

And so, I commend the House and the Senate for coming together.

I don't have an answer, [chuckles] but I think that that's what it's gonna take in bringing different stakeholders in, the healthcare industry, medical profession, and figuring how we do it, but we've gotta drive healthcare costs.

And even Treasurer Briner, I mean, his predecessor, Falwell, have talked about the state health care costs, the premiums are continuing to go up.

You know, it's cost.

- Mitch, we trust our doctor, if the doctor says we need it, but we want a insurance company to pay for it and we don't.

So a lot of people don't want the insurance company to have a say over what they pay for.

How do we sort this one?

- Well, it's gonna be interesting to see how it ends up coming out, because if you look at public views of this, they're going side with the doctors.

No one's gonna side with the insurance company, no one likes their insurance company, unless you just got a payment for something that you were looking for, but, otherwise, you think, "Well, I'm shelling out this money month after month, year after year, and not really getting any benefit for it," whereas, you go to the doctor and the doctor helps you not be sick anymore, or deals with your ailments.

So, I think from the public perspective, people are gonna line up much more with the healthcare providers, but there needs to be some sort of solution that does account for cost, and the fact that there are costs, and that some of what the insurance companies are trying to do is hold down unnecessary costs, and the doctors are chafing at that, because they say, "We're the ones who know the health, you don't."

- Dawn, I know how it works.

The budget bill comes out, the air goes out of the room for anything other than a budget and a budget negotiation.

This is coming late in the cycle, and the debate's the same week as the Senate budget.

Is this a two-year play if it even gets beyond one chamber or the other to survive?

- We are in like super, you know, busy time.

It's not even the crossover deadline, the self-imposed deadline of, you know, a bill passing at least one chamber.

So it seems like an issue that you already pay, even when you have good insurance, and you pay a lot for your insurance, you still have a lot of out-of-pocket costs.

This is something that people are gonna want their, you know, government to do something about.

But it is true that this week, you know, all attention was on the Senate budget, and it's like, "Oh, yeah, the House is up to stuff, too," but, you know, in May, the House is gonna have a big busy budget week, and that's when the Senate will get their stuff done.

- All right.

Conservative Republicans are proposing fresh regulation to regulation... What word did I just say?

[chuckles] To remove sexually explicit books from public school libraries.

This new effort will ensure books with sexual activity are removed.

It would allow parents to sue the school districts that violate the law.

Library Advisory Committees would be created at the local level, and they would screen and approve books for age-appropriate content.

This is an issue drawing some partisan distinction.

- Children, middle school students, even high school students, do not need to be reading.

Now, if you, as a parent, want to let your child read that outside of the school, you have every right to do that.

We're not telling parents what they can do outside the school, we're just saying, inside of the school library, this is not age-appropriate, and it doesn't belong in the school library.

- We're singling out groups that don't have a large voice in the population.

And I don't see...

I'd love to see some demographics on how many of those books are actually in libraries.

I really don't feel like we are doing a disservice to our children or by having books in a library, - These social issues with books, it's so awkward.

But you're a local leader and have been one for a while.

Is there a hubbub about school book content, legitimately, or is it a community by community issue?

- Well, once again, it's an example of our libraries and our school boards becoming political battlegrounds.

And I mean, and so, I think that, to answer your question, I think it's a, it could be a community issue.

I mean, the argument against it is we wanna keep our kids safe, which I think we all agree, we want to.

You can cross a line if you start censoring one group of books, then where do you draw the line?

You could start censoring other things, and you want to have a free thought society, where people can read what they want and learn.

And I would rather see us come together, rather than fight each other and sue each other.

I mean, I don't want a school system having to defend themselves in a lawsuit.

I'd rather the money, as much money as we can, go into public education so we can educate our kids.

I'm the proud parent of kids in public education and they've done pretty well.

So I think we need to continue this debate, but I don't like the way this is going.

I don't see banning books getting us to where we want.

I think we need to come together, maybe bring this up at a committee level, a task force level of how we can, well, that's what, how you punt the ball down the road, a task force.

But anyway.

- Yeah, and this is creating an interesting process for essentially reviewing all school library materials.

You have a school superintendent appointed committee that was half parents, half school district staffers, and they were gonna have to review everything that goes through the school libraries, which seems pretty cumbersome.

So lawmakers were asked like, how are you really gonna get about that?

You're gonna have these groups read hundreds, if not thousands of books in the libraries?

And the answer was, well, there are these conservative groups that have come up with lists of the objectionable titles, and we'll just use that as the basis for this.

What struck me about this bill is that while you had, as the lawmakers were presenting this, they brought along these various titles with some of these graphic sexual descriptions or drawings of genitalia in the books that they particularly objected to.

But if you read the bill, it goes beyond that.

It says this group is evaluating it for literary merit, for age appropriateness.

So you could see this go towards banning a lot more books than just what are seen as the most outrageous titles that some of these groups have pointed out.

- How are they handling you at the press conferences when they come out and they have these things and you wanna ask a question, and you question these sorts.

Are you getting a policy-minded feedback, or are you getting an emotional reply from advocates?

- It's definitely an emotional reply.

Like one of the terms in this bill is pervasively vulgar.

So what is pervasively vulgar?

I asked the sponsors of this bill, and they didn't really have a good definition for me.

They had some examples of what they treated that, but a word like that needs a definition.

There's obviously gonna be gray areas of what different people perceive as vulgar, and they're really not very clear on where to draw the line.

- And that was my concern.

If you don't define it, where do you draw the line?

You could start banning other things.

Well, it comes under this, and then you set a danger precedent.

So I think it's, rather than censoring and banning, I think we need to bring people to the table, have an honest conversation, whether it happens at our school boards and local communities.

- It seems very uneven, if it's these groups that like in so many different school districts, as opposed to a certain policy.

And I know that lawmakers are talking about regulating or at least coming up with a plan to maybe regulate smartphones in schools eventually.

But there's a lot more on that phone that the kids in school are holding than in the library.

And I haven't seen legislation addressing any of that, any of that yet.

- Time would be better spent Republicans and Democrats working together and how they can make education better.

- Mitch, it's just so partisan.

I mean, it takes one book, and they show you the picture, and you go, wow, I wouldn't want that in my school library.

But then that's just one book, and there are a million books out there?

- Well, this is a major issue for some mom groups that have been working on this for a while, go into school libraries and say, "I can't believe this is in there."

My guess is this is the type of bill that's being pushed because there is a segment within the base that really wants lawmakers to do something about this.

If anything ends up passing, my guess is it's a lot more watered down, and it would be something where you would set some clear standards of something that is clearly beyond the pale that no one would accept, but you don't allow it to open the door for something that is rejected because someone decides it doesn't have enough literary merit.

- Got 90 seconds left.

I wanna touch on the Jefferson Griffin-Allison Riggs State Supreme Court race.

Its newish news, maybe closer to a finish.

Let's recap.

State Supreme Court says most of those challenged ballots should be counted, leaving over 1,600 ballots of the 65,000 ballots that were challenged needing verification and review within a month.

A federal judge says, "Let the state process play out," Colin, but the State Board of Elections cannot certify the race until returning to federal court.

Allison Riggs is fighting to keep that 734 vote lead.

We got just a few minutes to touch on this.

That's last week's news, a little bit of this week.

Is this thing gonna be over soon?

- Oh, we might be getting close.

Now we're at the federal court level, that's probably gonna be one of the last stops for this.

And now we're talking about a smaller number of ballots after the initial rulings from the Court of Appeals and Supreme Court.

So even if Jefferson Griffin is successful at this point, there's a decent chance that they do what the Supreme Court wanted them to do, and Allison Riggs still wins.

- Don, nobody's covered it, your team's covered it, Brian Anderson's doing freelance journalism, he's been all about this issue, seems to suggest that Allison Riggs wins under this scenario.

But can you say that?

- Yeah, I don't think reporters need to call races.

My colleague Kyle Ingram has written extensively about it being a test case and everything else.

So I feel like there's lots of coverage, people wanna get in the weeds of this, like we were saying, there's more to come.

Maybe it's done soon.

- Final word.

- Yeah, the biggest thing is the 60,000 plus, the people who had the incomplete voter registration records, their votes are gonna count.

The State Supreme Court unanimously agreed on that.

So we're talking about a much smaller pool.

Griffin is still debating whether it should be the 1,600 that the State Board says, or maybe closer to 5,000, but it's much smaller pool, much less of a chance he's gonna overturn the result.

- 10 seconds, is the public checking out of this race?

- Yeah, people are tired, they're ready for it to be over.

I think we gotta respect the outcome of elections.

- Thank you, panelists.

Thank you more folks for watching.

Email me your thoughts and opinions at statelines@pbsnc.org.

I'll read every email.

I'm Kelly McCullen.

Thanks for watching.

I'll see you next time.

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