- Legislative leaders say they're making progress on a state budget deal.

The governor wants data center tax exemptions ended soon and a new elections reform bill is up for debate.

This is State Lines.

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♪ - Welcome to State Lines, I'm Kelly McCullen.

Joining me today to discuss all the state issues, Skye David of New Frame Incorporated.

Senator Todd Johnson joins us for the first time from Union and Cabarrus Counties.

Representative Sarah Crawford of Wake County joins us and Dawn Vaughan with the News and Observer in seat four.

Hello everyone.

- Hello.

- Welcome.

- Glad to be here.

- Well, you have a great crowd here.

They'll be kind to you and... - I mean, well, maybe.

- Well, maybe, maybe.

Well, let's talk about every week we want to touch on a budget until a budget is passed, Skye.

We'll start with you, but I got to read this to you first.

State House and Senate leaders say there's continued progress on that state budget deal with work remaining as we enter the weekend.

What appears finalized are those teacher, law enforcement, and state employee pay raises, as are guaranteed income tax rate cuts through next decade.

House Speaker Destin Hall and Senate Phil Berger say it is possible they can reach a deal by June 30th.

We discussed those points in this framework for about a month now.

So what's new this week?

- Well, Dawn has a story out about MLB and whether or not Raleigh's going to get a baseball team.

That's part of the discussions.

We're hearing rumors that VLTs, which is video lottery terminals, that's part of the discussion.

There are a lot of big things still happening.

And depending on the person you ask, someone might tell you it's coming in two weeks.

Someone might tell you it's mid-July now.

So there are a lot of rumors about what's happening.

But yesterday, Senator Berger said they need to be working more than one day a week to be able to get to the place they need to by the end of the month.

- It's not the quantity of time we spend together, but the quality, right?

Senator Johnson, one day a week, should we do more?

- The Senate comes in on Monday and leaves on Thursday.

We want to put in a true week and try to get it done as soon as possible.

I think we have an obligation to the citizens of North Carolina to get this knocked out.

- What surprises might be in a final budget deal?

Video lottery terminals, Major League Baseball stadium funding, those are not small ticket items.

They're big policy decisions.

- And I think the Major League Baseball is kind of a new wrinkle that's come to light pretty recently.

Who knows where that's going to end up, and who knows when we're going to get this done.

- I have an idea where it might end up in Wake County, Representative Crawford.

So now what?

There's a budget that might help lure Major League Baseball to the triangle, but it's a budget Democrats don't think so highly of.

So what do you do?

- Well, you know, first of all, I appreciate the little jab on the house.

I agree that we should be working more.

And if it were up to me, we would have a budget by now.

That's been a thousand days since the last time we passed a state budget.

And so the assignment is late.

I have a lot of concerns about what we're hearing about the budget.

You know, MLB, I like baseball too.

If we have a baseball stadium in Raleigh, that could be kind of cool.

We just had a great win with the Hurricanes, so maybe we could replicate that in baseball.

But we really have to be talking about and getting done for the North Carolina citizens what needs to get done around pay raises and Medicaid and a whole host of other things.

- I do want to set you up, because in your expertise in public health, Medicaid is out there.

July 1, the rumors or the, you know, the estimates are you'll need a billion dollars in state funds to fully fund this new expanded Medicaid.

What do you think about that in terms of how the budget is being negotiated?

- Yeah, so I think it's important to separate Medicaid into a couple of different pots.

It's not a billion dollars for the expanded Medicaid.

It's a billion dollars for the entire Medicaid budget, which includes Medicaid expansion and the regular Medicaid population.

Over three million North Carolinians are on Medicaid.

It's a huge, huge piece of our health care system that we need to make sure that we take care of for our hospitals and our providers.

You know, we had a lot of conversations over the last many, many months about Medicaid, but I'm hearing positive things coming from the department and coming from House and Senate budget leaders on Medicaid.

And so I believe that we will keep Medicaid stable going into this next year.

Of course, there are a lot of pressures coming down on it.

- Senator Johnson, let's set aside what people would call pork or things that aren't necessary.

What part or policies of this budget have your attention that could get through the finish line?

- Well, obviously, we've talked about from the Senate side, the Children's Hospital's been discussed.

Now the MLB is out there.

Obviously you've heard about the VLTs coming.

I think that discussion's been around for a very long time.

- What is a VLT?

Because people don't know this term.

Is that video poker being legal?

- It's video lottery terminals.

And so as you can imagine, especially in my caucus, there's a lot of differing opinions on that and how we need to address that.

But in the end, I think when we get this budget done, it'll be a good budget for the state because ultimately for me, I want to make sure that our state employees are paid, our law enforcement, our teachers make sure that they're getting the funds that they need to live their lives and be respected and rewarded for their hard work.

- And Dawn, Skye here gives you all the credit in the world for a great article, you know, earlier this week, the budget negotiations with all the ad, the framework isn't agreed upon and has been voted on, but now we're adding the goodies, if you will.

- So I wrote, the finish line is in sight.

We can see it.

It's now up to House Speaker Destin Hall and Senate Leader Phil Berger, who have already started meeting.

Berger's kind of, you know, like sort of diss at the House about the House doesn't have as many voting sessions as the Senate.

Berger said this to me and other reporters on Thursday, the House was gone.

Half the building was empty.

But Berger and Hall have been meeting the, what they call them, the big budget chairs, the top-level budget chairs, are finished with their work.

So two of those in the House, Representative Dean Arp and Representative Donny Lambeth, said that there's a chance that Hall and Berger would come back to them for any finalized things.

They're basically done.

And Lambeth told me that he is hopeful that Democratic Governor Josh Stein is going to sign it.

He said there's a lot of stuff Stein likes, like fully funding Medicaid rebates and the raises, maybe even a little higher raises for some employees.

Lambeth sort of like mentioned that, that they're still talking.

Again, this is before the final document is out, maybe a little more for some of the non-certified school personnel.

But that's still kind of in the weeds and those final things that they check off are up to Berger and Hall.

Now, the list isn't as long as it was under former Speaker Moore as far as what the corner offices have to sort out.

- But the surplus, the over-collection, the estimated that we're going to make, the state's going to make more money than they believe, that's helped this budget process, I would say, with all the extra items we're seeing added?

- It's always, I mean, it's part of the tax fight, right?

What's the recurring money and non-recurring.

And Senate Republicans always want, well, lower taxes or faster tax cuts than the House does.

And the House's budget last year, the reason it got a majority of House Democrats voting for it was because of slowing the tax cuts and the raises.

So this is finally the middle ground.

It's not coming this week.

Hall and Berger are going to meet Monday or Tuesday, Berger said, so maybe the next week, but we'll see.

- And one day a week, their meetings, what everyone's saying.

- No, they'll meet more than one day, but, you know, well, maybe two.

- I also think about the framework.

So if you look at past budgets, once you have the framework in place, there's a certain amount of time that it takes.

If you take when the framework was agreed upon with this budget, we're really not that far behind schedule over the next few weeks.

Now, it took a long, long time to get that framework agreed to, but once you got the framework, that's when - - You teed up the Democrats.

- Wait a minute, wait a minute.

We're not that far behind.

We're a year late.

- That's what I'm talking about since the framework.

- Oh, all right.

Well, we're still a year late.

- Which was the hold up.

- This time it is still a year late.

- I agree.

- The State House Rules Committee is holding an elections reform bill that has GOP support, some cheerleading in fact, but has Democratic Party attention as well.

What a look it up.

It's House Bill 958.

It has about 40 different policy changes in it.

I'm picking a few.

For instance, it can extend the time by two days for voters to correct their voter registration or ID errors that could otherwise spoil their ballot.

Precinct officials, they could be removed from the position on election day if they fail to perform their duties.

County elections board officials would be banned from partisan activity or supporting candidates.

They also could not encourage voter turnout.

Ranked choice voting, which is popular with some, would be banned for all primaries and general elections.

And just as luck would have it, we end up having a House Bill.

We asked the Senator to talk about it.

Senator Johnson, all yours.

- Well, I'm really excited for the opportunity to speak about a House Bill that has not made it over to the Senate yet.

But I have looked at this bill a number of times and seen that it's, I think it's in its fourth edition now.

It's been through multiple committees.

By the time, if we do receive it in the Senate, it's gonna probably change a few more times and then it'll change once it gets over here.

But election integrity is very important, I think, to everyone.

And I do believe that all members of the General Assembly would love to make sure that there's voter confidence in our election process.

And how we get to that point may have a different viewpoint on that.

But we're working toward, and I think it'll be an annual discussion.

- Representative Crawford, at this point in the legislative session, we're down to the final weeks, and a bill this large, it can't go to the Senate and be changed too many times and then come back for negotiations.

I think, don't they run out of time if they don't work quickly?

- Yeah, so first I'll say, hopefully we're in the last couple weeks.

We'll see, depending on what happens with the budget, which we just talked about.

Yeah, I mean, I think the chances that this bill changes a couple more times before it comes to the House floor, that could certainly happen.

It could go to the Senate and change.

But yeah, we will eventually run out of time.

I do have some concerns about the bill.

I mean, you know, obviously, I agree, we all want election integrity, and we can't do things that make it harder for people to vote.

We can't do things that put prohibitions on encouraging voter turnout in elections, which is one of the things that the provisions in this bill does.

But my hope is that this bill won't move, and that we will run out of time to get it across whatever finish line it needs to get to.

- Skye, part of your job is tracking big bills and small bills.

These reform bills are omnibus.

They have so many moving parts.

You're a professional.

How do you sort through 40 different provisions, and 40 seem to have someone who's for and against each individual paragraph?

- Yeah, luckily, we don't really work in elections.

- But bill structure in general, these-- - Yeah, I read all of the bills, and that's a lot of different provisions.

And some of those provisions are fairly innocuous, but some of them are controversial, and some of them are just logistical.

So I kind of put things into different buckets like that, like a nothing versus this is something that's gonna get the headlines and be controversial, and then things that are logistical that improve the election.

- As an attorney and a lobbyist, when you see these big bills with controversial topics, do the bill writers tend to put the most controversial up in the first paragraphs where it's easy to find, or is it buried on page 32?

- It depends on the person.

- Well, that's fair.

Dawn-- - I can tell you it's never on the title.

The controversial stuff is never on the title of the bill.

- That's always a good title.

- Not even page 32, maybe page 432.

- Dawn, if anyone at this table has read 32 pages of any election bill, you would do it.

You do your homework.

This bill is big, and I've looked at social media.

I love tracking it.

They say, I don't know what they say about it, but the left is fired up about provisions in this bill.

- Right, well, I mean, that's kind of how things play out.

If Republicans sponsor a bill about elections that does anything that might, or Democrats' point of view, hinder voting, then of course they're gonna come out against it.

I know protesters were at the legislative building about this, and this was gonna be in House rules, which is the last stop before going to the floor.

The House will put it in rules, put it on the floor an hour later.

The Senate always, usually waits a day.

But then it was pulled, and they're changing it.

So part of it is there's all these unanswered questions, like if you can't promote voting, can you say, go vote?

What's the language there?

How does that work out?

Is that something that's gonna be dumped from this bill?

I think that maybe some sponsors were excited about pushing this through, and then realized that a little more homework needs to be done, maybe a little more lawyering needs to be done to look at what the final version of this is gonna be.

And then again, when it goes over to the Senate, Berger and the rest of the Republican caucus and Clinton Senator Johnson can say, I know, we're not happy with this.

We're gonna add this and it back to the House.

And then it's that time of year where nobody really likes the other chamber's bill, and they need to put something of their own in it before it actually moves out of the building.

- And it's making a statement.

A bill this large, too, every week it changes.

So we'll just shelve the issue of elections reform until we see if it passes the House and then over to the Senate, 'cause those changes are meaningful.

Next topic comes from Adam Wagner, who's on "State Lines" a bit.

He works for WUNC News, and he's reporting the Stein administration's working with legislative Republicans and phasing out data center tax exemptions if the governor gets his way.

The state can grant some tax exemptions for data center investors who spend at least $75 million on a data center over a five-year period.

Tax breaks cover sales taxes on the construction costs.

Get a break on your electricity bill taxes.

Local governments can step in, offer incentives on top of that.

Governor Stein wants to end that power tax exemption in 2026, wants to require data center companies meet their construction goals by 2028, not five years from now, with every exemption gone by 2032.

Representative Crawford, how can something go from an economic driver, data centers, they sound great, to now as a bipartisan effort to possibly wipe out all economic incentives to bring them to North Carolina?

- Yeah, so this tax incentive was created many years ago, I think 15 or so years ago, maybe longer.

And I don't think anybody could have really predicted what would happen with the data center growth.

I mean, the total landscape of data centers has changed completely.

Lot of states were offering tax incentives.

A lot of states are now rolling those things back or have sunset provisions in those.

And I think with the amount of infrastructure that is needed, electric infrastructure that's needed to run these data centers, huge demand on our electric grid, other resources like water, it really is important to take a look and reevaluate some of these tax incentives.

This isn't about being anti-business or anti-economic growth, it's about smart growth and what works for the economy, but also what protects consumers.

- Senator Johnson, what happened in the debate over data centers?

Are people getting scared AI is gonna take their job?

Is this excellent grassroots advocacy funded from dark bunny sources that we heard about in Utah?

What's going on?

This issue has changed.

- Right, well, and I think to the average daily North Carolinian like myself, AI is an app on your phone that you can use to help you with summaries or make a picture or even make a little jingle.

But the reality is AI is here and it has national security implications and it is gonna be part of our daily life more and more.

So we have to understand that it's here.

We have to have the computing power to be able to provide it, but at the same time, it shouldn't be done on the backs of taxpayers or on the backs of rate payers.

- Why are data centers wanting to go to Wake County, Mecklenburg County, where real estate is off the charts, where the grid is strained?

Why not go to some areas that need economic development where 500 acres would be much differently used than 500 acres in an urban county?

- And I agree with that 100%, it doesn't make sense.

- Ah, well, Skye, you can build off that, it doesn't make sense.

Here's the thing though, we love our AI and we love our phones, we're addicted to it, but we don't want the infrastructure to support it.

What are we doing as voters?

- It's not going away, but I think what this article highlighted and what Governor Stein has highlighted is that if you look at the states around us, it's like any other tax incentives or MLB.

Other people are offered, look at what the other states are offering so we can be competitive to get the business, but also make the money off of that.

And South Carolina and Virginia are phasing out those incentives by 2032, so it seems crazy that we would not phase it out as well.

- Dawn, is this issue one that will be solved and it will go into the history books of North Carolina or will, like elections reform bills, something needs to be tweaked every legislative session to regulate the rise of AI and data?

- I think AI regulation is gonna be kind of a recurring issue, to use a word, about everything is recurring at the legislature.

With the taxes though, because Representative Lambeth said that these are tight budget times, so should our taxes go to the, how much is this helping us?

And you need to think about every time our tax money is spent on something or somebody, something is getting a tax break, that means other people are paying those taxes.

So why should our tax money go towards something that, do we still need it?

North Carolina business is pretty great right now, how much do we need this anymore?

And you were saying that this was years ago and maybe at the time they needed an incentive and then now maybe there's not really a need for that incentive anymore.

- Yeah, I mean, if you look at, I think these were originally passed in 2010 maybe, I mean, this is right as we're coming out of the recession, right?

So I think it makes complete sense of why we did that then.

Although I wanna go back to something you said, I look forward to hearing any jingles that you've written with AI.

Yeah, I'm really curious about this, so follow up.

- Well, I've never written one, but I have received them from friends, and so I might try to play around with that.

- All right, all right, looking forward to it.

- The State House has passed a bill this week that would omit some counties from a possible property tax revaluation moratorium while adding some new ones.

Nearly a dozen counties have reassessed property values in 2026, but legislation would not let the taxation at that higher property value take effect until 2027.

So a separate bill's moving, it adds Chowan and Pamlico counties to a moratorium.

However, Buncombe County would not face the moratorium, nor would Scotland County.

Scotland County's representative, Garland Pierce, he voted against the bill saying county taxpayers are struggling, Dawn.

They bypassed representative Garland Pierce in Scotland County and exempt that county from a moratorium, let the taxes flow.

- So there are two bills, there's one that had this, you know, not even 10 counties, so a handful of counties, and then they switched that up in the second bill that passed the House, and that impacted Garland Pierce, the House Democrat, the one no vote, and I talked to him after his initial vote, and he said that, you know, it's all of these, like, local governments, people statewide watching this show, you've probably had a lot of drama over property taxes and tax rates and the reassessments because, you know, everything costs more right now, are we all suddenly making enough money to pay for all these, you know, increased costs, and so there's just a lot of pressure there.

He said he wanted to do what was best for his constituents, and that was why he voted against it.

Now, it's still not gonna be, we don't know what Governor Stein is gonna do, but this is just part of the overall legislatures, especially the House, focus on some sort of property tax reform, and of course, there's a constitutional amendment about it on ballots in November, so this is gonna be, again, a recurring issue.

- Representative Crawford, I have heard bill sponsors say on this show last week, we wanna keep the Helene counties out of the moratorium, they may have some needs, and it dawned on me, those are hurricane-affected counties, so is raising county taxes the best thing to do to somebody who had their house washed away?

I don't know how to even make, I don't know what to make of this issue.

- You know, I think this is really about local governments having the authority to bring in the revenue that they need to provide the services that their citizens and their counties need, counties and cities, and I think the issue that bothers me the most about this is that we can talk about property taxes all day long, and what we need to do, and homeowners definitely need to have some relief from that, however, you have to make sure that cities and counties still have the ability, again, to pay for what they need to in their city, and we can't really talk about this affordability issue without talking about all of the other things that impact affordability, like healthcare, the incredibly low minimum wage that we still have in North Carolina, access to education, and all of these other things that impact economic mobility, it's not just a property tax issue, it's an affordability issue overall.

- Tie in affordability to the property tax issue, but counties, even Republican county commissions are calling Republican senators and representatives saying, hey, watch out, what are you doing here?

- Well, I think a lot of that has to do with the fact that they do not understand the bill, the bill does not say you cannot raise taxes, it's simply saying that you're gonna use the values now, and if those are not adequate to meet your needs, then you need to raise the tax.

Ultimately, from that, they have to answer to the people that put them in office, so this is not saying you can't raise your tax, or you're putting a cap on it, this is simply saying for a period of time, we're gonna use the values that exist today, and then you can set your tax rate accordingly to your needs.

- I think we should also talk about, when you said about, you know, ultimately, the folks have to answer to the citizens that put them in office, you know, the same holds true for the state legislature, right?

There are bills that we are not paying for, because either we don't have a state budget, or we've prioritized different things in the state budget, and counties are having to pick up the tab for that, things like public education, particularly in Wake County.

- Skye, are you seeing the state push costs down on the local governments, making it more expensive than capping local governments' ability to pay for it?

- I mean, I don't know about all of that, but-- - I'm asking you, I don't know either.

- Back to your point about the Helene counties, when Buncombe was asking to be removed from this bill over on the House side, I believe on the Senate side, they had removed all of the other Helene-affected counties, and Buncombe was saying that they shifted their revaluation a year because of Helene, and so people would be taxed on what their home was valued at before, and some of those homes no longer exist.

- Last topic, I wanna touch on this, the Carolina Journal's covered a recent state audit showing North Carolina's Unemployment Security Office paid benefits late and paid improper benefits between 2024 and 2025.

Auditor Dave Boliek's reporting 28% of first unemployment checks were paid after a 14-day federal deadline had passed.

Boliek says the state hasn't been meeting these timeliness goals in 15 years, did pay on time a little bit better rate in 2025.

North Carolina's rate of improper unemployment payments is 22% worse than a 2022 audit.

So much for audits, it didn't seem to do much for the, quote, "waste, fraud, and abuse of unemployment checks."

- Well, you know, the report that came out is concerning on both sides of this equation, right?

People who have lost their jobs, who need those unemployment benefits need to get timely access to those payments.

I mean, this is about rent, groceries, medicine, all kinds of things, and then on the other side of this, taxpayers deserve to have confidence that the tax dollars are going to the right people.

You know, and I think this comes down to government needs to work for the people who need it most, and we should be able to trust that.

And there are some efforts already being put into place to make sure that some of these things are corrected, and so I appreciate that, but we need to keep our eye on it.

- Senator Johnson, are audits like this to attack an unemployment office or to lay out a framework of things that need to be corrected, get the bureaucracy right?

- I think it has to do with an education, because a lot of folks did not, maybe didn't know that this was an issue.

So bringing it to light, the issue's been there for a decade, a long time, but the fact that now Auditor Boliek is looking at it, people are paying attention to it.

And so from that, I think it's incumbent upon both the legislative and the executive branch to take a hard look at it to resolve this, because I agree with Representative Crawford, these funds need to go to the right people who are needing it at that time, and I don't think taxpayers really mind paying it as long as it's going to the people who actually need it, because in this situation, it may be you next that needs it.

- Skye, very quickly, the Boliek brand, he is really raising the public perception of these audits.

- Yeah, he is pumping out audits and doing a great job at it, I must say.

You're seeing audits, and they're doing a good job of communicating to the public what they're looking at and what they're finding, but as you pointed out, I think their last audit, they haven't really, they've gotten worse since the last audit, so what are we going to do for the next audit, I think is really important.

- 20 seconds, Dawn, last word on unemployment, getting it right, paying the right people the right amount.

- Well, it sounds like people have work to do in that agency to write this, that's the point of an audit, to say this is what's going wrong and what you need to do to fix it.

- And to tease up an issue to follow in the media.

Thank you so much for being on, Senator Johnson, always great to have you for the first time, hope you'll come back.

And hope you'll come back week after week.

Email us at statelines@pbsnc.org, share your opinions.

I'll see you next time.

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