- North Carolina budget negotiations continue as the House passes a rate payer protection act that would regulate data centers.

And a veto override approves federal tax breaks for private school tuition donations.

This is State Lines.

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(upbeat music) ♪ - Welcome back to State Lines.

I'm Kelly McCullen.

Joining me today, Kimberly Reynolds of Maven Strategies.

Wake County Republican Representative Mike Schietzelt to his right.

Democratic Representative Maria Cervania of Wake County.

And Jordan Shaw of Game Changers Strategies holding down Charlotte.

Hello everyone.

- Hello.

- Hello.

- There you go, that's a good start.

And we have two rookies on, Representative Cervania, so the representative here, and Representative Jordan making their debuts on State Lines.

Welcome to the show.

- Thanks for having us.

- Well, it's gonna be a fast paced show.

It seems like there's a lot going on, no budget yet.

North Carolina legislators did return to Raleigh this week.

Budget negotiations certainly continued.

House and Senate Republicans still say they have the framework in place.

It ensures tax cut rates through next decade.

None of this triggers business and likely pay increases for state employees.

It's not clear just how much new spending will be in the budget.

The current state budget, Representative Schietzelt, I'm told about $32 billion per year under the old law.

How much you gonna spend?

What you gonna do with this framework?

And how do you get the Senate to do what you want?

- Well, that's a mystery that I don't think anybody's been able to solve yet.

But, you know, listen, we had a long wait to get this budget deal in place.

And of course, you know, the Senate passed their version of the budget in April of last year, I believe, we passed our version of it in May.

And then there was a huge bottleneck where the two corner offices had to work out some of the most important details.

I think we finally, after an intervening primary election, we've gotten some resolution on that now.

The House got, I would say, most of what we wanted in that budget framework.

And so as it's working through the other committees right now, as it's working through, the conferees are working through their different parts of the budget.

Last I heard, there was only one part of the budget left to report.

So, you know, you guys will probably get the details on how much we're spending about the same time I do on that.

- Representative Cervania, well, he's saying one more report out, which is one committee's work on a budget.

As the sausage is made, how well is the sausage machine working in creating a budget bill?

- So just to level set, I'm not part, or my team is not part of the sausage making or the idea, but I do frequent or often in the building.

So I know that the Republicans are actually working on this.

At the end of the day, in respect, but at the end of the day, that's our one major responsibility is to have a budget.

And we haven't had one since 2023.

And we're the only state in the union that doesn't have one.

I think that we are closer in coalescing in the House side, very concerned about the Senate side and what their decisions will be.

But we have to be very careful about these corporate, personal income tax and property tax overall, when revenue and things cost.

We have to pay for education, we need to pay for public safety, we need to pay for Helene and things.

But if we have zero corporate income tax and we're at a precipice when it comes to one percent, even lower in personal property tax, we won't be able to run government.

- Well, it doesn't help your cause, the state ran another surplus expected for this year and next with these dropping income tax rates.

Are you worried about a structural deficit because rates get too low that no matter how great the economy is in North Carolina, it won't be able to keep up with spending needs?

- Correct.

- Is that the problem?

- Yeah, exactly.

So what are we going to do with this forecast?

We can choose to keep it and put it in reserve, which would be prudent and then be able to spend it on Helene which we're drastically not like funding.

Or do we bring down that trigger?

And if we're even half a percentage on the trigger, we'll be in a fiscal cliff.

- Jordan, you were here for the House.

Speaker Thom Tillis back in the day when they started this gradual decline of income tax rates down.

You know, it's still on its way.

So what's the vibe in Raleigh from the, I would say the Charlotte lobbyist perspective?

- I think that what you've seen since Republicans took the majority in 2010 is this process of trying to right-size our tax structure, process of trying to invest in our people, right?

And teachers and law enforcement.

And so what you're going to see, I think from this budget framework and we eventually do get a full budget, is a budget that really accomplishes everything that we're trying to highlight here.

You talk about fiscal sustainability, this will be fiscally sustainable.

It's going to include the largest pay increase for teachers in 22 years.

It's going to include the largest pay increase for law enforcement in a generation.

It's also going to give voters the opportunity to get their arms around and manage this problem of runaway property tax increases all across the state.

And so I actually think based on what you just said, you're going to love this budget.

And I hope that you and a lot of your members of your caucus will vote for it.

But I think it's remarkable what the House and Senate have been able to agree on to this point.

There was obviously a lot of chatter over the last several months.

Are they going to get this done, are they not?

And I think what the Speaker and the President Pro Tem have demonstrated is a willingness to come together to accomplish these big things.

And I think it's going to be a remarkable budget.

- Kimberly, let's talk about, I don't want to get back into tax caps.

We've talked about them for five weeks.

Nothing changes with the issue.

However, in this budgeting thing, in the future budget years, if voters do decide that they want to approve these constitutional amendments to cap taxes, can't you say the voters want it and they're asking for it, or they are happy with the way things are going in our state?

- Well, I mean, we'll see what the voters decide, but I have some just basic points that I disagree with, especially as Jordan's sitting over there, like these are the best teacher raises and whatnot.

Well, the Republicans have been in charge for 15 years.

Anytime they wanted to give the teachers a raise and give law enforcement a raise, they could have.

And we are now sitting at the bottom... - They have in every budget.

- ...in teacher pay and per pupil spending.

- They have in every budget.

- ...in teacher pay and per pupil spending.

We're still at the bottom.

And when you say the largest teacher pay raise in 20 years or something, the way their scales are, you're really seeing an increase for new teachers.

And then there's just this poor cliff for teachers and veterans teachers where they're barely seeing anything.

So I think it's when you really dig into the details that there are some concerns.

And I think we're not prioritizing public ed and the things that we need to put money towards.

And if there's no money to do it, I just think it sounds great now.

And everybody's like, yes, they're moving forward, but they should have done this a year ago and they're way behind.

I think it's a real problem.

- I'm not sure that I would agree with a lot of that.

I think one of the lessons from 2008 was that we need to make sure that while yes, we want to make the investments in our teachers, we wanna make the investments in infrastructure.

I mean, teacher salaries, state employee salaries, correctional officer salaries, those are recurring spending.

And if we don't have the revenue picture to support the increases, we can't make the increases.

That's why we had furloughs coming out of 2008.

That's why we had frozen teacher salaries for so long.

This is a significant raise.

I mean, I think Jordan mentioned it's the largest in 20 years.

Let's also go further back.

It's the second or third largest in half a century in terms of the percentage that teachers are getting out of this.

So that's, I mean, we have to make sure that those raises are sustainable.

And the current revenue picture, the importance in adjusting the tax cut triggers gives us that sustainable revenue picture to give these raises.

- And I would just say, I'm curious in all seriousness.

You may not like everything in the budget.

The raises may not be as much as you would like or that you would like.

But my question is, do you think it's so far below your expectations that you vote against it?

- I don't vote.

- Are you gonna advise your clients?

- Are you gonna advise your clients?

Are you gonna advise your clients to vote against it?

Right, that's the question.

- So we need a lot of things in place.

And then we have a lot of time to make negotiations.

But I will say this, when we have these amendments that would cut levy, levy is how much the counties and municipalities can budget.

When we've put everything on our counties to do supplements and pay for public education, and we haven't integrated any action when it comes to our responsibility when it comes to public education, that's a problem.

And then on top of that, what's hurting our people on their tax bill is the actual assessment of property and that tax bill.

We're not doing anything about appraised value process or what that bottom line will be when they receive that tax bill.

We're not doing, that amendment does not cover that.

- We don't have to do anything about the assessment because the point is to stop the increase in the overall revenue picture, the overall needs that the counties are, the overall budget growth.

So if you create a system where you're saying your budget can only grow X amount, whether that's based on, and we are looking at basing that on taper, population growth, inflation, and perhaps a certain percentage on top of that with allowances for debt servicing, you're creating a more predictable growth rather than allowing counties to take a windfall every time the revaluation process goes through.

So you don't need to stop the revaluation process because everything is set off of that budget.

- But that levy has nothing, like if that-- - It has everything to do with it.

- No, I didn't say everything, exactly, but it didn't put that in that amendment.

And if they did put that, that would have been-- - The only thing the amendment does is require the General Assembly to put a cap on the levy.

[talking over each other] - We're so far in the weeds, we're down to the roots here, but I will say this, I don't normally take the, I don't take much bait off of the old Twitter machine, as they say, but there was a guy, I think he's a school teacher down in Brunswick and New Hanover County, Coach Budd, and he's apparently a long-time teacher.

And he's like, "I want you to ask this question, Kelly."

I said, "Sure, why would anybody want to be a teacher "in North Carolina right now?"

And if you're looking at pay scales, why would you stay a teacher if you're a veteran, where everyone perceives you're too old to quit, so we don't need to pay you, or a young teacher who can go to another state and maybe make a little more, but have to leave the state?

So can you answer that question for that one viewer out there?

- Absolutely, I'd be delighted to.

So first and foremost, my brother, I believe, spent 10 years teaching.

He's a former teacher now.

Many of the people that I went to school with, we were talking before we kicked off here, I was a music major, and many of my colleagues were music education majors.

I myself was an aspiring teacher at one point until I saw the frozen teacher salaries and said, "I'm not going into debt for this."

So I've made that decision myself.

We have to pay our teachers more.

I think there's a solid investment right now, particularly, I mean, it is front-loaded.

I'm not gonna shy away from that.

There are still 5.5% raises for our veteran teachers as well.

Now, that's not the only thing we're doing for veteran teachers.

There's an expansion, I believe, coming in, Advanced Teacher Roles, which creates a promotional track for teachers, so especially for our veteran teachers that pays them not just more, but significantly more than they're making in the classroom, but it does keep them in the classroom rather than them saying, "Well, in order to get that promotion "or in order to get that extra salary, "I've now gotta go into administration.

"I've now gotta go into another profession."

We're creating those opportunities for veteran teachers.

We can't, or we need to do more, but we have to make sure that the stability is there as well.

- That's where we're going to the Ratepayer Protection Act.

- Okay.

- Even better.

- Oh, yeah, but not for all teachers.

I think we have an opportunity to actually look at the whole comprehensive system of public education.

We're doing it very piecemeal.

I think we have a lot of commonality in trying to find a solution.

We just need to get to the table and do those solutions, and not the way we're doing it now.

- Next topic will be the Ratepayer Protection Act.

A bipartisan state house has approved a bill with that very name.

It happened this week.

It aims to protect us from rising electricity bills.

How does it do that?

Data center power costs could not be passed onto residential customers.

The state would create a special commission for data center planning.

Data center plans would be studied for water and environmental impact, but it would also possibly affect renewable energy initiatives through price caps.

While requiring new power plants, nuclear plants, I always say "nuclear," go southern with it.

(laughing) You have to have one of those plants on before you can retire an old plant, Representative Cervania.

I'll give you the first nod at this.

This thing does a lot.

People don't like data centers.

They like to use them.

- Right.

- So what are we gonna do with, why does the state need to regulate all private land going to data centers and all this?

- So ultimately it is to protect ratepayers, to protect our people.

Affordability is such a huge concern right now.

Now this bill is really two parts.

The data center portion, I think, has been increasingly, as we've been negotiating, getting better.

Like really putting data centers and their responsibility of cost and putting safeguards toward that.

It's the energy side, that energy portion, that is very detrimental.

Especially that last section where, as you're a little bit alluding to, that we can't retire coal until we build a large-scale 1,000 megawatt nuclear reactor.

That could be 10, 20 years from now.

That's unrealistic.

The science is not there.

Duke can't do it.

I mean, everybody's really upset about the energy part.

At the end of it, it's gonna increase tax, like energy bills hundreds and thousands, hundreds fold.

- These bills are, these omnibus-type bills, Jordan, you've sat there through 'em, man.

They are something to weed through, and you can split this bill into three or four parts.

The science is in the rate payers don't wanna see rates continually go up.

Now here's what's interesting to me is, for years, some side said it's okay to pay more if you're doing renewable, but now if the rates are going up for a data center, that's bad.

So can we boil this down to, do people mind paying higher rates for certain things?

I mean, they want lower bills no matter what.

- Look, I think people are sick of paying higher bills for everything right now, right?

Affordability, as you said, is a huge problem, and I think wherever we find an opportunity to try to help curb those costs, we oughta pursue it.

Data centers aren't all bad.

There are some communities across the state who like the jobs that they bring and like some of the economic development that comes with them, but we've also seen a lot of the problems that they cause in terms of the impact on water systems, the impact on infrastructure, energy costs, not to mention all the environmental impacts that they have in rural areas.

So I think this is almost a common sense thing that we need to have some regulatory framework in terms of how data centers are integrated into the community, while still giving these communities that want them a framework to do it.

When it comes to energy, it's really about reliability.

If you're driving an old car around, you're not gonna ditch your old car and start walking everywhere before you go find a new car to purchase, right?

And so this is about making sure that as we grow and as our technology develops, as we find new, clean ways to have reliable energy sources, that we don't abandon the energy that we have now that is clean and more affordable than some of the renewables that are out there.

- Kimberly, some parts of this bill do seem awfully democratic, the way they're regulating, the data centers were something that at the grassroots level, that's the people speaking, but also I understand there'll be no local incentives.

I mean, this really puts a, I won't say handcuffs, but a nice belt around this growing industry.

- Yeah, I think you would have seen a bipartisan bill with a lot of Democratic votes if it had been the data centers only.

I think there's a lot of interest in it.

I think it's very positive that North Carolina's leading in that conversation and the General Assembly's willing to go out.

They have heard the concerns of the local communities.

They have seen what's happening in other states.

Jordan mentioned it, especially with water and some of the things that are happening.

These are real concerns.

And I think it's really important on this issue to be in front of these concerns and not behind them.

I think it's when you put that energy piece in and you're really concerned about rates going up.

And then, you know, this is coming right when Duke Energy's out there getting an 18% increase and consumers are already gonna feel that.

And then you just have another layer where you won't believe it won't raise those rates until you see it.

And I think there's a lot of skepticism when y'all are like, oh, it's not gonna raise the rates and they're just seeing an 18% rate coming in.

I just think it's very complex and it probably should have been held separately.

- Representative, what's the bipartisan vibe with this bill?

It has to go before it becomes law.

I think it goes back to the Senate, it has to get Governor Josh Stein's signature.

So is this a bipartisan effort?

I know parts of it are very partisan.

- Parts of it, well, I would say parts of it are bipartisan.

And then, of course, the big issue is the retirement, I think, of the coal plants and putting a moratorium on the retirement of the coal assets until we have other things in place.

But, you know, it's interesting to me that that's the part that makes this bill divisive when I think that's the part that's the most common sense.

You cannot sit there and replace, you cannot get rid of energy producing assets without replacing them with something.

You cannot replace baseload power generation with intermittent power generation.

I'm all about having a diversified energy portfolio as a state.

We should have natural gas, nuclear, solar, wind, but solar and wind are not going to replace the baseload power.

So it's gonna cost rate payers a lot more to decommission coal and then bring something new online rather than let's just stick with coal right now while we already have the asset and while the asset doesn't have to be retired, stick with that and allow it to produce the energy.

'Cause what we don't wanna be at the end of the day is California relying on getting, and listen, you're a Californian.

I also hail from California.

We moved here in 1993.

But we've all seen the rolling blackouts because California simply did not have the supply to meet the demand.

- So a diversified portfolio includes intermittent and we shouldn't stray away from solar.

- I said that.

- Oh yeah, yeah.

But the thing that is not flexible in this is what kind of nuclear that we can adopt.

Right now, small module reactors, the rage in the technology is growing and growing much faster than improving large scale.

So that's not integrated.

That's not 1,000 megawatts.

It's 250.

And that we can put that in localities.

We can put it next to our nuclear reactors.

That is missing in this bill and that's where we need to be more open towards.

- Jordan, does this bill get through the Senate?

- I've learned not to speak on behalf of the Senate.

(laughing) I don't know.

I mean, look, I think there are, I think there are elements to this bill that have a lot of bipartisan appeal.

I think that it's attractive to legislators to do something around data centers.

And to Mike's point, I think that Republicans in the Senate will also see the energy piece as fairly commonsensical and worthy of protecting rate payers.

So I think it's got a good shot, but I'm not about to speak for them.

- All right, Kimberly, this story's been around a while, but I did wanna bring it to the State Lines table about these license plate readers.

A new effort is out that can make a license plate scanning program a permanent operation within the State Bureau of Investigations.

32 law enforcement agencies are using license plate scanners on our public roads and highways.

The data is stored up to 90 days.

Kimberly, 150 million license plates have been scanned.

We've been scanned into the database.

Law enforcement says it's a crime prevention tool, but critics do wonder how long until Mission Creep sets in on this.

And you know, if someone has an interest in license plates other than finding stolen cars and fugitives of the law.

- Well, I think that that is a legitimate concern.

I don't think anybody is gonna stand up and say it shouldn't be used as a crime fighting tool.

But when you have that much data on people, I think there is a lot of skepticism from the public right now on what kind of data the government is holding, how they will use it.

And they don't ask permission.

It's just sort of once a bill comes through and the next thing you know, there's a larger scope on data that's already collected.

And we should be nervous and we should be upset.

I mean, you've got people, all of a sudden, you could be at a protest and your license plate's scanned.

You could be going to a healthcare clinic and they have that information.

So there's all sorts of nefarious ways they could use that data.

- Representative Schietzelt, when I was a kid growing up, the old Republicans in my hometown, they're in a small town, always worried the Democrats would put surveillance state in.

They always scared us from the pulpit and beyond.

These are Republican bills and done in the name of keeping us safe, should we be concerned.

- I think, I'm a civil libertarian, I'm a constitutional attorney.

You're not gonna find too much pushback from me on that.

I do think there need to be appropriate guardrails.

And I think right now there are guardrails in statute about how the information that's collected and how the data collected can be used, as well as criminal penalties for improper use of this information.

I believe it's a class one misdemeanor right now.

Somebody can fact check me on that.

But it's a misdemeanor to use that information improperly.

Now, having said that, full agreement with Kimberly, we've seen what's happened with big tech over the last couple of decades and we've seen how people's data is used, can be used against them, can be sold.

And I think there's a lot of skepticism whenever data's collected on you.

However, license plates aren't the only place this is happening.

Every time you go near a cell phone tower, your cell phone is pinging off of that tower and the government can get that information as well.

- Can.

- Can get it, yeah, sure she can.

But Representative Cervania, data is part of our life.

We don't mind certain companies using our data to make our lives easier.

So is it a bit old fashioned to worry so much about the use of cameras, the use of technologies that could prevent crime or calm the waters of a, you know, unrestful, restless populace?

- It's not old fashioned.

And I'm gonna just probably springboard off both my colleagues here to say, yeah, it is of concern.

And we are also a capitalist society.

So I'll just ping more off the fact that they're ahead of us.

Tech is 10 years, like, ahead of what any conversation we have in that building is, or here.

So they already know how they're gonna use this data to be not for public safety, but for surveillance and money.

- Jordan, I thought we'd have a bipartisan debate on this issue, and it seems to be fairly one-sided, but this bill's apparently on the move.

So are there people there really for it and they're saying they're against it?

- I don't know.

Look, I think you have to have a balance, right?

As we're all saying, you have to have a balance.

Public safety concerns are real.

This is a useful tool for law enforcement to use, especially in some of the cases that you talked about.

So it's good to have it.

But we also have to balance that with privacy concerns.

But the reality is is that our society, I mean, look, if you're on Facebook, then you've already surrendered all of your privacy to a number of agencies, a number of companies.

They sell your information for advertising purposes.

We know how this world works, right?

So I think that if we're gonna have concerns about license plate readers, then I would say get off Facebook.

And I would say start reducing your digital footprint if you're worried about license plate readers.

Because I think we all make decisions in our lives now with modern technology, with social media, with cell towers, that we are open to some level of our own data being stored by the government or sold to private enterprise.

So I think we gotta make sure we're intellectually honest about these things.

But if you're gonna have this for a law enforcement tool, we gotta have a balance.

There has to be protections.

- John, I'm gonna get to Kimberly last word.

- I just wanna, I mean, I'll really quickly say, since I came out and expressed concerns, let me also offer the other side of that.

One of the first conversations I had with my police chief in Wake Forest, the previous police chief who retired last year, this was his one ask, was that they have license plate readers or be able to expand this program because they use these to find missing children, they use these to find stolen vehicles.

And if you were really following closely the Idaho University murders, that's how they found Brian Kober going through Colorado when they thought he was gonna be headed a different route.

It was a license plate reader and I believe it was Loma, Colorado that picked him up.

So these are useful tools for when we have the appropriate guardrails in place.

- We got 25 seconds.

- Well, I'm just sort of laughing at his analogy of Facebook.

I mean, I do think it's very different when you proactively go on and you sign up for Facebook than the government and a law enforcement body of the government collecting your data and holding it and then using that data against you down the road.

So I'm not sure I agree on that one.

- It's not the same.

My point is though, we can't have a problem with that and willingly subject ourselves to it.

- Hey, that's our show.

Thank you, panelists.

Great conversation.

We've milked every second.

Email your thoughts and opinions.

You have them, statelines@pbsnc.org.

I'll read it.

I'll share it.

I'm Kelly McCullen.

Thanks for watching.

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