- Legislators cover Medicaid's $319 million funding shortfall as Senate Republicans propose pausing recent property tax revaluations and teachers protest in Raleigh.

This is "State Lines."

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♪ - Welcome back to "State Lines."

I'm Kelly McCullen.

Joining me today, my seatmate, is Kimberly Reynolds of Maven Strategies.

Hi, Kimberly.

- Hello.

- Representative Chris Humphrey made the drive from Green, Jones, and Lenore counties.

To his right, Representative Allison Dahle of Wake County.

Paul Shumaker is in seat 4.

He of Capital Communications.

Hello, Paul.

- Hello.

- Hello, Representatives.

- Hello.

- Good morning.

- Well, we have a lot to talk about.

I'll let you drive the conversation, though, but let's start with the Medicaid funding, I guess, law now.

The program received a $319 million investment this week to cover a structural shortfall.

The funding will carry our Medicaid program in North Carolina until June 30th.

Then legislators are looking at somewhere just above $1 billion in Medicaid needs for the 2027 budget year.

Now, this bill's gonna call for state audits of Medicaid services, immigration verification, and having state officials verify Medicaid recipient eligibility on a monthly, not a quarterly basis.

I hate to simplify a Medicaid bill.

They're impossible.

But the big things are verification that you're supposed to be on Medicaid if you're receiving it, and $319 million.

Sounds like a lot of money for only eight weeks of service.

- That it does, but it also helps 725,000 people, and you've seen a lot of growing cost of healthcare, so I don't think any of that is surprising.

I think I was really excited to see them come in and address it so promptly, and the governor's already signed it into law, so I think that was exciting to see.

I think the opponents are folks that had some issues with the bill or those things that you talked about.

You've got 27,000 lawfully here citizens, immigrants that are here lawfully, that now have to worry about health insurance, and of the 27,000, 26,000 of them are children, and then the rest are made up of pregnant women.

And so I think people are concerned about that.

- Why do they have to worry if they can legally receive Medicaid services?

- That is a question I cannot answer, but they flagged them in this bill, and I think it worries people to a great degree.

And I think people want to see some of those policy issues, the workforce requirements, the validations things that put stress on DHHS.

I think they want to see them pulled out and just discussed and debated separately, because this bill was important, and they needed to pass it, and it moved quickly.

And so I think people are just concerned about those and want those revisited.

- Representative Humphrey, the bill did move quickly, but from all indications, even six months ago, when you were haggling with Governor Stein over when money would run out and how much money was needed, you said you could wait till spring.

You did.

There was never any funding shortage, and you funded Medicaid.

So what about that versus the policy pieces?

- Well, you know, there's a lot of money at stake.

This is taxpayer dollars, and it's a new social program that I think will help us, especially rural communities.

You know, there's waste, fraud, and abuse in most every government program, and I think that's important to make sure we reel in those costs and those losses.

And the federal government is going to require us to make sure that we don't have leakage.

So, you know, we've got to be prudent, and hopefully Auditor Boliek and his office will be able to help streamline things and make sure those who qualify for these benefits actually receive them and then the wasted money goes back into the state coffers.

- July 1st, here we go again, Representative Dahle.

This time, I think the state put in just over $800 million to help stabilize Medicaid.

Something about the 319 that just passed.

Look at over a billion dollars for the next 12 months.

- Well, you know, we have-- I mean, the fraud side is mostly on the provider side, if you look at it, and, you know, we all sit here as very privileged citizens, and when you ask, "Why are folks worried?"

Well, they're worried because they get targeted, and they get targeted for things that they don't-- that they don't know why they're getting targeted.

And I think with this bill and worried about fraud, we need to look at the providers, 'cause oftentimes-- and it may be a misunderstanding of how--I don't know if any of y'all have ever filed a Medicaid form.

I know I haven't, but I know it's tons of information just to get reimbursed for $10.

- Paul, Medicaid's popular with working folks.

Republicans are covered by that Medicaid expansion.

I've heard that statistically.

It's that working class that's getting covered by Medicaid.

Republicans also have come on this show in past weeks and said the verification, the work-- all that polls well as individual topics if you ask the voter.

How does the Medicaid issue disperse into public discourse heading into fall?

- First of all, you're absolutely right.

In fact, I've done a lot of polling on Medicaid over the years.

Medicaid is viewed as a very needed program, and it has broad-based support on all political spectrums, particularly in the rural areas, and we have a lot of issues-- rural health care issues beyond Medicaid in providing that, but this is something that has to be done.

It was something that's very reflective of the vote that was taken in the legislature as far as House and Senate, and it's gonna be something that will be resolved by the end of June.

- Next year, is Medicaid going to be a big issue, you think, for the--of course, for the budget, but politically, the next six months, is that something voters are gonna care about?

- I think it's part of a broader picture of affordability and that are people looking out for the working class?

Because I think when you go into areas, rural areas, and even increasingly in urban areas, people feel like no one in the government is looking out for them.

Their taxes, they feel high.

The groceries feel high.

Their gas feels high.

I mean, people-- - Feels?

- They're really getting the pinch, and so I think that will be-- it'll just be a piece of the larger discussion as we go into November.

- Representative Humphrey, how much do you think Dave Boliek, as auditor and his team, can really find savings, waste, fraud, and abuse?

And as I asked last week, I see a point where politicians are looking at programs they don't like, and they're calling it waste, fraud, and abuse to sort of target it.

- Well, you know, they've got a tough job, and there's no doubt about it, and I think Representative Dahle's right.

There's some providers who have been in the news lately, in fact, in my area, that have been caught.

So, you know, they've got their work cut out for 'em, but I think they're up for the task.

- Very quickly, does this make it easier to pass a state budget bill, a big one, instead of a lot of reconciliation-type bills?

- You are asking the wrong girl, 'cause I am on the wrong team for passing a budget.

I hope it does.

We need a budget desperately.

- What do you make of that, Paul?

Medicaid, SAAB, that's a-- Stein and the Republicans can take credit.

We still need a budget.

- I actually would make the counterargument on that.

I think it was five years under Governor Roy Cooper that the state did not have a budget.

We did not have a government shutdown.

We do not have, I mean, I talked about when Cooper was governor for the first five years of legislature, we didn't have many budgets as we went through the step.

And state government's functioning.

The services are being provided.

And so, you know, the average voter's not waking up today and saying, "Wow, I wonder what's gonna happen "on the state budget today."

They don't live in that world.

- I disagree, though.

I think people are talking about the state not having a budget more than you think, and that is impacting races like Berger, and the incumbents, you had eight out of nine incumbents lose their primary, and I think people are upset teachers have not had pay raises, public safety workers haven't had pay raises, state employee haven't.

I mean, there are programs that are getting impacted because the one job people believe the General Assembly has is to pass a budget, and they have not enacted a budget since 2023.

- You did a very good job of outlining all the people who benefit from the state budget in relation to public employees.

You're forgetting about the private sector.

You wanna talk about affordability, and that's what this is all about.

The state budget's not gonna fix the affordability problem.

It's gonna be tax reform, it's gonna be clearing away of government regulations that can help streamline.

- But if you didn't do your job, would you expect somebody to let you keep your job?

I mean, not, and being the only state in the nation that hasn't had a budget, it's time to get the work done.

- And we're one of the fastest growing states in the nation for private sector and private sector growth, and our local governments continue to grow, and our state government continues to grow, so how can you tell me the state budget's an impediment for a good North Carolina?

- I think it is for the people.

- Tell me, look at the numbers.

Let's look at the economic numbers and look at where we are.

I mean, we are one of the most attractive states to come to and do business.

I mean, Wake County's adding 70 new people a day.

70 new people a day.

Do you think the folks are Googling right now?

- And you think all of that is because of the state government?

- Maybe they're coming here.

- And look at the local government.

What's happening at the local level to make sure Wake County's growing?

- Let's get into local government, let's get into property taxes.

That'd be the way to go.

(laughing) Absolutely.

- But people are looking for a big budget bill Representative Humphrey.

They're getting mini-budgets.

The legislature can easily pass a pay raise, what they call a mini-budget bill, but it's a bill and keep the government.

It's a budget by patchwork rather than you pass it by June 30th, you go home for six months, you come back next year.

So is this a new business model for the state?

- Well, I don't know if it's a new business model, but I do hear from teachers in the district and state employees, but as Paul said, they are, the private sector isn't really paying a lot of attention to it, but we're hearing from folks and that creates a sense of urgency.

So, you know, will we see a mini-budget?

Maybe, but I understand there's talks going on now, so we'll see.

Hopefully we'll have a comprehensive budget.

- I do want to ask, you don't get wealthy becoming a state legislator, Representative, so when they're staying in and they're passing mini-budgets every so many months, there is never any downtime anymore.

And I remember the legislature would shut down to make it truly a citizen part-time legislature.

How close are you to full-time?

- Well, we are not as close as we were last biennium.

Last biennium, well, yeah, last biennium, we were there quite a bit.

This biennium, there is a schedule and there is a time off, but if you're not, and I'm gonna be honest, if you're not in the ruling party, you don't trust that time off.

So you can't really make plans without knowing whether you're supposed to go or not, because you're on call 24 hours a day, right?

- Can Republicans clear up the polling issues with pay raises and disgruntled state employees with a mini-budget and cool all that down without a budget bill?

- When polling issues, referencing to what?

- Oh, okay.

- Okay.

- Senate President Pro Tem Phil Berger filed legislation that would freeze property tax revaluations while state leaders in Raleigh debate reform measures for the local level.

Berger's proposal would prevent new property tax values from taking effect until 2027.

Now there's been some bipartisan comment about new property values causing sticker shock, if you will, for those counties that reappraised this year, 2026, Paul.

The lobbyists are starting to formulate their talking points against it for a month.

We talked about the bill and bipartisan legislators wanted to see more and learn more about property tax reform.

Can the opponents come up with something that's gonna convince voters not to cap property taxes if they can vote on it?

- Well, here, quite frankly, is that Senator Berger's bill is a step in the right direction, but it's a step that does not go far enough.

We have a horse and buggy tax code in this state as it relates to local government, as it relates to state government.

In other words, at the state level, we could totally eliminate the property tax, I mean, I'm sorry, we could totally eliminate personal income tax that you pay on your state payroll.

It would do nothing to address the affordability crisis, but clearly some of the Democratic counterparts here were very concerned about.

The property tax crisis is taking place in that we have counties that have had tax structures restructured, and now they're looking for greater revenue, and it comes back to the homeowners.

So people who are impacted most on these revaluations, folks on fixed income, those are looking to get Medicaid.

And also look at senior citizens as they retire, and their property values are going up, but they're no longer having the income stream that they once had.

So we need to look at comprehensive tax reform that starts local level all the way up to the top.

It needs to address a cap on property taxes so that people have stability in their home.

It's about preserving the American dream.

It's not about taxing the American dream into oblivion, which is right now what local government's gonna be forced to do because of constraints for them to seek for other revenue sources.

So Senator Berger has made a step in the right direction.

It's very smart politics too, 'cause Democrats are gonna argue, let's protect local government, let's protect this revenue stream for local government.

That's a fight that we welcome because it's a fight that takes us directly to the affordability issue.

- We have a Democrat sitting right here.

- No, I mean, the problem is the state's not funding, I mean, Leandro, they didn't fund any of Leandro.

The state's not funding any of the programs they promised to fund, and that counties and cities rely on.

And what are counties and cities supposed to do?

Okay, you can't go to school 'cause we can't raise your, I mean, I don't know what the answer is.

I don't think it's putting a cap and strangling your local government from doing what they need to do.

- I said we have a horse and buggy tax code system for this state.

We have a tax code built off 19th century politics, and we're in the 21st century.

And we have done no modernization of it from the local level all the way up to the state level.

So now, opening up the discussion about property taxes starts to open that door.

And it's a door that, quite frankly, Republicans can drive a Mack truck through this election cycle, and we'll fix the affordability crisis that's taking place right now, not just in North Carolina, but in the country as a whole.

- I think it's convenient that it's also an election year where they're very worried, and they're seeing a lot of polling that they should be worried.

But to your point, you have to fix the entire thing.

I mean, you have rural counties and a county like Guilford County where 50 to 60% of their property tax money goes into public education.

The next bucket is public safety.

They are growing.

They have kids in these schools.

The state is not passing a budget.

They have to get money for this somewhere.

So then to hinder them and say, "You can't raise the property taxes."

I mean, I'm from Guilford County.

I have heard from my family.

They do not like it, and they have sticker shock.

But where are these counties, especially rural counties, supposed to get this revenue from?

- Where's the discussion to expand the property tax base?

We have exclusions, and we have carve-outs.

That's my whole point here.

This opens the door to start to have this discussion.

- Well, then start there.

Don't start at the somewhere in the end.

- You're the representative here.

I'm just a consultant, all right?

I'm not a policy person.

- Representative, you've got a piece of the state budget on the Republican side.

You have a point.

It's time to revamp, but that doesn't sound like an easy task.

What can you do if you do a one-year property tax freeze, other than just prevent more tax-- - Well, it is a complicated issue.

There is a cap.

$1.50 is the most that municipalities and counties can charge.

Back in my home county, our city council lowered rates 3 cent.

The county lowered rates 17 cent.

The county came closer to revenue neutral, but the city just was tone deaf.

The citizens complained, and they still raised taxes.

You can call it a tax decrease, but it was raising revenue by about $20 million.

Citizens are fired up.

I don't care which side of the aisle you're on.

If you're a homeowner, property owner, it really affects you.

- Second time I've heard that this week that on the county representative side, the lobbyist or the advocates are saying the cities are the ones not lowering their tax rates enough and are capturing a lot of new revenue, whether it funds growth or not.

The counties are taking a beating for the city decisions.

Is that happening?

- Yes, the cities are seeing an opportunity to raise revenue and call it a tax decrease.

But the public has not fallen for it.

Something needs to happen.

Is it maybe require a revaluation, restructuring every two years instead of every eight years?

There's some challenges and changes that need to be made for sure.

- Kimberly, is there a point when local government, any kind of government, state level, it just becomes too expensive for the populace to be able to pay for it?

Medicaid's growing.

Lots of these services are growing.

Now you're down to folks actually paying attention to local property taxes.

- I think it just depends, and it's about priorities and different things.

I think you've seen the corporate tax go way down, and that's left a big hole.

You won't say big hole, but it's left money that could have been paying for some of these things off the table.

I think it's always a balance.

People are always going to feel the squeeze, but I also think people want their children educated.

They want and need access to health care.

So I just think it's an ongoing discussion.

- And I gotta say, if a business is gonna come in and use my roads, then I want them to pay taxes.

They drive on my roads with large trucks.

I'm just taking that for an example.

They drive on our roads.

They utilize all of our services.

I mean everything, public services, and then, well, let's just, they only need a little bit of tax.

But it comes back to us.

- I think they're taking care of the roads when they're buying their fuel and they're paying the state fuel tax.

You don't get an exclusion on that at the pump.

I'm sorry, I don't see where that takes place.

Here, though, is what we need to talk about.

We need to talk about private sector growth.

We need to talk about private sector.

The only real wealth created on the tax code is coming from the private sector.

If you're one of the teachers that are getting paid, you pay your state taxes, absolutely.

But understand, that is recycled wealth that came out of the private sector.

If they come here and they put $100,000 into the tax code, they can fund maybe two teachers' pay salaries.

Those teachers pay their state taxes.

That is recycled wealth.

So we're gonna truly address how we find the funding mechanisms here.

We need to be focused on policies that are going private sector wealth growth.

Recycled government wealth is not gonna fix the problem.

It's only gonna dig the hole deeper.

And that's one of the reasons why I say we have a horse and buggy tax code.

It starts at the local level, goes all the way up to state level.

It's gonna create a problem down here at the local level.

And so we need to have that.

So Senator Berger's bill, talking about a two-year pause, gives you time to go ahead and start to address these policy issues.

But in the absence of that, the only thing you're gonna do is dig a deeper, deeper hole for everybody.

- But do you see a real appetite for them to come in and open this up in the way that you were talking about?

Because I don't, especially in an election year when they are polling behind.

- The representatives, talk to him.

- Coming in and having the appetite for it.

- Here's what I will tell you.

The appetite is there right now on the Republican side.

- Is that true?

- Yeah, I think so.

I think so.

- With input from others.

- It was a Republican leader that introduced the bill.

How can you say it's not there?

- With input from other people that may or may not be on their party.

'Cause that is my biggest problem is that if you're a Democrat, your opinion is just crap.

- When does, when does the urban rural county divide show itself in tax reform policy in any discussion with property taxes?

I would imagine you're gonna look after Eastern North Carolina and you're gonna look after Raleigh/Cary and that whole area that you represent.

When does it become, you gotta get yours?

- I mean, look, taxes are paid by most everybody.

So when it hits your pocketbook, doesn't matter whether you live in Charlotte or in LaGrange, I mean, you're still gonna feel the shock of taxes and less disposable income.

- But Charlotte has more places to go to get tax revenue than a place like LaGrange.

So I do think whatever the comprehensive plan is-- - But you'd say Charlotte has more places to go, but my point is the city of Charlotte and the county, they have limitations on where they can go.

It's they primarily fall back into the property tax spectrum.

And you got a lot of carve outs and exclusions even in those who are not paying property taxes.

- I was gonna ask you, you brought that up, your first comment, 'cause you remember the first thing that leaked out that people got feathers ruffled was the idea that hospitals have already gotten into the tax reform debate and gotten themselves exemption from property taxes.

Is that what you're talking about?

- Well, there's all kind of carve outs.

And what I'm saying is, is that keep in mind is that what we need to be looking at, not piecemeal solutions, we need to look at a whole restructuring.

I can go into alcohol privatization, a completely inefficient way that's a prohibition-based policy that right now, but you got county commissioners who like the political patronage through their local systems, but you've got a state-based system that right now, if you privatize that and you took the revenue that right now, the overhead out of the state and put it into the counties, you have now created a new revenue stream for them that basically comes out of private sector, putting money into the government without government having to spend more money to get the dollar.

- All we need is 61 votes in the House, what?

26 votes in the Senate would solve all the problems.

That's just a matter of getting there.

- You got the Hastert rule, so.

(laughing) - All right, two state House members elected as Democrats have now left the House Democratic Caucus.

Representative Dahle putting you right on the spot on this one, but I wanna ask some questions about it.

Carla Cunningham and Nassif Majeed two sitting House members, are now unaffiliated and they publicly left the Democratic Party.

Both legislators lost in the 26th primary.

After the state Democratic Party supported their opponents, Representative Majeed told an NC Insider that the Democratic Party left him.

They spent a half a million dollars against him and smeared his character.

That was an interview I saw earlier this week.

You didn't do that, of course, Representative.

But-- - Majeed is actually, was my seatmate.

I have the utmost respect for him, so.

- Why go public, though?

What's the, I guess you can't speak for another person.

What's going on in your caucus, by the way?

Is it just an alignment of values and political positioning?

- When we vote, each vote is individual and it's voted on what are, sometimes what our constituents have written in.

Sometimes it's what we think our constituents' value is because we're talking about does the public have an appetite for taxes and that?

So you have to really poll and figure that out.

And I, you know, Majeed was my seatmate, Carla Cunningham and I have worked together on several things.

I'll know if they wanted to come out.

I mean, we have a democratic society that allows people to make their own decisions.

And, you know, the people in their, the people in their district spoke and they made a decision.

- Does it, I know your reputation in Raleigh, I've heard it from Republicans and Democrats.

You can work with anyone, whether you agree or disagree with them on political philosophy.

But does this action chill you and how you think?

Because if you don't do exactly what people think you should do as a Democrat, they'll go after you in the primary.

- Well, I think you have to, I mean, no, it does not chill me.

- So you're fine, okay.

- I mean, I, what?

- Meet her, she's, that's you.

- I am, no, am I happy?

No.

Do I want to lose those people out of that fold?

No.

I enjoyed working with them, but they also have individual decisions as we all do here.

And we look forward to working with them as independents just as much as Democrats.

- And I think it's, the statement he's making is not factual.

The Democratic Party did not spend $500,000 to beat him.

Organizations that have progressive leaning values spent that money, but the Democratic Party did not.

And the constituents in his district are the ones that voted him out.

- That team spent five, there's a group of friends there that they will do that.

- The Democratic Party did not spend $500,000.

- What happened with Phil Berger?

- I was going to say, I can't let Representative Humphrey off the hook, even on the Republican side.

To the right they came and Senator Berger got let out.

- And other senators and representatives in the Republican Party are now gone after this cycle.

What is going on in your caucus?

- Well, I mean, if you upset certain people, I mean, you may have a challenge, but look at the statewide registration rate.

People are leaving the Democratic Party.

I mean, the Democratic Party numbers are declining.

- They're leaving your party too, baby.

Sorry.

- But not as fast.

Not as fast as Democrats.

I mean, they're going independent, but yeah, I mean, you know, but at the end of the day, you got to represent your constituents.

And I think Representative Cunningham and Representative Majeed felt like they were representing their constituents and their core values.

We're told in our caucus to represent your convictions first, then represent your constituents and then represent the caucus.

- And the independent just rides it out.

You're just not going to hang out.

- I just have one question about that.

- We got less than a minute.

- Okay, I have just one question.

If that's true, then why do y'all all vote together and the Democrats over there vote all over the place?

Because what is that about?

- Hold on, hold on.

Now, Paul, you know the polls on all this.

Going independent, walking away from a party, whether you're Republican or Democrat.

What's going on with the elect?

- Okay, here, first of all, let's talk about primaries.

We hit this last time there is that you had 6.1 million people who chose not to vote participate in the primaries.

There's dissatisfaction on both sides.

Republicans are holding their own on registration.

Democrats are now at parity, but we had fastest growing voting block of voters for those who don't want to be part of either side.

And what's going to take and what's going to change in right up the left and the right is going to be when these unaffiliated engage in the primaries.

And they are going to be doing that in the future.

- Business is going to be good for you two.

Thank you so much for being on the show.

Good to have you.

Email us at statelines@pbsnc.org.

I'll read the email.

Thanks for watching.

I'll see you next time.

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