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Senate | April 30, 2013 | Committee Room | Senate Finance

Full MP3 Audio File

Now, all right, there it goes. We have one of our pages annual end [?], Senator Meredith, thank you for being here today. We've got a busy schedule today, because we've got some things we want to get done. We will have a finance committee meeting tomorrow, I think its been announced. First bill we're going to hear today will be Senate Bill 476, North Carolina Captive Insurance Act, Senator Meredith. And, Senator Meredith, do you want include it now, the member of the committee, right? Okay. Will you make a motion that we accept the amendment and . . . [SPEAKER CHANGE] Thank you, Mr. Chairman. I'd like to, I have an amendment I'd like to bring forward and I'd like to make an amendment that we hear the motion, please. [SPEAKER CHANGE] Alright, members of the committee, we have an amendment before us. Senator Meredith would you like to explain that? [SPEAKER CHANGE] Yes, Sir. [SPEAKER CHANGE] Then, lets get this part through and then we can go on to explaining the bill. [SPEAKER CHANGE] Thank you, Mr. Chairman. Members of the committee, this is an amendment that will revise putting the tax in the general fund. It's specifically exempts captive insurances from the regulatory charge, it specifically includes the expense of regulating captive and promoting captives for which the regulatory charges may be used. This is actually taking the funds that will be generated from the captive insurance companies and is specifying specifically what those funds can be used for. If there are any specific questions, staff can speak to it. I think that the bill will help a little bit when I start to discuss that . . . I'm sorry, Mr. Chairman. [SPEAKER CHANGE] Okay. Very good. Members of the committee we have that amendment before us. Yes, Senator Cook. [SPEAKER CHANGE] I move to approve the amendment. [SPEAKER CHANGE] Alright, members of the committee we have that amendment before us and a motion to approve it. All in favor, please say aye. [SPEAKER CHANGE] Aye. [SPEAKER CHANGE] All opposed, nay. Alright, the amendment is part of this and will be enrolled or engulfed with the entire bill, but please forward to Senator Meredith to explain the bill. [SPEAKER CHANGE] Okay. Peter, or I was going to have someone from staff explain please. Peter, I'm sorry. Thank you. [SPEAKER CHANGE] Please identify yourself, if you'll be kind enough. [SPEAKER CHANGE] My name is Peter Ledford, I'm on the research division staff. I'm staffed to the senate insurance committee where this bill was previously heard. This bill authorizes captive insurance companies, captive insurance are a [?] form of self-insurance, only instead of doing it within a corporation it sets up free standing entity that insures the parent corporation or in certain circumstances industry associations, or multiple corporations that are within the same parent company. So, a captive insurance company would be set up to provide self-insurance for certain forms of insurance only for these corporations. They are not in place to insure individuals or to provide various personal lines of insurance such as homeowners insurance policies or auto insurance. They are authorized to provide [?] insurance for lines of insurance, but its obviously a very complicated 40 page bill.I think it would be easier for me to answer individual questions, if there are any. [SPEAKER CHANGE] Mr. Chairman? [SPEAKER CHANGE] Senator Meredith. [SPEAKER CHANGE] [?] [SPEAKER CHANGE] Okay. Lets hear from the Insurance Commissioners Office. Would you please identify yourself and explain, the microphone over there. Then, what we can do is get the questions from the committee and see if we can make sure everyone understands this bill as amended that stands before us. [SPEAKER CHANGE] Thank you. Thank you very much, Senator Rucho and Senator Meredith. Thank you, very much. My name is Rose Vaughan-Williams and I'm legislative counselor to the Department of Insurance and the department strongly supports this bill and we've talked about this a long time and worked on it for a long, and are grateful for your attention to it. It is a complicated bill and I think has done a great job giving it a summary of the bill. It provides a great options to companies in North Carolina, large and small to have savings on their part, to give them management of their income in a different way that may save those insurance costs and tax costs. Right now, they're forming these companies all the time, but they can't do it in North Carolina, but they're doing it in other states and they're doing it in other countries. We're hoping that we're creating a law here with your help that will cause them to look and to decide to come to North Carolina instead of Vermont or South Carolina. I think there are about 30 states that have captive laws, of those maybe only seven or eight are actively, aggressively

Senator Williams: ...actively seeking this business and we hope to be one of those states who are actively seeking this business. The captive industry generates other economic development in the state. They are required to have a home office here, which is brick and mortar, visits, meetings here, hotel costs, restaurant costs, and other things. Jobs. These are more higher level jobs. Accountants, actuaries, lawyers, and other folks who would need to do the work of the captive. The captive managers also. The bill also provides for micro-captives which are the smaller companies that, if you can guarantee the 1.2 million dollars of investment income only, they get a benefit there. And we applaud the Senate for approaching this complicated issue and looking at it and hope to do anything we can to make it possible to move forward. Chairman: Excuse me. Questions? Senator Cook? Senator Cook: Can you give me some examples of the kinds of insurance that we’re talking about here? I know it’s not auto. It’s not home. But what is it? Senator Williams: Yes. sir. Senator Cook, thank you. It can provide any type, many types of insurance. And you’re right. It doesn't… it’s for that company or that group of companies that form together. It doesn't sell to individuals. It can be direct or an office of insurance, general liability insurance, employment practices, litigation defense, construction defect, warranty, mold, medical stop loss, deductible reimbursement, employee benefits, and worker’s compensation reinsurance are some examples. Chairman: Follow up question. Senator Cook. Senator Cook: So this is basically, just sort of, an insurance plan that would help corporations, large corporations, and maybe even some small groups of businesses? Senator Williams: Yes, sir. You’re absolutely correct. It’s more a sophisticated businesses who can do this. That can set up and essentially run their own insurance company. If they choose to do that. Chairman: OK. I get Senator Ford. Senator Ford: Thank you Mr. Chairman. What, if you know? What is the projected revenue from this new line of business. And what is the purpose for the use of those funds? Chairman:Ms. Williams, do you have a question to that….or an answer to that question, or do we...? Senator Williams: Yes, sir. Senator Rucco [sp]. Senator Ford. We can look at other states. We've tried to estimate...make an estimate for North Carolina. And we've looked at other states as well. South Carolina just filed an economic report about 18 months ago that says since their act was passed in 2000 they think they've received one billion dollars in revenue from these companies. And I had a document I sent to fiscal staff earlier today I had on Missouri, that I brought a copy of, that gives our estimates for North Carolina. It would be starting off slow, I think, in that first year in particular but hope to pick up if we got five small, medium… five small captives and one medium captive in the first year, that would be 25 million in premium. And of course, if they open it here, we get that premium tax; instead of, the other state. In the second year, say we grew to have ten small companies, three medium companies, and a large company. That would be 170 million dollars in premium that would come to North Carolina in subject to the premium tax set forth in the bill. Chairman: You have a follow-up? Senator Ford: Yeah. The follow-up to that question was, is there a designated purpose to these funds? Senator Williams: Oh yes. I’m sorry. Senator Ford, I’m sorry. Yes.If I may. I’m sorry. Part of the money would go for the seed money to start up this program in the state. Part of it would go to a small marketing effort to try to businesses all across the country they need to come to North Carolina to do this. And then the rest would go to the general fund. Chairman: OK. Miss Avery [sp], can you add to that please? Miss Avery [sp] : Yes, sir. The gross premiums tax on insurance companies currently is credited to the general fund and that is what this amendment does. It goes into the general fund to be appropriated. There is currently, with insurance companies, an insurance regulatory charge that insurance companies pay and then that money is used to reimburse the general fund for any appropriations the department of insurance may make. And we have added to the use of that money, the very items that Miss Williams just espoused. But the tax money generated by this bill will go into the general fund. Chairman: Question? OK. Alright. I've got Senator Walters. Senator Walter: Thank you, Mr. Chair. And I just wanted to make sure I remember correctly, from the insurance committee, that we have no….

The Chemline ?? Corporation is already practicing this industry in our state but they’re not allowed to do it in our state, and they have to go offshore shore to other states to do that, is that correct? [SPEAKER CHANGE] That is correct. We have a small exception for pure captives. And there is one company I know of that asks for that, they are doing business in Bermuda now, however. But you’re right, it’s going on all the time and it will continue to do so, they just can’t do it here in North Carolina. They are having to go elsewhere. [SPEAKER CHANGE] Ms. Williams, please don’t leave yet until we get it. I see the Senator has a question. [SPEAKER CHANGE] Thank you, Mr. Chairman. This is also a question Ms. Williams can probably answer. If the company sets up a captive to say, handle its workers comp claims, will that captive participate in the guarantee fund? [SPEAKER CHANGE] I think the answer is no. And the reason is because the only risk is taken by that company. Is that a correct answer? [SPEAKER CHANGE] Please come up to the podium and identify yourself. [SPEAKER CHANGE] Hi my name is Ray Martinez and I worked on this bill. The answer to your question is no for workers comp. They cannot do that on a direct basis, however, they can provide reinsurance for that. Because of the regulatory regimen for the captive insurance business they are not, none of the policies sold through any captive are subject to guarantee funds protection. [SPEAKER CHANGE] Okay. Mr. Martinez who are you with, or who do you represent? [SPEAKER CHANGE] I’m with the Department of Insurance. [SPEAKER CHANGE] Thank you sir. Okay, I’ve got Senator Brown. [SPEAKER CHANGE] Thank you Mr. Chairman. Mike can help me with this as well. Reinsurance on homeowners insurance, particularly beach land has been a problem for ever, I guess. Will this create more competition for reinsurance in those plans? [SPEAKER CHANGE] Senator Brown, I don’t think so. But let me verify. [SPEAKER CHANGE] I think Rose’s answer is correct. [SPEAKER CHANGE] Could you? [SPEAKER CHANGE] I think Rose’s answer is correct, however it is theoretically possible. Well it is practically, it is possible to provide reinsurance for any personal lines that these guys would be precluded from writing on a direct basis, so in that regard, it could result in a more competitive environment. [SPEAKER CHANGE] Senator Brown are you okay? Senator Hise, question? [SPEAKER CHANGE] Thank you Mr. Chairman. We’ve vetted the insurance parts of this pretty clearly and I just wanted to ask are the rights of tax that are put on these contracts, regulatory charges, consistent with a third party who would be selling the same insurance to these companies? [SPEAKER CHANGE] Ms. Everett do you have a question? [SPEAKER CHANGE] Perhaps someone from the Department of Insurance can answer, I’m not sure how those rates would compare. [SPEAKER CHANGE] Thank you. Senator Hize this is Rose. I think that is a better deal for the captive’s. I think it is a little, if I’m understanding your question right, it’s a better price than what the regular insurance surcharge price is. And the reason for doing that is to try to encourage the companies to come here and make us an attractive market. [SPEAKER CHANGE] Okay. Senator McKissick. [SPEAKER CHANGE] Sure, and Rose, maybe you could help me with this. I remember asking a question regarding insurance about how these types of captives are done in other states and what the loss ratios have been like, and over all the loss ratios are very, very good. There are very few that failed or collapsed. The thing I was wondering about where these micro-captives, that are talking about establishing. I mean, it would seem that they are going to be pretty small, with not a lot of money put in, only about 1.2 million or so to get it well-established. I mean, will they have to submit data that will show that actuarially they are adequately able to take care of whatever potential losses they would have? So that you don’t end up with the micro-captives somehow, it seems like they might be more vulnerable in terms of loss and risk. But maybe you can tell me what’s going on in other states and what we’re going to do about that. [SPEAKER CHANGE] Thank you, Senator McKissick, that’s a very good point. The bill would require them to undergo the, the micro-captives, to undergo a feasibility study requested by the department. You’re exactly right, we would be looking at them. It is a 40 page bill because it does allow all these different types of captives, the micro-captives being one. But under each one is a pretty thorough regulatory scheme although it’s still l-i-t-e.

A little bit later. [SPEAKER CHANGES] Okay senator Mckissick. [SPEAKER CHANGES] One quick follow up. I don't know how many other states have these types of micro captives and what their experience has been but if you know anything about that, if you could share that with us, particularly to the extent that there have been problems potentially with adequately being capitalized. [SPEAKER CHANGES] And you're right senator McKissick and I didn't answer that part of your question. I'm going to ask Ray Martinez whose head of our financial evaluation division. [SPEAKER CHANGES] Our regulatory mechanism that's envisioned in this bill is totally in line with what other states are doing. I think I also heard you ask had there been any problems. No, the answer is to date not with micro or mini captives, no. [SPEAKER CHANGES] Thank you very much. [SPEAKER CHANGES] Senator Tucker. [SPEAKER CHANGES] Thank you Mr. Chairman, just these reinsurance companies. Are these the ones Ms. Williams kind of like the - I'm sorry, Mr. Chair. Can I ask the series [??] a question? [SPEAKER CHANGES] Yes, you can ask a question one after another. [SPEAKER CHANGES] Ms. Williams kind of like the companies that are set up in Bermuda? [SPEAKER CHANGES] Are the reinsurance companies when I refer to that? Yes. They are offshore, many are offshore. I see what you're saying. They're reinsurance companies and they are also offshore and then there are also companies that form these captive companies. It may be a bank that says, you know what, we want to provide our own insurance, we don't want to be paying whatever company to do this, so they're insuring their own risk. So it's similar but different in a certain way if I'm answering your question. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Yes sir, two more questions. Ms. Williams what is the fee, regulatory fee that the department of insurance is going to be charging these companies and what is the expected windfall to regulations for the department of insurance for these fees? [SPEAKER CHANGES] All right, and I may need help from the state. Are you asking, I'm sorry senator Tucker, under this bill what is the fee they would charge, or are you asking the insurance surcharge in general? [SPEAKER CHANGES] No, I know the surcharge in general is 6% I think but I'm talking about on this particular kind of insurance. [SPEAKER CHANGES] Right, it's set forth in the bill for each particular type of captive there's a certain percentage. And I would need to turn inside the bill or maybe you look to staff for a little bit. And I can find out. [SPEAKER CHANGES] Question Mr. Chairman or Ms. Avery. [SPEAKER CHANGES] Ms. Avery can you answer that question? [SPEAKER CHANGES] Not so much that question. [SPEAKER CHANGES] Well you want this one answered first? [SPEAKER CHANGES] Well, she's looking. [SPEAKER CHANGES] I got it. For direct premiums it would be .4% on the first $20 million, .3% on each dollar thereafter. And then there's set amounts in the bill for assumed reinsurance premiums that are graduated and the mid annual minimum aggregate tax is set at $5000, the maximum would be $100,000 for all captives except for protective cell captives.And for protected cell captives with more than ten cells the annual minimum aggregate tax would be $10,000 and the maximum would be the lesser of $100,000 plus $5,000 multiplied by the number of cells over ten. And that money according to this amendment goes to the general fund, but yes the department would require some funding for a staff to run this program. If we don't have the ability to do this if I can say so we might not have a bill, we can't do this. If we're not running a good program the companies are not going to want to come here. They're looking for stability and clarity and a way to do business that they can count on. [SPEAKER CHANGES] Senator Tucker, follow up question. [SPEAKER CHANGES] One more question for Ms. Avery. Explain to the rest of us the flow. What happens is if I understand it the department of insurance collects this money, it appropriates - it gives it to the general fund and then we turn around and appropriate it back to the department f insurance with very little oversight. Is that the right scenario? [SPEAKER CHANGES] Ms. Avery. [SPEAKER CHANGES] There are - and Lisa Hollowell [SP] is here. She's from fiscal research and the analyst for the committee that works with their department of insurance. insurance companies pay two different things. They pay the gross premium tax, that money goes into the general fund and is appropriated over along with all the other general fund revenues. The second charge that insurance companies pay is an insurance regulatory charge and that, the rate for that is set each year by the general assembly. I cannot remember what it is, I think it's .12%. [SPEAKER CHANGES] Ms. Hollowell [SP]? [SPEAKER CHANGES] It's 6%. [SPEAKER CHANGES] I'm sorry, it's 6%. [SPEAKER CHANGES] 6%. [SPEAKER CHANGES] On the jurisdictional revenues. And under this bill captives would pay a gross premiums tax. Captives would not pay the insurance regulatory charge. The revenues form the insurance regulatory charge are credited to the insurance regulatory fund and...

The money in that fund is used to pay the expenses of the department of insurance. The expenses of the department still need to be appropriated by the general assembly but there's less oversight than there may be of other general fund supported activities. [SPEAKER CHANGES] [??] Tucker. [SPEAKER CHANGES] Yes sir. All right. I've got Senator Hise. [SPEAKER CHANGES] Thank you Mr. Chairman, we move for a favorable report for the bill as amended, [??] committee substitute unfavorable to the original bill. [SPEAKER CHANGES] I have a motion before us of favorable report for senate bill 476 as amended and rolled into a PCS for senate bill 476, unfavorable to the original bill. Seeing no additional questions or discussion all in favor please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed nay. Aye's have it. Thank you Senator Meredith. Let's talk about senate bill 129 limit state finances, facility finance act. Senator Tucker you got senate bill 129? Okay. Now we have had a meeting earlier regarding the discussion of senate bill 129. I believe there is a PCS, is that right senator Tucker? All right, and senator Tucker makes a motion that we adopt a PCS for senate bill 129 for discussion. All in favor please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed nay. Ayes' have it. You have the senate bill 120 PCS before you, senator Tucker will you explain what that does. [SPEAKER CHANGES] Yes sir, thank you Mr. Chairman. We had a relatively lengthy discussion last time, this is an act to prohibit the insurance of debt under the state capital facilities act. What it does is it sets up the 25% threshold as related to the general fund so that the legislature has to, it has to be at 25% or below. cops bills or cops money has to be at 25% or below the general fund for us to be able to borrow any more money under cops. For those of you who don't know what cops are they are really securities and it's an opportunity to hastily receive money to be able to get it quickly when you have major capital projects within the state. It's my understanding that, and someone can correct me if I'm wrong and may senator Blue knows since he's been here a while, I was reading up until 2001 the state had never issues any cops in the history of the state, and then from 2001 on through roughly 2009 we issued about $3 billion dollars worth of cops. And what cops does is it allows the general assembly to issue debts for the state of which the taxpayers have to pay back without a voter referendum. We have not had a voter referendum in this state since 2000. So what this would do would prohibit anyone from using cops until the percentage of cops debt is at 25% or below in the general fund. Currently right now it's pushing close to 40% of the debt and of course this year we have $7.2 billion dollar state debt, not counting the [??] security commissions debt, and we're going to pay almost three quarters of a billion dollars out in principle and interest. So this $3 billion dollar hit over the last decade has doubled the debt. All for a worth costs, it's prisons, schools, and primarily the university system but I was asked my senator Stein and will do so to tone down the partisan rhetoric on this and I have done so. So that's what this bill is about and I will be glad to answer any questions. [SPEAKER CHANGES] Members of the committee you have the PCS on 129 before you, we had a lot of discussion early on. Are there any questions regarding the changes that senator Tucker has in the PCS? [SPEAKER CHANGES] Senator McKissick. [SPEAKER CHANGES] I was just curious what the position of the treasurer office would be on what we have here before us in terms of what their thoughts are, how it will potentially impair our ability to provide for what the state needs or whatever their perspective might be, I don't know. [SPEAKER CHANGES] Thank you. Would someone from the treasurers office help us? [SPEAKER CHANGES] Mr. Chair, members of the committee, Tony [??], I'm the liaison from the department of state treasure. We are in full support of the bill. The legislation would do a couple of things. It brings us in line, other triple A rated entities have an average of about 25% of cops or special indebtedness. Whereas as senator mentio0ned we're at about 40%, this would bring us inline with other triple A rated entities. It's been a recommendation of the debt affordability study that the state rely more on general obligation than on...

?? and this is in line with that as well. To answer your other question, there were earlier versions of legislation that would have done away with ?? completely or taken away the Capital Facilities Finance act in total and we were not in favor of that, primarily for the that you mention. We feel that having special indebtedness is an important tool in the toolbox that may be needed at times but that there shouldn't be an over-reliance on that so this bill addresses the reliance on ?? and what some might say is an over-reliance but at the same time it keeps the tool in the toolbox. [SPEAKER CHANGES] Senator McKissick? [SPEAKER CHANGES] Thank you, that is what I wanted to know. [SPEAKER CHANGES] Thank you, sir. [SPEAKER CHANGES] Mr. Chair, if I may respond too? Also Senator McKissick, we had multiple meetings with the Treasury, we did not do away with the Capital Facilities Finance Act and also the current ?? debt is not included in this bill. In other words we kept it all in place so the bond holders will be happy so moving forward it will probably be 8 or 9 years before we can use ?? again until it comes down in its debt service so we will have to go before the people to get a vote to incur any debt and of course the constitution allows us to get money in an emergency, so I think we will be okay. We last a couple hundred years without Cox, we probably can make it a little while longer. [SPEAKER CHANGES] Thank you, Senator. [SPEAKER CHANGES] One quick follow up, if I could? [SPEAKER CHANGES] No, sir, Senator Cook, right here. [SPEAKER CHANGES] I'd like to move for a favorable report at the appropriate time. [SPEAKER CHANGES] Okay, we will hold that favorable report. Senator McKissick. [SPEAKER CHANGES] Sure. I was just curious and I want to thank you, Senator Tucker, for working with the Treasurer's office because I did have concerns originally and it sounds like they've all been addressed. Assuming the General Assembly at some future date wants to go ahead and allow ???, notwithstanding this policy, we could always deal with it at that time,if there was a need, I would assume, is that correct? [SPEAKER CHANGES] Senator Tucker? [SPEAKER CHANGES] Senator McKissick, that is correct but if you want to go before the voters and tell them you want to incur debt without their approval, go for it. [SPEAKER CHANGES] Okay, any additional questions? Seeing none, we have before us a motion from Senator Cook, a motion for favorable report of the PCS of SB 129 and unfavorable to the original bill. Any additional questions? Seeing none, all in favor, please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, Nay. Ayes have it. Thank you, Senator Tucker. Alright, let's do Senate Bill 25. Senator Brown. Called Senate Bill 25, Hunting and Fishing, Active Duty Military. [SPEAKER CHANGES] Thank you, Mr. President. This one, I think this is a little simpler. I think the bill explains itself. It just provides the members of the Armed Forces that are serving on active duty. [SPEAKER CHANGES] Senator Brown, you do have a motion for favorable report. I've got a motion for favorable report on Senate Bill 25 from Senator Clodfelter. Any additional comments, questions? Seeing none, all in favor, please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed say nay. Ayes have it. Senate Bill 25 is done. Let's do Senate Bill 368, Inmates Prescription and Pistol Permit. Senator Bingham and I understand you have a PCS, is that correct? Okay. [SPEAKER CHANGES] ??? [SPEAKER CHANGES] on 368? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] Okay, great. Okay, first things first. Senator Brown makes a motion to accept the PCS for Senate Bill 368 for discussion. All in favor, please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, nay. Ayes have it. You have Senate Bill 368 PCS before you. Senator Bingham, would you like to explain that? [SPEAKER CHANGES] Thank you, Mr. Chairman. I think we have an amendment. [SPEAKER CHANGES] Okay, do we have the amendment before us here? [SPEAKER CHANGES] Unfortunately, I did not have time to make copies but it is pretty straightforward and I'll explain the amendment real quick. What the amendment does is it changes the fee for the pistol permit from $5.00 to $10.00 so that's on line 29 of the PCS. [SPEAKER CHANGES] Alright. You have that before you, members of the committee. Any discussion on the amendment to increase it to $10.00 for that pistol permit? Seeing none, all in favor of the amendment, please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, nay. Okay, the amendment is now part of Senate Bill 368 PCS. Members of the Committee, Senator Bingham, would you continue explaining Senate Bill 368? [SPEAKER CHANGES] Thank you, Mr. Chairman, I will be happy to. This is a ?? bill also, meaning the Sheriff's Association. The $10.00 co-payment for prescription drugs, currently there is a $20.00

copayment for non-emergency medical care, and the daily jail fee in 2011 went from 5 dollars to 10 dollars. So the costs of prescription drugs have continued to rise, and this will help offset the costs of these drugs to the sheriffs and the counties that you represent. The application fee for the pistol permit, this actually, this fee helps, will help them offset the costs, because they have to do a criminal background check, and it nowhere comes close to paying what their expenses are. So, initially it was 5 dollars we raised it to 10, and that's only going to be about half the cost of what they incur, because when they do a criminal background check, the way present law is, if their permit is denied they don't receive any funds for this. So, this is endorsed by the Sherriff's Association, the Police Association, and many other law enforcement groups, and I would urge your support, and I'll be happy to try to answer any questions. [SPEAKER CHANGES] Alright, I have a question from Senator Stein. [SPEAKER CHANGES] Thank you Mr. Chairman. Senator Bingham, is it really a good idea to give pistols to prisoners? [SPEAKER CHANGES] Well, it seems like a good idea to me, but I don't know. [SPEAKER CHANGES] We thought hard and long on changing that title. But, you have what you have. OK, any realistic questions? Senator Tucker. [SPEAKER CHANGES] Senator Bingham, this may be for staff. How much is, I suppose that the 10 dollar copays will come out of the accrual amount the prisoners have for their average monthly salary from the state. Would that be correct? [SPEAKER CHANGES] That's how I understand it. I think they get a salary of 50 cents a month. Anyway, we've got someone here that can answer that question for you Mr. Tucker. Senator Tucker, sorry. [SPEAKER CHANGES] Alright. [SPEAKER CHANGES] Excuse me, please identify yourself. [SPEAKER CHANGES] John ?? ??. Senator Tucker, these are county inmates, so they are not being paid the same wage the state prisoners are. [SPEAKER CHANGES] Does that satisfy your question? [SPEAKER CHANGES] Yes sir. Just for my edification, what are we pay state inmates, per month? [SPEAKER CHANGES] They can make up to a dollar a day. [SPEAKER CHANGES] Members of the committee, and Senator Hise. [SPEAKER CHANGES] Favorable report ?? [SPEAKER CHANGES] OK, we have before us a motion for favorable report of the Senate Bill 368PCS as amended and rolled into the PCS Senate bill 476, an unfavorable to the original bill. Any additional questions? See none. All in favor please say Aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, Nay. Ayes have it. We go one last bill, and it is Senate bill 547 Energy Savings Contracting Amendments and this is Senator Hunt and he is a member of the committee. Senator Bingham. [SPEAKER CHANGES] Thank you Mr. Chairman, and thank members of the committee. [SPEAKER CHANGES] You're slowing down the committee sir. Thank you. Alright, Senator Hunt makes a motion that we accept the PCS for Senate Bill 547 for discussion. All in favor please say Aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed, Nay. Ayes have it. You have Senate Bill 547 PCS before you. Senator Hunt, would you explain it. [SPEAKER CHANGES] Yes, thank you Mr. Chairman. This bill is basically for energy saving projects. There are two purposes for the bill. The first one is intended to make energy conservation efforts easier for contractors to bid on governmental agencies efforts to save energy. These are contracts basically that are self-liquidating, meaning the contractor is paid based on the savings he achieves from the energy efforts, and he has to bond his efforts. In other words if he doesn't achieve his savings, then the bonding company has to come in and pay for him. The current situation is currently vendors have to give a detailed analysis of how they're going to save the money. That means that they have to design the plan, and they have to, then after they've designed it, then they have to figure out how much it gonna cost to implement it, how much it gonna cost to build it. You might say, "Why is that different than DOT?", but when DOT sends out bids for a project, they provide the plans, here are the plans, you bid on it. These energy savings projects the designer and the contractor have to design the plan, and then tell us how much it gonna cost. Basically that prohibits many smaller contractors from bidding on it, because sometimes it costs as much as a hundred thousand dollars to design the plan. So how does Senate bill 547 fix this? This resolves the

dilemma by allowing the state energy office, to have an approved list of contractors. and then the governmental agency will negotiate with that contractor that its approved qualified experience and knows what there doing that can negotiate with that contractor without the contractor going through all the details of designing the plan the coughing it out. As is said there is a bonding requirement that if there not successful then achieving the savings then the bonding company will have to pay, The second part of the bill requires all universities to comply with requirement. In other words, the universities are no longer able to do these energy savings projects in the house two years ago in the budget the ncsu was allowed to do that. What we are trying to do here is give companies an opportunity to bid on this business and generate more jobs for are economy. they will ncsu will be allowed to continue and projects in the pipeline as long as its identified by the end of this year and financed by the end of the following year this has been approved by the comers committee and the treasure office has approved it, but i will be happy to answer any questions of the committee any questions? Senator Brown favor report. Senator brown makes a motion report bill 547 pcs and unfavored to an original bill any questions or thoughts members of the committee seeing none all in favor please say i all oppose no the I's have it members of the committee senator raven will be sharing tomorrows finance committee 3 bills that are listed for tomorrow and with that the finance committee is adjourned