Heard on the Street Posted: Thursday, June 18th, 2009 Beverly come lately
The scene was the Old House Chamber in the Capitol. Governor Beverly Perdue, speaking mostly to NCAE supporters and the coalition known as Together NC, urged the legislature to raise taxes by $1.5 billion in order to minimize firings of teachers, larger class sizes and other harmful cuts to k-12 public education.
Her remarks might have been taken more seriously by legislators and other political observers had she used her bully pulpit much sooner…like in March when she presented her own budget proposals. No, she didn`t know just how deep the budget deficits were going to get, but she was noticeably missing when we got final figures about the deepening deficit. Our Governor has been quiet, some say too quiet as first the Senate, then the House considered how to deal with this economic crisis.
We`re told she summoned House Speaker Hackney and Senate President Pro Tem Marc Basnight over to the Governor`s Mansion for breakfast, similar to the famous breakfasts Jim Hunt was known for. As an aside, you didn`t want to get summoned to breakfast by Hunt. It was usually accompanied by lectures, scoldings, or instructions.
When Perdue came forward this week with her pleas for more taxes, many legislators (like former colleague Senator David Hoyle) and even seasoned political observers just rolled their eyes and chalked up her remarks to politics. She is clearly playing to her support base with NCAE.
Teachers are angry with Perdue. They believe she sold them out when implementing a one-half of one percent pay cut. They are part of the reason why Public Policy Polling showed her popularity rating had dropped from 34 percent to 30 percent. Even among Democrats her approval ratings have dropped from 66 to 46 percent.
Perdue is taking to the road, again reminiscent of Jim Hunt, to “sell” this tax increase to the people. It`s going to be a tough sell. Polling by PPP shows that voters were 51-32 in favor of budget cuts when asked if the budget should be balanced by cutting government or by raising taxes. Governor Perdue might have had more support if she had included restoring cuts to mental health and other programs.
We also hear there are heated arguments going on among Perdue`s advisors about the wisdom of getting out front on the subject of tax increases.
One fact is undeniably true. Governor Perdue`s administration is sweating bullets over having enough cash to make the payroll on July 1. Revenues are continuing to drop and these are slow collection months.
Look for lively discussion on this subject on this week`s NC SPIN.
Get ready for more taxes
Longtime legislative observers expect significant tax increases when the conferees come forward with a state budget. House Speaker Joe Hackney publicly stated the House would not increase taxes, but then capitulated and his body raised taxes by $780 million. Governor Perdue is advocating a $1.5 billion increase and Senate Finance Chair David Hoyle, who has publicly stated he will “never, ever” vote in favor of a tax increase on upper income wage earners, told TV news reporters last night the tax increase won`t likely be that much but that the Senate had been looking at a tax hike of around $900 million.
In a somewhat surprising move today Senate Finance leaders made public their alternative proposal for $950 million in new revenues, saying they will not support higher sales or income taxes in a down economy. Their plan, which they hope will be agreed upon by the House conferees, would increase sales taxes to 55 services which previously have not been taxed, including vehicle repairs, yard services, remodeling, manicures and other services. By implementing these taxes on services, the Senate plan would avoid having to raise the overall state sales tax, as the House had proposed. The state portion of the sales tax would drop from 4.75 to 4 percent. In addition, the personal income tax rates would be lowered. Those currently paying 6 percent would pay 5.25 percent. Those currently paying 7 percent would be lowered to 6.5 percent and those in the 7.75 percent maximum bracket would see their rates lowered to 7.5 percent. Corporate taxes would also be lowered in the Senate plan.
Senate leaders say this would generate $950 million in new revenue and would avoid the painful increases proposed by the House. Conferees have already been meeting, both in Appropriations and Finance.
As we said it is somewhat surprising for the Senate to have gone public with this proposal. They are obviously hoping that many will see this as a better way to raise revenues than the House proposal and garner support for their plan.
The danger of all of this is that when budgets go to conference committees they always increase over what either of the two houses approved. The $18.6 billion budget passed by the House will be a starting point. Don`t be surprised if the final approved budget is in the $19.5 – 20 billion range. Instead of the 784 or even 950 million dollars in new revenues, don`t be surprised if taxes are not increased in the 1.1 billion neighborhood. There are still some advocating taxes on cigarettes, beer, and wine.
Not only are teachers raising sand but so is every other special interest group. They will begin converging on the legislature like locusts, pleading for their programs to be spared. Everyone wants government to be cut, just not their program.
But how will this play with voters? Public Policy Polling asked voters if they would vote for incumbents or challengers if there was an election today. 44 percent indicated they would vote for a challenger and only 13 percent were inclined to vote for incumbents.
Legislators and the Governor are obviously hoping voters have a short memory and that they will have forgotten the pain of tax increases come re-election time in November 2010.
The problem legislators have is that the public is far from convinced that our leaders have even scratched the surface on seriously eliminating duplication, waste and low priority programs. They will have a tough time getting voters` blessings until they have done so.
More discussion on this can be found on this week`s NC SPIN. Be sure to join us.
Community college board to recommend open admission to undocumented immigrants
The ongoing debate over allowing undocumented immigrants to attend our 58 community colleges took another turn today as a committee examining the issue recommended that the staff draw up a policy that would be similar to that of the university system in allowing students who graduated from North Carolina high schools to attend. The policy committee will review the staff proposal and it is expected to come before the full Community College board in August.
Easley and the Southport Marina
While the media devoted a lot of energy to reporting that former NC State Chancellor James Oblinger spent four hours in the federal courthouse yesterday, many missed the big story, in our opinion. State Ports Authority Chairman Carl Stewart and Wilmington developer Nick Garrett were called to testify. That can only signal that the Easley investigation has now moved to examining relationships between former Governor Easley and his friends. Let us run through the sequence of events and the potential conflict of interest regarding the Southport Marina. This will be lengthy, but stay with us.
Southport was originally intended to be the major port for our state but a powerful politician in Wilmington had it moved to his city. To pacify Southport, a marina was later constructed and the state leased it out to a private entity. Over years, largely as a result of storms, some of the piers at the marina were damaged and many said the marina was deteriorating, even to the point some considered it unsafe. The lack of repairs and maintenance was attributed to a dispute as to whether the state or the holder of the lease were responsible for paying for repairs.
In May 2005, Carolina Journal`s Don Carrington, The Wilmington Star-News, The Southport Pilot and SPINCycle reported that the Easley administration had struck a sweetheart deal to sell the marina for the sum of $5.1 million to a group that included Nick Garrett, “Bubba” Rawl and Tim Smith . At first officials denied the marina was for sale but later we were told offers were being accepted. It was reported they ranged from $2.1 million to $16 million.
On July 29th, the Star-News reported that Ports Authority Chair Stewart said he ”… learned of the impending leaseholder change during a call from Gov. Mike Easley`s office late Wednesday. That call followed a public hearing in Southport regarding the possible sale of the property.”
Abruptly, on August 4, 2005, Governor Easley announced “the state marina at Southport is not for sale.” The Town of Southport subsequently made an offer to the state to purchase the property but this offer was not seriously considered. Nick Garrett told people that he would raise any offer the town made.
End of story? Many thought so but then, mysteriously, the January 2006 Council of State Agenda contained an item for a new lease for the Southport Marina. After the fact the public learned that a group, consisting of Nick Garrett, “Bubba” Rawl and Tim Smith had agreed to purchase the corporation that currently held the lease and that a new lease had been negotiated, subject to Council of State approval. A group of citizens from Southport came to protest the new lease but were never allowed to speak. Terms of the new lease were considered much more generous than the previous lease with the corporation owned by Raleigh`s Cliff Benson, Jr and essentially tied up the marina until 2040. Benson was outraged and made no secret of his disgust with the way he was treated.
The Council of State approved the new lease by a 6-2 margin, with Labor Commissioner Cherie Berry and then State Auditor Les Merritt voting against the lease. The Governor`s spokesperson said Easley had not voted one way or another, however the Governor doesn`t usually vote on Council of State matters unless there is a tie vote.
Southport residents and reporters who had followed the story were convinced that the Governor had orchestrated the agreement. When asked about the Governor`s relationship with Nick Garrett, his spokesperson boldly stated that Garrett was not a part of the group that purchased the marina, however a letter from the corporation to slip holders dated February 28, 2006 stated, “As you all know by now, investors Tim Smith, Julian `Bubba` Rawl and Nick Garrett purchased Southport Marina as of January 2006 and subsequently assumed the property lease from the North Carolina State Ports Authority.”
The Southport residents filed a complaint with the state ethics board. That group voted 6-0 that there was no conflict of interest between Easley and the marina lease, stating that Nick Garrett was not an owner in the company leasing the marina, dropping out of the deal just before it was approved by the Council of State.
So how does this point to conflict of interest? For starters, Garrett, Rawl and Smith were large contributors to the Democratic Party and to the Governor. On June 6, 2001, about six months after Easley became Governor, Nick Garrett Development applied for a construction permit to remodel the Easley`s Southport home, reporting the improvements to cost $150,000 and include adding 800 square feet to the Governor`s waterfront home. Records show Easley wrote a check to Garrett for $200,000 in March of 2002.
In September 2003, Garrett applied for a franchise to sell license plates in Wilmington. The DMV supervisor investigating the application recommended the franchise not be granted, noting there was already a location about 15 miles away that was struggling financially and that a new outlet would only harm it. In October 2003, over the objection of the DMV supervisor, the Department of Transportation granted Garrett`s application.
In 2005 Easley appointed Garrett to the North Carolina Clean Water Management Trust Fund Board. Shortly thereafter we reported that there were conflicts of interest charges regarding board members trying to profit from grants being awarded. We reported that Director Bill Holman tried to block these insider deals but was rebuked to the point of being put on probation, then essentially being forced to resign in November of 2006. But Garrett was also forced to resign from the board because of questionable real estate transactions. Then came the marina deal.
Garrett is also a business associate of and shares an office building with Lanny Wilson. Easley appointed Wilson to the NC Real Estate Commission and then the DOT board. Marc Basnight put Wilson on the NC Turnpike Authority Board and his mother on the NC Ports Authority Board.
The Easley investigation is smokin` and you know what they say about where there`s smoke…
Read more about this story in today`s Charlotte Observer and get a detailed, chronological background from Carolina Journal articles.
More Grand Jury appearances
We hear that Dan Gerlach, now head of the Golden Leaf Foundation and former advisor to Governor Easley has been called to appear before the Grand Jury. They are also reportedly going to call other former Easley cabinet members and high-ranking officials to find out who gave the order to do away with the 2005 travel records of the Governor.
Foundation for ethics in public service
Former State Auditor Les Merritt was acclaimed by many for his aggressive investigations into fraud and mishandling of state funds. He hired former FBI agent Frank Perry to head investigations in the Auditor`s office. The two have teamed up to continue their fight against public corruption and have formed The Foundation for Ethics in Public Service.
The new foundation`s mission includes conducting their own independent investigations concerning allegations of corruption in government, but also providing reports of corruption to journalists and educating government leaders and the public on the true nature of ethics in government, along with causes and remedies of public corruption.
This is a promising new organization with an impressive web site you can visit to learn more, report possible corruption, or contribute to help them in their efforts.
SEANC on warpath…again
The State Employees Association of North Carolina has once again started a radio campaign, this time against Rep. Deborah Ross from Wake County, saying she is out of touch with state employees. They are upset because of Ross` support of the State Health Plan band-aid that was approved by the legislature.
We have to wonder if the state employees, faced with no pay increases, possible massive layoffs, and pension fund investments that are tanking don`t have bigger fish to fry than further antagonizing legislators who are in positions to make decisions about their fate?
Would someone please buy Dana Cope a copy of Dale Carnegie`s “How to Win Friends and Influence People?” ");
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