Heard on the Street Posted: Thursday, August 27th, 2009 Financial picture still grim
The release of unemployment numbers showing our state had not gotten any worse but had not improved was a signal that we are still mired in the recession. All over the state we get reports that despite the improved balance sheets at banks the big boys still aren`t making many loans. Local banks are more open to making loans.
State revenue numbers for August are expected to be reported in the next ten days and state officials are worried they might continue to reflect declining revenues to the state, perhaps calling for further budget reductions. Folks at the capitol are worried.
BTW (for those who don`t text message this means “by the way”) we also learned that the Governor and her top staff had a brown bag lunch over at the mansion this week. A major topic on the agenda was how this staff could communicate, cooperate and conduct the affairs of the governor better. We didn`t hear what, if anything, was resolved.
Off-budget expenses being borne by stimulus money
Governor Perdue recently released a report showing the effect of stimulus money in North Carolina. The explanation on the home page of ncrecovery.gov indicates the state expects to receive as much as $8.6 billion in federal moneys from the $225 billion awarded to states.
One would think that the 10th most populous state in the nation would receive considerably more than $8 billion but the narrative indicates much of this money has yet to be distributed.
What bothers seasoned observers more is the fact that many traditional items in the continuation budget for the state were removed from the state budget this year and are being funded by the stimulus money. There are two points worth noting here: the way we were able to balance the state budget was to remove many traditionally funded programs out of the budget and designate them to be funded by stimulus money. The second, and more important point, is that these federal stimulus funds are projected to cease in the next year or so. These off-budget expenses will then need to be returned to the continuation budget. Lawmakers are betting the economy will be sufficiently improved so as to add them back into the state budget. With a preponderance of economists predicting the state and nation will slowly recover from the recession this might be highly problematic.
Read for yourself the information provided on NCRecovery.gov. You may or may not be able to recognize some of the programs removed from the state budget. NC SPIN will discuss this topic in more detail next week.
Corruption swirls
Despite the death of Senator Kennedy, the start of school for many, and another tropical storm nearing our coast, the big stories of the week all involved scandal and corruption.
Governor Perdue and her administration faced a major crisis in confidence regarding obvious cover-up regarding the Easley travel records. Once again the State Highway Patrol appeared to sweep problems under the rug with an obviously inadequate internal investigation into the disappearance of the 2005 flight records of former Governor Easley. For all her promises of transparency and open government, Perdue bungled this one. She is no more tired of this case than are we citizens of having our government leaders misuse and abuse the trust put in them. It doesn`t help that her Secretary of Crime Control is Reuben Young, who was Easley`s legal counsel and may himself be involved. We understand he was called before the Grand Jury to testify.
In an attempt to restore some confidence an independent panel was formed, consisting of former Supreme Court Justice Willis Whichard, former U.S. Senator Robert Morgan, and Ralph Walker, former Court of Appeals Judge. We will trust these men, all are distinguished citizens but none is under 70. Morgan formerly ran the State Bureau of Investigation as Attorney General so he knows how an investigation should be run. We hope they are up to the task.
Appearances are not always reality, but more times than not they are. The appearance of this case is that what has occurred so far is a massive cover-up.
But as Henry Hinton, Greenville`s Talk of the Town host and panelist of NC SPIN remarked, the R.C. Soles case reads like a John Grisham novel, only the plot is too confused and the characters too complex.
Soles has been the accused of wrongdoing and improper behavior almost since the outset of his legislative career in 1968. He first was elected to the House, then moved to the Senate in 1976, the longest-serving current Senator. But in 1983 Soles was indicted for trying to buy votes for Rex Gore, the District Attorney who must now determine whether or not to prosecute Soles or the many young men who have been involved with him. The judge threw out the case, even though one witness testified that Soles had given him thousands of dollars to help his preferred candidates. By the way, Gore`s opponent in that race was Mike Easley.
Events are unfolding so fast in this story we are almost afraid to tell you the latest, concerned that another revelation will supersede current events. We know about the young man, living in a house furnished by Soles, whose house burned. We reported about the two young men who reported Soles had made improper advances toward them, including trying to fondle one`s genitals. Just as mysteriously these two recanted their stories. Then there were the two young men who Soles says were trying to break into his home and a subsequent shooting of one of them. Soles says it was an act of self-defense. Not so says the victim. He was shot in the back of the leg as he was attempting to leave Sole`s palatial estate. The police investigated. But we now understand that the police were called to Soles` house 17 times in the past year because of disturbances, most involving young men on the property.
Can Soles survive this latest controversy? Folks in good old Columbus County are forming a chorus to sing Tammy Wynette`s “Stand By Your Man.” Yup. Many tell you privately that tales of Soles` reported homosexual engagements are frequent. But just as quickly they tell you Soles brings home the bacon and that`s all they care about.
Also there is the controversy surrounding State Auditor Beth Wood who has been summoned to the Grand Jury to explain why she withheld an audit conducted by her predecessor concerning the hiring and pay of former first lady Mary Easley. Pardon our growing skepticism but this one also sounds like a cover-up, despite all the defenses Wood offers.
It was interesting to learn today that Wood released an audit completed in January that reported Mary Easley`s salary was excessive and should have been reduced to $79,000 and the term of her contract reduced to two years. Using the old ten-finger calculator, one has to wonder what happened to this report over the past six months? Why did it suddenly see daylight now? Rather than clarifying the release of this report only confuses the entire Mary Easley story, creating further conviction there has been a major cover-up going on.
For more on the corruption in our state, be sure to tune in to this week`s NC SPIN. We promise it will be interesting.
BRAC Commission meets
Governor Perdue called together the first meeting of the commission she appointed to make recommendations to streamline and find economies in state government. She told those assembled that she was very familiar with each and every one of them, that they had been through wars together before and would likely do so again. The concept is for this commission to make recommendations that would be voted up or down by legislators. First step, however, is for them to agree to the process of voting them up or down.
As Perdue stated, the list of committee members includes many of her friends. They include Norris Tolson, who has served in the legislature and may have been head of more state agencies than any other person in our history. Also included are Hilda Pinnix-Ragland as chair of the Community College Board. Dan Gerlach, former budget advisor to Easley and now head of Golden Leaf; Ron Penny, former State Personnel Director; Curtis Clark, IBM exec; Norma Houston, former chief of staff of Senate President Pro Tem Marc Basnight and Charlie Sanders, former CEO of Glaxo.
We can easily see where this might be a great group of friends for you to hang out with, Governor. They are good people and many have government experience. But forgive us for saying this group looks like the same-old, same-old. It is hard for us to see cutting-edge government reform coming from this bunch. We would like to have seen a world-class acknowledged leader, a cutting-edge tax accountant and attorney, a top-drawer efficiency expert, some highly experienced think-tank consultants, government reformers, and outsiders who can look at government and budgeting through fresh eyes.
There is a fatigue in government today. Old people, old policies, old ideas. Not what we need in the 21st century, especially in a fast growing state that is transitioning into a new economy.
Pension fund investment manager resigns
Patricia Gerrick, the woman hired five years ago to guide the state`s $60 billion investment portfolio, abruptly resigned this week. Nobody`s talking but we hear through the grapevine there were disagreements between Gerrick and new State Treasurer Janet Cowell as to investment strategy. Gerrick, who earned $340,000 last year, is considered one of the best in the country at what she does and guided the pension and other state accounts through the rocky climate of the recession. This is a bad time to be without strong leadership at the helm of state investment accounts.
UNC-TV offers health call-in show
Kudos to UNC-TV for inviting our entire Congressional delegation to participate in a health care call-in show Tuesday night. Unfortunately, only Senator Burr, Congressmen Etheridge, Miller, Price, and Watt bothered to participate.
While no new earth shattering information was learned it was a healthy discussion and UNC-TV pulled off a fairly difficult production well. We would have liked to have seen tougher questions asked and more give and take between the panelists. This was a good opportunity for our elected officials to stand before us and talk to us about their positions and issues regarding health reform. It is shameful more were unwilling to come.
We`ll talk about this presentation in greater detail on this week`s NC SPIN. Be sure to catch it.
Rallies for health care
The NC Justice Center is helping to coordinate a series of pro-health care rallies this weekend in Raleigh, Asheville, Charlotte and Greenville. For more details on each visit their website
UNC Out-of-staters
The News and Observer`s Joe Neff wrote an excellent piece that highlighted yet another repercussion from the “Generous Assembly`s” gift of in-state tuition to out-of-state students. By classifying these students as in-state students it provides more room to accept out-of-state students in our university system. UNC Chapel Hill has a cap of 18 percent on out-of-state students.
Neff reports that this year`s freshman class has 3,950 students, of which 823 are out-of-state, or 20.8 percent. When the 116 out-of-state athletes and other full scholarship students are counted as in-state students the percentage falls to 17.9 percent, just below the cap. Two-thirds of the 992 out-of-state scholarships are athletes, Neff reports.
We highly recommend you read Joe Neff`s article.
SAT`s level; students down
The average score from SAT tests in our state dropped one point from 1007 to 1006 this year, according to data recently released by the College Board. That`s not good news, but the really bad news is that 2,600 fewer North Carolina students took the SAT this year. We`re told the reason for this is because more students planned to attend community colleges, enter the workforce or into the military. But that makes our scores look even worse. You have to believe that few of the 2,600 were among the top students, a fact which should have increased our average scores.
Look for us to talk about this next week on the Labor Day edition of NC SPIN.
Michaels films Documentary
Journalist Cash Michaels, one of our favorite NC SPIN panelists and writer for The Carolinian, reports that he is in the closing stages of a new 90 minute documentary film called “Obama in NC: The Path to History.” The premiere of this film is scheduled for Saturday, October 10th at the state NAACP convention in Winston-Salem. Should be interesting viewing.
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