Archive for the ‘News’ Category

A Trust Fund, A Couple of Billion Dollars and The Raleigh Swamp

In the private sector, few things will land you in hot water quicker than dipping into someone else’s trust fund to get your hands on cash – we’ve all heard about lawyers who took money out of a trust fund then, in the blink of an eye, ended up disbarred.

The state of North Carolina has what’s called the Highway Trust Fund – a public version of a private trust fund – which has money sitting in it that belongs to taxpayers across North Carolina.

Now, under state law, the money in that trust fund can only be used to do two things: 1) Pay for long-term road building; and 2) In emergencies, when DOT lands in a financial jam, for loans to bail DOT out.

However, those loans can only be made with the approval of the State Treasurer. He’s the Keeper of the Public Purse.

Two years ago, after Governor Cooper was elected, DOT went on a spending spree – it spent $1.8 billion it had in the bank, borrowed $300 million (using bonds) more. As part of all that, the Governor’s folks borrowed $1.1 billion from the Highway Trust Fund and spent it.

What did the Treasurer say about that loan? Nothing. DOT just raided the trust fund without his approval.

Next, after blowing through billions in cash, DOT got a shock: It discovered it had spent too much. It was in a ditch. Watching red ink pile up.

So what did the big spenders at DOT do? They stopped needed projects and laid off hundreds of workers so their legislative allies would give them another $660 million to spend. Immediately.

I know some people hate the term but that’s why it’s called ‘The Raleigh Swamp.’

That’s How Government Works

Two years ago, when Governor Cooper took office the Department of Transportation (DOT) was rolling in cash – $2 billion in cash.

The Governor promptly decided he ought to spend the money as fast as possible – because having less cash on hand meant DOT would be able to borrow another $300 million (using Build NC bonds) and spend it too.

Democrats excel at spending money and cash flew out the door and the Department borrowed the $300 million – then DOT got a shock: It found it had overspent. It was in a ditch. With red ink piling up.

DOT said, We’ll lay off workers and stop road repairs. Then DOT added, By the way, none of this is our fault. We got hit with unexpected bills like the Map Act lawsuit. The department’s allies in the legislature launched a bill to give DOT another $660 million – immediately.

The Map Act is the lawsuit DOT lost because it had taken people’s private property without compensating them.

The pitch supporting DOT sounded good but, when you scratched the surface, it didn’t hold water. Because DOT had lost the Map Act lawsuit three years ago – so it had known about those liabilities before it went on its spending spree.

Spend and spend then borrow and spend more and then, when you land in a ditch, come up with an excuse and say, Don’t blame us. Just give us another $660 million to spend.

And, of course, if the legislature says, Okay. Here’s $660 million. No problem – DOT is likely to just keep on spending like there’s no tomorrow and history will repeat itself.

That’s how government works.

And another reason to drain the Raleigh Swamp.

Cash Management and the Raleigh Swamp

The state Highway Department blew through a whopping $1.8 billion in cash in just 20 months – and now it’s laying off hundreds of workers and cancelling road repairs people need.

The DOT says its cash problems are due to a lawsuit it lost. Let’s look at two facts about that lawsuit: First, the NC Supreme Court ruling in that case goes back three years to June of 2016 – before DOT went on its spending spree.

Second, DOT lost the lawsuit because it violated property owners’ rights (trying to take their land). Our highest court stated that DOT must ‘determine the value of the loss of these fundamental rights’.

Bottom line: DOT knew about the lawsuit but spent the $1.8 billion anyway – and, now, here come the demands, ‘Give DOT more cash.’

Let’s drain the Raleigh Swamp, too.

Bang Down the Gavel

The budget deadlock’s gone on so long even liberal Democrats are complaining legislators are being paid to sit in Raleigh and do nothing which has cost taxpayers a million dollars.

Of course, there’s a twist here: Democrat legislators are just ramping up the pressure to make Republicans pass Governor Cooper’s budget which increases spending – so we can go home.

I’ve got a counterproposal for them: Let’s adjourn. Period.

After all, the Governor’s veto (because we spent hundreds of millions less than he wanted) means there is no budget. Which means the state spending can’t go up at all. By law the state has to spend the same amount it did last year.

It’s simple: No budget means less spending which means less government. And taxpayers save money.

So next time a Democrat stands up and says, Let’s adjourn, let’s bang down the gavel and do it. Right then.

Education Bureaucracy

Every year the state sends millions of dollars to local school systems across North Carolina to help them pay for school supplies. This year’s budget is $47 million. Now, State Superintendent Mark Johnson wants to send $37 million of that $47 million straight to classroom teachers, instead of school system administrators. And the education bureaucracy isn’t happy. Because teachers will get to spend $37 million that their bosses spent last year.

Fighting to keep control of that $37 million, school administrators are arguing they can spend the money better than teachers, that a centralized government bureaucracy makes bulk purchases at a better price, stores supplies in warehouses, and then distributes them when, and to whom, they decide needs them.

That argument took me back to the 1970s, when factories in Japan were selling products at a lower price than American manufacturers. Our manufacturers faced a big challenge. They had to lower the costs of their products and, to do that, they made an innovative change in their supply chain (which, in part, was copied from Japan). It was called the Just-In-Time (JIT) supply model, and it was a dramatic departure from the old practice of buying mountains of supplies and storing them in massive warehouses until the day came when they were needed.

How well did manufacturers’ new JIT plan work? According to an article in The Economist, US companies “gained over the following five years (on average) a 70% reduction in inventory, a 50% reduction in labor costs and an 80% reduction in space requirements.” And that happened long before the age of desktop computers, smart phones, and being able to order supplies on the Internet.

Of course, that kind of streamlined (and less expensive) supply system doesn’t appeal much to a centralized government bureaucracy. To put it bluntly, cutting costs means fewer administrators on a 30-year career path leading to a six-figure pension and free medical insurance for life.

Unlike entrepreneurial American factories in the 1970s, government bureaucrats see change as a threat to be avoided. School choice is one example: It allows parents to pick a school that is best for their child’s needs. But the education bureaucracy fought that change for years.

Superintendent Mark Johnson’s new plan to put the money to purchase classroom supplies in the hands of teachers isn’t popular with the education bureaucracy. But, like School Choice, it means a better education for our children.

School Supplies

Every school year, we read stories in the newspapers about teachers who have to spend their own money to buy school supplies for their classrooms. But, it turns out, only part of the story has been in the newspapers.

Taxpayers spend $9.5 billion on K-12 education. And, every year, part of that money – $50 million – is sent to local school boards to pay for supplies for classrooms. But, in the past, that $50 million hasn’t gone straight to classroom teachers. Instead, the money was paid to local school boards – which turned out to be a mistake.  Because, all too often, local bureaucrats decided not to spend the money on school supplies.

What did they spend it on? The answer to that question isn’t simple – it varies from school district to school district. But the short answer is bureaucrats used the money to pay for other things on their to do list – and left teachers paying for their own classroom supplies.

When I learned that money appropriated to pay for school supplies wasn’t being spent on school supplies, I asked, Why don’t we send the money straight to teachers? And, this week, we’re introducing a bill to do just that: Under our Senate bill, every licensed teacher in North Carolina will receive $400 to pay for classroom supplies – and bureaucrats will no longer be able to take that money and spend it on something else.

A Website That Doesn’t Work

Most people understand running a business is hard work. And, after doing it for years, most find it’s worth the sacrifice. That said, it’s maddening when a business is running smoothly and then, after years of hard work, it’s hit with a new tax or regulation – productivity drops and, suddenly, a new struggle starts to comply with a new government mandate.

In January that happened to business across North Carolina, when the State of North Carolina ordered them to file 1099s on-line. No more paper sounded okay. Filing bureaucratic forms on-line makes sense. Properly set up, it’s faster for businesses and reduces manual processing in the tax collector’s office. But hardly anything government does turns out to be simple and this was no exception.

The tax collector’s new 1099 system was not faster or more efficient. It was the opposite. It did not work with popular small business accounting software and businesses could not simply upload their information.

So, now, along with all the other headaches that come with filing tax returns small businessmen, bookkeepers and accountants are pulling their hair out trying to figure out how to file a 1099 online.

In this day and age, setting up a web site is no big feat – so why can’t a state agency with a $271 million budget set up a website that works? Is it an example of government ineptitude? Or could it be that filing 1099s online means the department will need fewer employees – and what government bureaucracy wants that?

The Department of Revenue has given us one more proof of the old saying, ‘More government isn’t the solution – it’s the problem.’

Saving Five Billion Dollars

Leaving buildings vacant, especially in a growing city like Raleigh, is a costly waste. In a private business it would get a property manager fired but not in state government.

Back is 2015, Governor McCrory commissioned a study on state office use by a reputable national firm, CBRE, which found state government uses an average space of 319 feet per employee (FTE). The report continued, “Current commercial and governmental standards average between 175-200 square feet per FTE.” In other words, the state uses about 40% more space per employee than the norm. And the problem may be even worse.

The 319 sq ft per employee number is based on self-reporting by the state agencies. However, since there is no accurate inventory of state space, you have to ask: Did State agencies underreport their space?

According to the CBRE study, the state agencies reported a total of almost 123 million square feet. Reducing that space to the commonly used standard, a 40% reduction, means government is wasting 49 million square feet of unnecessary office space.

What does that mean in dollars? At $100 a square foot it means the state owns, or makes lease payments on, excess space valued at five billion dollars. That’s $5 billion that could be used to pay for schools, law enforcement or infrastructure.

Flooded by Big Storms

There’s nothing like two 500-year storms roaring ashore in eastern NC in two years to get your attention. But, if you stop to think about it, that’s only part of the problem. Because out here in the western part of the state we’ve had our share of usual storms as well. Most of us have seen the destruction up close. And it’s all starting to feel like a bad trend.

So, what do we do?

Unfortunately, what we are doing is typical politics – hyper-partisan activists are lining up on opposite sides and they’re already pointing fingers and calling people on the other side names.

A more sensible solution would be to put the politics aside to discuss what can be done to help people and towns -like Fair Bluff-  that were flooded by both hurricanes. That’s the alternative Duke University Professor of River Science Martin Doyle presented to the General Assembly’ s Joint Committee on Storm-Related River Debris/Damage last month.

Professor Doyle used stories to make his point, saying, “In 2019 North Carolina is as likely to have a flooding or hurricane disaster as we are to win a men’s national college basketball championship.” It’s human nature to believe natural disasters are rare but Professor Doyle put the odds of a major disaster in any given calendar year at 1 in 6.

Right now, after a hurricane, politicians go to work appropriating recovery grants to towns like Fair Bluff. But, then, another hurricane comes along, and history repeats itself and the same towns are flooded again. More floods. And more displaced families. I guess, next, we could discuss spending state tax dollars to build levees or dams to protect those communities but, when you get down to it, none of those suggestions is likely to be a lasting solution. What would work? It’s simple, updating flood maps and encouraging people who live in flood zones to move to higher ground.

A political circus is almost always more entertaining than a real debate about a serious problem. But with lives and property at risk we may want to skip the drama and go to work on a solution.

Shooting at the Wrong Target

After Hurricane Florence, when you read the newspapers, it looked like North Carolina faced an environmental disaster because of flooded hog farm lagoons. But, as it turns out, the media got it wrong. Which isn’t a surprise.

When the NC Department of Environmental Quality gave its report on Hurricane Florence damage to the General Assembly’s Oversight Committee on Agriculture and Natural and Economic Resources, hog farms weren’t the problem by a long shot. There are 3,000 lagoons on hog farms in counties hit by Florence but only a fraction – less than 2% – experienced breaches, flooding or overflows during the hurricane.

At the same time, municipal sewage treatment plants spilled 87 million gallons of waste into creeks, rivers and the Atlantic Ocean, a problem which the media largely ignored.

A whopping 44% of the municipal sewage treatment facilities facilities had problems during the hurricane and what that means is simple: We have to start preparing for the next major storm by focusing our attention on those sewage treatment plants.

It’s hard not to wonder: Is the media interested in explaining and solving real problems? Or is it simply interested in writing sensational eye-catching stories – in this case about lagoons – in the hope those stories will get more ‘clicks’ and sell more internet ads?