Haves and Have-Nots

After thirty years in business, I’ve figured out that (regardless of the ideas of well-meaning but over-ego’ed politicians) economic and demographic trends are more powerful than government. It’s a hard fact but the logic is unbending: No President or Governor has the power to stop trends like an aging population or urbanization.

What’s puzzling – and what I have trouble understanding – is why politicians have such a penchant for making change harder to live with – and more expensive.

Toward the close of the 2013 legislative session there was a hot debate in the General Assembly over House Bill 1224, a bill to broaden NC’s incentives funding – which a lot of our leading politicians felt was a pretty good idea.

Now incentives – or government subsidies to corporations to encourage them to locate in North Carolina – have a long history. Years ago, the General Assembly set up a formula for allocating state incentive grants. They divided North Carolina’s 100 counties into three groups – they put the wealthiest 20 counties (the Haves) in Tier 3, the poorest 40 counties (the Have-Nots) in Tier I and the middle 40 (the also Have-Nots) in Tier 2.

The theory was straightforward: Incentives were structured in a way that the Have-Nots who needed more jobs would be eligible for more incentives. The theory made sense. But it didn’t work out.

When I asked for a breakdown of how state incentives funds have been spent historically – what came back was a shock.

Between 2007 and 2013 the state handed out more than a billion dollars in incentive grants. The 40 poorest counties – who needed the most help – only received 16% of the grants. The 40 middle tier counties (the Also Have Nots) received a dismal 7%. And the rest – 76% of the incentive grants – went to NC’s wealthiest 20 (Have) counties. The Haves, who were doing just fine, gobbled up 3/4ths of the pie.

Now, in Raleigh, a lot of folks would say that’s one more proof big government doesn’t solve problems. And they’ve got a point. On the other hand, a lot of other folks would also say we’ve simply proved, when it comes to grabbing for the loot, the big rich counties have a lot more muscle than the smaller poorer counties.

Either way, we’ve still got a multi-million dollar incentive program. And it’s still broken.

Receiving the League’s Community Champion Award for 2014

League Linc article2

Senator McLaurin, Representative Wells and Legislative Assistant Mary Marchman Receive League Awards

NCLM Greensboro, NC 2014

Senator Gene McLaurin of Rockingham and Representative Andy Wells of Hickory were recognized earlier this week as recipients of the League’s Community Champion Award for 2014. The League presents the award to legislators who make strong efforts to work with municipal officials and ensure that municipal interests are represented during the legislative process. The awards were presented during CityVision 2014, the League’s annual conference held in Greensboro.

The League also presented its inaugural General Assembly Ambassador award to Legislative Assistant Mary Marchman. The award recognizes a legislative staff member for professionalism and selflessness while carrying out his or her duties at the Legislature. Ms. Marchman has been a legislative assistant for the last 11 years, working both the House and Senate. She currently serves as legislative assistant to Senator Kathy Harrington of Gastonia.

“Each of these award recipients is a true champion and true professional. Their service at the Legislature has been invaluable to the state, its cities and towns, and the residents of North Carolina,” said League Executive Director Paul Meyer. League President Ronnie Wall presented the awards to Senator McLaurin, Representative Wells and Ms. Marchman.

In remarks to those attending Monday night’s dinner at the Koury Convention Center, Senator McLaurin noted the relative inexperience of the current legislature and how many legislators do not come to the job with a municipal perspective. He challenged city and town officials to take that perspective to their legislators. Representative Wells discussed his upbringing as the son of a city manager, and noted how issues that are allowed to fester locally can end up before legislators. Ms. Marchman gave a witty speech on how to tactfully approach and discuss issues with lawmakers. The League extends it congratulations and thanks to Senator McLaurin, Representative Wells and Ms. Marchman, and looks forward to working with each in the years to come.

 To view the full LINC’ed in Update,  visit it here.

IMG_3796   NCLM Greensboro, NC 2014   NCLM Greensboro, NC 2014   IMG_3794

Teacher Salary Schedule Comparison

There has been a  lot said about the teacher pay proposal.

Perhaps a picture will make it clearer.

Comparison Graph


This chart shows only the base state salary.

It does not include the NBPTS certification of 12%.

It does not include the Master’s Degree Supplement of 10%.

It does not include the local supplement which in Catawba County in 2013-14 was 7%.

Earned Income Tax Credit

The howls started immediately when, last year, to reform the tax code and create jobs the General Assembly dropped the state’s version of the so-called earned income tax credit.


It became, pretty quickly, a media circus.


Rev. William Barber waded in, suggesting he – by virtuously standing up for the E.I.T.C. – was the epitome of rectitude while those who didn’t agree with him had no empathy for the poor.


It was politics run amuck.


So what exactly is the E.I.T.C.?


Well, first it’s not a tax credit at all. Instead, it works like this: Let’s say, hypothetically, a low income person pays $500 in Social Security and other taxes. At the end of the year, they can file for an E.I.T.C. tax credit and receive a ‘refund’ of, say, $2,000. In effect, they receive a ‘refund’ $1,500 greater than the taxes they paid.


And that’s what the General Assembly ended last year: North Carolina’s local version of Washington’s E.I.T.C.


Now, last week, one of the publications that showcased Rev. Barber’s attacks on conservatives – like me – reported the federal E.I.T.C. is a poster program not just for welfare boondoggles but outright fraud. According to the Government Accountability Office, 24% of all E.I.T.C. refunds ($14.5 billion) were ‘overpayments’ that should never have been made.


How, you might ask, could that happen? The Commissioner of the IRS explained the “improper payments” were caused by parents lying about their number of children or their incomes – and the IRS mailing the checks before bothering to check the claims.


To put that into perspective, $14.5 billion would pay for North Carolina’s entire General Fund budget for eight months.


It never made sense to disguise a welfare payment as a tax credit. It was pure political hoo-doo. North Carolina took a step in the right direction when it ended the E.I.T.C. And Washington could save $14.5 bi8llion in waste by doing the same thing.

Coal Ash Management

My wife and I raised three sons who still live in the Carolinas, so, naturally, how to dispose of 100 million tons of coal ash got our attention.


I also guess, by now, we all know the biggest coal ash deposit in the state is right here in Catawba County. While that pond is downstream from our local water intakes, a spill – like the spill on the Dan River – could cause harm along the Catawba-Wateree basin from Charlotte to Charleston.


When it comes to cleaning up coal ash, one problem is folks can’t agree on what to do. One group says – with absolute conviction – we ought to drain every pond, haul away the ash, burn it and then close the ponds.


Since that may cost $10 billion, other folks argue it’s better to close the major threats immediately, then determine if there’s an effective but less costly way to clean up the others.


There’s another question hardly anyone’s asked: Coal ash ponds have been regulated by state experts for decades. So how did we land in this mess? What went wrong?


There’s no way to put this but bluntly: But when it comes to cleaning up the coal ash ponds having the same old team of regulators in the room isn’t enough – we need some new faces.


And that’s starting to happen. The legislature has put new people – who have no historical ownership of the problem that may blind them to a better solution – to work. It also helps the new team includes a number of people who have the engineering backgrounds, as well as a former national President of the Sierra Club with a 30 year history of environmental leadership.


Of course, we can’t expect to correct 80 years of mistakes in six months.


When our sons took their first steps across the room, we didn’t critique the wobble in their stride or measure the length of their steps and point out how they could cover more ground with a few tweaks. The bill dealing with coal ash is like that – it’s the first few steps.


North Carolina Education Revenues Chart

The chart below with an interesting perspective on education funding that crossed my desk this week from the NC Department of Public Instruction. Click on the chart for a closer look.


General Assembly Required Tests

A lot’s been said and written about testing students (grades K – 12). Here’s a list of tests – many required by the federal government, and others by the State’s Read to Achieve program.


G.S. 115C-174.11 provides that the State Board of Education “adopt the tests for grades three through 12 that are required by federal law or as a condition of a federal grant.” The federal No Child Left Behind (Elementary and Secondary Education Act) law requires standardized testing at the end of the school year in reading and in mathematics in grades 3-8, in science in grades 5 and 8, and in English II, Algebra I, and Biology in high school.


G.S. 115C-174.11 also requires the administration of the ACT to all 11th graders and, in G.S. 115C-174.22, to the extent that funds are available, of the diagnostic versions of the ACT in 8th and 10th grades.


In 2012, the State Board of Education received a waiver from the federal government for the requirement to measure annual yearly progress through No Child Left Behind, if they agreed to reduce the gap between the highest and lowest performing groups of students by a specific percentage each year.  The State Board also had to agree to evaluate teachers, in part, based on student academic achievement. In order to measure all teachers based on student outcomes, the State Board has developed “final exams” in subjects such as social studies that did not have statewide tests. Local school systems can use these final exams, or present an alternative way of measuring teacher performance for approval by the State Board.


The Read to Achieve program was passed as a part of the Excellent Public Schools act in the 2012 Budget. Through this program, per G.S. 115C-83.7, students who do not demonstrate reading proficiency on the end-of-grade third grade reading test, must be retained, unless they meet one of the following “good cause exemptions”:


(1) Limited English Proficient students with less than two years of instruction in an English as a Second Language program.

(2) Students with disabilities, as defined in G.S. 115C‑106.3 (1), whose individualized education program indicates the use of alternative assessments and reading interventions.

(3) Students who demonstrate reading proficiency appropriate for third grade students on an alternative assessment approved by the State Board of Education. Teachers may administer the alternative assessment following the administration of the State‑approved standardized test of reading comprehension typically given to third grade students at the end of the school year, or after a student’s participation in the local school administrative unit’s summer reading camp.

(4) Students who demonstrate, through a student reading portfolio, reading proficiency appropriate for third grade students. Teachers may submit the student reading portfolio at the end of the school year or after a student’s participation in the local school administrative unit’s summer reading camp. The student reading portfolio and review process shall be established by the State Board of Education.

(5)  Students who have (i) received reading intervention and (ii) previously been retained more than once in kindergarten, first, second, or third grades.


The Department of Public Instruction has developed an alternative assessment and a student reading portfolio to address #3 and #4 above. Our understanding is that the State Board will also review other alternative assessments to see if they would meet the law’s requirements, as submitted by local school systems.  We have also heard that DPI has sent out additional clarification that the student reading portfolio was not meant to be administered with all third grade students, but only those who appear to be reading at, or close to, a third grade level, and who may have difficulty taking more traditional standardized tests.


Here is what the law says about the student reading portfolio:


G.S. 115C-83.3(8) “”Student reading portfolio” means a compilation of independently produced student work selected by the student’s teacher, and signed by the teacher and principal, as an accurate picture of the student’s reading ability. The student reading portfolio shall include an organized collection of evidence of the student’s mastery of the State’s reading standards that are assessed by the State‑approved standardized test of reading comprehension administered to third grade students. For each benchmark, there shall be three examples of student work demonstrating mastery by a grade of seventy percent (70%) or above.”


The third grade beginning of the year reading test was administered for the first time during the 2012-2013 school year for several reasons:

  1.  Give third graders an early experience with a standardized test.  NC law (G.S. 115C-174.11(a)) prohibits standardized tests for summative assessment in K-2.
  2. Discover third graders’ reading abilities at the beginning of the year to help inform instruction.
  3. Provide a pre-post measure of the impact of instruction on a third grader’s reading ability.  The Read to Achieve program requires that the summer reading camp, the transitional third-fourth combination class, and the accelerated reading classes be taught by teachers with demonstrated student outcomes in reading proficiency.  This impact data can also be used to help populate Standard 6 of the NC teacher evaluation.  According to the waiver that NC received from the federal government for the No Child Left Behind measures of adequate yearly progress, by 2015-2016, all teacher evaluations have to include a measure of student impact.


The end-of-third grade reading test is a standardized test administered to all third graders.  It is a requirement of the federal government through No Child Left Behind (Elementary and Secondary Education Act).

A.A. Shuford plant




Representative Andy Wells and Stephen Shuford of Shurtape Technologies review the cleanup of the A.A. Shuford plant on Highland Avenue – a project facilitated by Wells’ House Bill 706.

Medicaid – It’s Not Our Job

Medicaid is the biggest, fastest growing program in state government – and the only program with no budget. That’s not to say the department doesn’t crunch numbers and set targets and pretend to have a budget, but the hard fact is the numbers are illusions. When the end of each fiscal year rolls around, with red ink piling up, DHHS lands on legislators’ doorsteps saying, We’re back for our annual bailout.

No one would run a business that way. No one would say to a manager, Here’s your budget but don’t worry if you spend too much – we’ll write you another check.

But that’s happened over and over with DHHS – which may lead to a second mistake: Frustrated legislators may decide to fix DHHS’ bungling by managing Medicaid themselves.

Now, I’ll grant you, that’s a temptation. But a legislator would be better off taking title to a local coal ash pond than taking ownership of Medicaid.

So, what’s the alternative?

How about this: Let’s set a real Medicaid budget that includes a hard cap on spending – then tell DHHS, Don’t even think of coming back at the end of the year for more.

Let’s also give the Governor the power to do whatever it takes to stay under that spending cap, including the authority to cut the number of people receiving Medicaid, to cut programs, and to cut fees to providers. If the Governor wants to set up ACO’s (and offer them incentives and penalties) that’s fine too. But, either way, the bottom line’s the same: Legislators aren’t giving DHHS one penny more.

And while we’re at it, let’s give the Governor and Secretary Wos the power to tackle Medicaid waste and fraud. Right now, if North Carolina slips up and wastes (or gets flim-flammed out of), say, $100 million in Medicaid funds we have to repay roughly $65 million to Washington. In other words, North Carolina has to repay Washington for Washington’s share of the wasted money. Now, in practice, that sounds fair. But in the real world it’s led to one odd consequence: No one at DHHS is on fire to identify Medicaid waste and fraud.

So, let’s give Secretary Wos the green light to negotiate a pilot ‘Fraud Elimination Program’ with Washington. The Secretary could ask the members of our Congressional delegation to sponsor legislation to waive the refund requirement to allow her to cut every penny of waste she can find.

When it comes to fixing Medicaid the cure isn’t the legislature stepping in and doing DHHS’ job – it’s good old-fashioned accountability. For years, legislators have given DHHS billions then, every time they’ve screwed up, we’ve bailed them out. That’s not accountability.

So instead of continuing the bailouts, let’s say: Here’s a budget. Here’s a hard cap. And here’s the power to stay under that cap. Now go do your job. And don’t even dream of coming back for more money.