Carolina Journal Weekly Report

August 05, 2002

In This Issue:
Feature 1 - Networks Focus on Tobacco

Feature 2 – Winning Majority: What It Takes

Feature 3 - Monkey Business

Feature 1
Networks Focus on Tobacco
North Carolina, other states squander billions of dollars

CNN this week reported on how several states, and particularly North Carolina, have misused money won in the 1998 tobacco lawsuit. Forty-six states settled for $246 billion from the tobacco industry because of health-related costs they incurred for the care of smokers.

Several national news organizations found that several states, rather than using the money to offset health costs related to smoking or campaigns to prevent smoking, instead used the revenue on questionable projects. On July 29, CNN’s “NewsNight with Aaron Brown” (which airs in prime time at 10 p.m.) zeroed in on projects in New York and North Carolina as examples where tobacco settlement money was misused.

“No one really believed the states would spend all of their billions on health care and antismoking ads,” Brown said, opening the segment. “But golf courses?” he wondered, referring to New York’s Niagara County public golf course, which received $450,000 in tobacco settlement money.

“Of the estimated $30 billion handed out to date nationwide, experts say a little more than 5 percent — 5 percent — has been used toward tobacco prevention,” Brown said. Later in the segment he turned the focus to North Carolina. He said the state’s allocation of funds to discourage smoking by teen-agers “falls way short of what needs to be done,” according to “critics.”

“There is also a lawsuit which has been filed against the state for the way it's distributed millions of the big tobacco settlement dollars,” Brown said, adding, “monies in part that went toward the funding of an equestrian center and a tobacco processing plant.”

The Golden LEAF Foundation, which was established by the state to distribute half of North Carolina's $4.6 billion share of the settlement for economic development concerns in “tobacco dependent” communities, gave the Five Points Horse Park in Hoke County $200,000. It also provided $400,000 for a tobacco processing plant's water and sewer lines in Nash County. Brown said Gov. Mike Easley provided a statement to “NewsNight” that said “he’s disappointed with the way some of the money has been spent, notwithstanding some investments that have helped attract good jobs to North Carolina.”

Brown interviewed Mississippi Attorney General Michael Moore, who “spearheaded the tobacco settlement.” “I assume you find it a little galling to know that North Carolina spent it on a tobacco processing plant,” Brown said.

“Yeah, that’s a little galling,” Moore said. “I mean, we don’t need to do anything to help the tobacco companies…they have plenty of money. So I wish they wouldn’t do things like that. That’s kind of crazy.”

Ahead of the Curve

• The Winston-Salem Journal reported that the weekend’s sales tax holiday, in which North Carolina consumers were absolved from the state’s 6 1/2 percent sales tax on back-to-school purchases, wasn’t necessarily a great deal. The story cited the research of David Brunori, an editor for Sales Tax Notes, which tracks state tax policies and studies by a University of West Florida professor. “People rush to the stores. The laws of supply and demand then dictate that the prices go up. You save 5 or 6 percent on your sales tax, and you’re paying 10 percent more for the underlying product,” Brunori said.

• Gov. Mike Easley’s order to hire 1,200 teachers for a More at Four program and additional teachers may have unintended consequences. The Statesville Record & Landmark reported that public school officials in Iredell County are worried that the hiring of additional teachers will force layoffs or a lack of space. They expect cuts in other areas such as textbooks or other job positions to make up for the additional cost. The officials also said the order will require more classroom space in already crowded schools and more furniture.

Person County school leaders are concerned that its “Support Our Students” program, which they say has proven to increase end-of-grade test scores for at-risk 12- to 14-year-olds, is expected to receive a 36 percent cut in state funding. The program offers tutoring in math and English and homework assistance.

Reported by the Roxboro Courier-Times.

Feature 2
Winning Majority: What It Takes
NCGOP chairman says Dole must run well

The wind was at the Republican Party’s back throughout the legal fight over redistricting in state and federal courts. Having achieved electoral balance, North Carolina GOP Chairman Bill Cobey says the party must catch a few more breaks in order to win majorities in both the state House and Senate.
“I really believe we’re going to take both chambers, but it will be razor thin — one or two seats in each chamber,” Cobey said. “That’s predicated on our U.S. Senate candidate (likely Elizabeth Dole) running very well.”

Despite being a nonpresidential election year, Cobey said the fortunes of the party holding the White House rise and fall with the nation’s financial condition. While North Carolina Republicans have a popular issue in tax increases to target incumbent Democrats with, voters traditionally hold the party of the president responsible for a poor economy.

“I think the thing that helps us the most,” Cobey said, “is [the Democrats] were responsible for the biggest tax increase in North Carolina history last year, and they haven’t shown any will to cut back on spending.”

Cobey said that even though the state’s economy is struggling and Democrats are in power, voters probably won’t hold them responsible for it. They tend to look for a national culprit for such problems: the president.

“In ’94 (when Republicans won the state House) the environment was great for us,” Cobey said. “Issues are important, but the environment is important, too.”

He also said that state Democrats will have a sizable money advantage as well. “They start with a lot more money in the bank than we do,” Cobey said. “They hold the reins of power and have larger traditional givers.”

Races where Republicans face established but vulnerable Democrats and open swing seats will receive the bulk of support from the state party. “(Republican) incumbents can pretty much take care of themselves (raising money),” Cobey said. “What the party needs is money to support challengers and new people on the scene.”

He mentioned Republican Rep. Michael Harrington’s challenge against traditionally strong Sen. David Hoyle as one example where the GOP needs to channel resources. Hoyle’s district now leans Republican.

Cobey on some key races:

• Rep. Carolyn Russell, who decided not to run against fellow party member Rep. Billy Creech and will run against Sen. John Kerr, and former Raleigh Mayor Paul Coble vs. Sen. Eric Reeves: “Those seats look good (for Republicans) because of who’s running.”

• Republican challenger Robert Pittenger vs. Democrat Sen. Fountain Odom, whose district has shifted significantly toward Republican voters: “I’m counting on that one.”

• House incumbents John Blust, R-Guilford, vs. Democrat Flossie Boyd-McIntyre: “I wouldn’t want to run against John Blust. He’s got the energy of two people. He’ll knock on every door in that district.”

• Wilmington Councilwoman Laura Padgett vs. Senate Minority Leader Patrick Ballantine: “Ballantine has the biggest (Republican) challenge in the Senate, but he’s proven that he can get it done.”

“The worst thing that could have happened is if our weaker candidates ended up in Democrat-leaning districts,” Cobey said, “but that didn’t happen to us.”

Capital Quotes

“It’s going to be costly on anything he wants. It upset a lot of people. I don’t think he talks to people around here. You have to have some green stamps to cash in around here and right now he doesn’t have any.”
— Rep. Andy Dedmon, D-Cleveland, commenting to the Winston-Salem Journal on Gov. Mike Easley’s influence with the General Assembly. Legislators were shocked and dismayed to learn that Easley had authorized the hiring of 1,233 additional teachers on short order despite the state’s budget problems without obtaining approval from the legislature.

"As we reduce class sizes, we need to do so responsibly and give our school districts an opportunity to exploit every source of teachers."
— George Truman, superintendent of Anson County Schools, speaking to The Charlotte Observer about a proposal to reduce the pay of teachers who come out of retirement to teach. Currently, teachers may retire in June, then come back and teach an additional year and receive both their pension plus normal pay. The Senate has proposed that such returning instructors get only half pay for teaching. Several school districts oppose the proposal, noting that they were already short of teachers before Gov. Mike Easley's increases.

“I’m not just pleading poor-mouth. These are claims of truly innocent victims, and we can’t pay them.”
— Janice Carmichael, interim director of the N.C. Division of Victims Compensation Services, talking about her agency’s backlog with The Charlotte Observer. The agency, which compensates victims of crime, estimates it will have a backlog of unpaid claims of at least $5.5 million by the end of the current fiscal year. It is scheduled to receive $1.6 million in state funds plus $1.9 million from other sources this fiscal year. The division typically pays out about $6 million in claims a year.

Feature 3
Monkey Business
House committee misguided on incentives

A House committee that hastily approved a new business incentives program apparently was misguided by reports that the incentives were necessary to persuade Time Warner to relocate some of its corporate offices to Charlotte.

On Wednesday, Gov. Mike Easley unveiled the business recruiting program, which he said would help North Carolina compete more effectively with other states. During the Finance Committee's discussions proponents of the bill also made it clear that the program would be used only if a project was a risk of locating in another state.

However, Charlotte Observer news stories and Charlotte Chamber of Commerce documents show that the company had chosen Charlotte before the incentives program was introduced by Easley.

And Time Warner spokesman Mark Harrad told Carolina Journal on Friday that his company has already decided on Charlotte. "We did an extensive analysis and selected Charlotte," he said.

The program is contained in House Bill 1734, which was heard and approved after lengthy discussion and debate by the committee Thursday. The bill has a provision that requires the economic investment committee to make five specific findings before approving a company for the grant program. Among the finds are that "a grant under this part is necessary for the completion of the project in this State." But since Time Warner had already declared it was going to move some of its offices to Charlotte, a provision in the bill apparently would preclude the company from receiving the incentives.

A Charlotte Observer story said Time Warner was being recruited by Tampa, Fla., and Austin, Texas. On Friday, CJ talked with economic development and city officials in both locations, referring them to the recent Observer story. None was aware that their cities were currently or were recently recruiting Time Warner.

Asked whether they were actually being recruited by Tampa or Austin, Harrad said, "It was not an open contest. We have decided to locate in Charlotte."

Several legislators complained that the legislature was moving too fast on the bill. "We need to slow down. We don't even know what we're talking about here," Rep. John Blust, R-Guilford, told the Charlotte Observer.

Companies selected for the incentives program would receive cash grants of up to 80 percent of the state withholding taxes paid by company employees. The awards would be determined by a three-member Economic Investment Committee, comprised of the secretary of Commerce, the secretary of Revenue, and the director of the Office of State Budget and Management. All three positions are political appointees reporting directly to the governor.

Harrad said Time Warner already has one division based in Charlotte. He said Time Warner will move its corporate services division, consisting of about 200 positions, from Denver. Time Warner also will move to Charlotte about 200 other positions in payroll and accounts payable from across the country. He said he expected most of the people in those positions to move to Charlotte.

Attempts to contact Harrad about other details of Time Warner's talks with state officials were unsuccessful.

On The Cutting Edge

Ozone and Antarctica

• Scientists have been perplexed by two seemingly contradictory trends in Antarctica. While parts of the continent have warmed in recent decades, the interior has cooled.

For instance, average temperatures on the continent’s western peninsula have warmed by 2.5 degrees Celsius since the 1950s. Global warming has been blamed for the higher temperatures, which were dramatically illustrated by the breakup of part of the western peninsula’s Larsen B ice shelf earlier this year.

Scientists with the National Oceanic and Atmospheric Administration and Colorado State University have an explanation for 90 percent of the cooling and about half of the warming. Global warming isn’t the explanation, the scientists said. Instead, both temperature trends are strongly linked to atmospheric ozone depletion.

Analyzing more than 30 years of temperature measurements from weather balloons and additional data from monitoring stations across the continent, they found that an abnormally intense westerly flow of air in the lower atmosphere encircles the continent during the summer months (December and January). By bottling up cold air over the pole and restricting warm air to the outer ring, this vortex cools the continent’s center, but warms its edges.

The scientists say these atmospheric changes are driven by the ozone hole over Antarctica, which grows every spring.

Previous research had established that ozone losses above Antarctica — exceeding 50 percent during October throughout the 1990s — have cooled the atmosphere 12 miles to 31 miles above the surface by more than 6 degrees Celsius.

The existence of the ozone hole is attributed to the presence of chlorofluorocarbons (CFCs), manmade chemicals that are being phased out worldwide. As CFC use subsides, the ozone hole will shrink and the intense westerly flow will ebb, creating more uniform Antarctic temperatures.

Reported in Scientific American, August 2002.

Smart Growth

• In recent years, environmentalists and urban planners have been pushing Congress to enact legislation to limit urban sprawl through taxation and other economic incentives. Their “smart growth” plans propose tighter government regulation of land development and would encourage more people to live in smaller areas of land.

However, a study released by the Heritage Foundation shows not only that current urban growth rates pose no danger to the environment, but also that these plans would seriously infringe on property rights and discriminate against lower-income individuals.

According to the most liberal estimates, only 5.2 percent of land in the continental United States is developed. The number drops to 3.2 percent when Alaska is included — and includes all highways, roads, railways, and power lines that run through otherwise rural areas.

Environmentalists would charge homebuyers of detached homes $20,000 to $40,000 per unit, making it difficult for lower-income families to purchase homes and effectively limiting the freedom of lower-income families to live where they choose because they couldn’t pay the environmentalists’ fee.

The Sierra Club defined “efficient urban density” as 500 housing units per acre, which is more than three times the highest-density tracts of Manhattan and more than double the most dense area of Mumbai (Bombay), which achieves this density with a 55 percent homeless population.

However, even in states such as New York and Virginia, only 10 percent of the land is developed.

Reported as “Will Sprawl Gobble Up America’s Land? Federal Data Reveal Development’s Trivial Impact,” The Heritage Foundation, 5-30-2002.

Wind Power

• Wind-generated energy is hyped as one of most environmentally beneficial sources of energy. However, according to a new study, the costs of wind-powered energy far outweigh the benefits.

Since wind power is available only when the wind is blowing; the power stops when the wind subsides. To produce the same amount of energy as a conventional power plant, wind farms need 85 times more land area.

Wind farms produce both noise pollution and sight pollution, emitting blinding strobe-light sensations at dawn and dusk, and nearly constant noise pollution. Wind power costs twice as much as electricity produced by traditional fossil fuels. Also, critics ask, where is the environmentalist lobby’s well-known concern for animal life?

The Department of Energy plans to build 132,000 new wind turbines by 2020. By conservative estimates, the new turbines would kill 2 million to 15 million birds.

Environmentalists, however, ignore these clear and certain costs of wind-powered energy.

Researched as “Energy Answer is Not ‘Blowing in the Wind.’” Environment & Climate News, Volume 8, Number 6, July 2002.

Coming Up

• Dr. William Peterson, an adjunct scholar and senior fellow at the Heritage Foundation in Washington, will speak on The Forgotten Man: How You Fare In America’s Two Democracies, at a John Locke Foundation Headliner luncheon Aug. 20.

Peterson’s vast experience in business and government includes service as economist and assistant to the chairman of the Finance Committee of the U.S. Steel Corporation, senior economic adviser to the U.S. Department of Commerce, and economics speechwriter on the campaign staff of Richard Nixon.

Peterson has published articles in the Harvard Business Review, Freeman, Challenge, Monthly Labor Review, Christian Science Monitor, New York Times, Dun’s Review, Business Week, Journal of Business, Journal of Economic Literature, Kihon Keizai Shimbun, die Zeit, Farmand, Australian (Sydney), and Sunday Times (London). For 14 years he wrote a regular column for the Wall Street Journal entitled “Reading for Business.”

The luncheon will begin at noon at the Brownstone Hotel in Raleigh. The price of the luncheon is $15 per person. To preregister, contact Kory Swanson at (919) 828-3876.

The cost of the luncheon is $15 per person. For more information or to preregister, contact Thomas Croom at (919)828-3876 or [email protected].



Material published here may be reprinted provided the
Locke Foundation receives prior notice and appropriate credit is given.


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