Carolina Journal Weekly Report

December 16, 2002

In This Issue:
Feature 1 - Day of Reckoning

Feature 2 - Academic Freedom

Feature 3 - Not-So-Bright Beginnings

Feature 1
Day of Reckoning
No more quick fixes; states must cut costs, analyst says

The day after the Nov. 5 elections, William Eggers wrote a “Memo to Rookie Governors” in the Wall Street Journal. His message? “Cut, Cut, Cut.”

It was the same message he brought to the economic advisory staff of Gov. Mike Easley Dec. 9, before a presentation Eggers gave at the John Locke Foundation. A senior fellow at the Manhattan Institute and director at Deloitte Research, Eggers has consulted and advised all levels of government on issues of reform and expenditure reduction.

The “cut” message is one he has delivered to several states and municipalities nationwide, which are desperate to close budget gaps in the millions, and sometimes billions, of dollars. Having faced similar situations last year, Eggers said at the Locke luncheon that politicians’ solutions to budget problems were not “profiles in courage.”

He said that last year many states “banked on sin,” by raising tobacco taxes, courting casinos to come to their states, and gambling-tax increases. He said governors also used accounting gimmicks, such as delaying payments to schools by one day into the following fiscal year and pushing off payments to their cities and counties. Many also tapped reserve funds and payments from the national tobacco settlement. Eggers said those resources won’t offer much relief for the coming fiscal year.

“We’ll see a lot more layoffs this go-round,” he said.

Eggers said North Carolina in recent years has had the greatest growth of government expenditures in the South. “[It’s] been higher than just about any other state,” he said.

In his Wall Street Journal article Eggers wrote, “With revenues in free fall, states will find it impossible to balance budgets without reducing government workforce costs.” He said ways to accomplish such difficult cuts include: employment caps, hiring freezes, renegotiating contracts, early-retirement incentives, the freezing of COLAs, and higher premiums for retiree health care costs.

Eggers cited Florida and Virginia as states that are “in pretty good shape.” The states made significant moves to reduce the size of their governments’ workforces. Florida has a plan to reduce its number of employees by 25 percent over five to six years. He said Virginia eliminated 6,000 positions in one year, over the course of three rounds of budget cuts.

Eggers also advocated reforming the way states manage their Medicaid programs. He said in the short term, “states can reduce drug costs through private pharmacy contracts, co-payments and buying pools.” Long term, they can seek private and community alternatives to institutional care and eliminating optional services.

Ahead of the Curve

• Now that the dust has settled somewhat on the 2002 elections, both state and national newspapers this week turned their attention to the 2004 presidential race, and specifically the activities of North Carolina Sen. John Edwards. The News & Observer of Raleigh devoted a special Sunday section on Edwards’s possible candidacy. Roll Call, a Washington, D.C. publication that covers Capitol Hill, reported Thursday that because of the Republican takeover of the Senate, Edwards could lose his seat on the Judiciary Committee. That could diminish his image as a power broker and his heft as a presidential candidate. Still, at an event in Bedford, N.H., Wednesday, Democratic National Committee Chairman Terry McAuliffe said he expects Edwards to enter the race. Speaking of New Hampshire, where the nation’s first primary will be conducted in January 2004, Edwards on Dec. 9 hosted about a dozen Democratic Party activists from the state. Caroline McCarley, who helped direct political strategy in the state for Al Gore in 2000, committed her support for Edwards in 2004 if he runs.

The Fayetteville Observer reported Thursday that a 1998 law that allows school officials to suspend the driver’s licenses of students who drop out of school, or are failing at least 70 percent of their classes, is having minimal effect. A study by the state Department of Public Instruction found there is little evidence that the law is making much difference in dropout rates.

Feature 2
Academic Freedom
Professors' group studies incidents after Sept. 11

The American Association of University Professors has announced the formation of a committee to study incidents after the Sept. 11 terrorist attacks that may limit academic freedom.

The special committee is led by Robert M. O’Neil, director of the Thomas Jefferson Center for the Protection of Free Expression. O’Neil has previously served as president of the University of Virginia and the University of Wisconsin.

Cases prompting the AAUP’s concern were, according to The Chronicle of Higher Education news of Sept. 11, 2002:

• The uproar over the University of North Carolina at Chapel Hill’s Summer Reading Program requirement of Michael Sells’ book, Approaching the Qur’an: The Early Revelations;

• The controversy that erupted over Colorado College and the University of Colorado’s invitation of a Palestinian activist, Hanan Ashrawi, to speak at events intended to commemorate the Sept. 11 terrorist attacks;

• Violence between pro-Palestinian groups and pro-Israel groups at San Francisco State University;

• A proposal from a Minnesota legislator to remove state support from the University of Minnesota Press in wake of its publication of Harmful to Minors: The Perils of Protecting Children from Sex, by feminist Judith Levine, a book that posits that sexual encounters during childhood are positive and that the current societal fear of pedophiles is unfounded, a projection of parents’ own erotic desires;

• The Missouri legislature’s removal of $150,000 in appropriations to the University of Missouri after the station director of the university system’s public TV station in Columbia banned personnel from wearing flag pins on camera, and also in response to work published by a professor in Kansas City, Harris Mirkin, wrote “The Pattern of Sexual Politics: Feminism, Homosexuality, and Pedophilia.”

According to the Chronicle, the committee will study “responses by academic leaders and politicians to controversial speech and teaching; restrictions proposed by the federal government on university research that is considered sensitive but not classified, particularly in microbiology and bioterrorism; renewed concerns about conducting classified research at universities; and restrictions on foreign scholars and students.”

The cases listed above fall under the first category of study, “responses by academic leaders and politicians to controversial speech and teaching.”

One incident in North Carolina is receiving the AAUP’s scrutiny, the UNC-CH “Koran book” controversy. AAUP General Secretary Mary Burgan used the UNC-CH issue in her Sept. 6 Chronicle op-ed as an example of, “in a number of ways, how much the independence of public colleges and universities may be in jeopardy.”

Another incident involving “controversial speech” in a UNC institution, however, so far hasn’t appeared on the AAUP’s list.

As reported in Carolina Journal and elsewhere, UNC-Wilmington officials plundered Criminal Justice Prof. Mike Adams’ email after receiving a complaint from a student, Rosa Fuller, about Adams’s response to her campuswide email blaming the Sept. 11 attacks on the United States.

Adams said no one at the AAUP has contacted him about the invasion of his privacy by university officials.

Capital Quotes

“Don’t talk to me about all the things that we’ve done in the past. I can’t do anything about where the money went, where the time went.”

— Isaac Manning, author of the Global TransPark’s new business plan, as quoted by the Kinston Free Press, addressing a gathering of area officials and local citizens in New Bern about the future of the Kinston airfield and industrial park. GTP officials has recently admitted that early projections of the facility generating 50,000 jobs in a 13 county region are unlikely to pan out. Likewise, the park is only 4,885 acres, of which 487 are suitable for development, not the 16,000 acres as has been referred to in the past.

“If you look at the freshmen in the House, are feet are to the fire. We’re in swing districts, and we ran on job creation and no tax increases. We’ll resist all tax increases.”

—Rep. Elect Patrick McHenry, R-Gaston, talking with the Winston-Salem Journal about the prospects for a tax increase next year. With the state facing another large budget deficit next fiscal year, the state finances are again expected to dominate the upcoming session of the General Assembly. One key issue will be whether to extend a temporary half-cent sales increase that is set to expire on June 30.

“I’d say by tomorrow [Friday, the day after the ice storm], everything should be fine. That’s what’s good about having your own power company. You can get to thing quick.”

— Herman Caulder, Maiden town manager, commenting to The Charlotte Observer on when his town would have electricity restored to all of it customers. Town officials say that a critical item in getting power back on so quickly was the increased attention they’ve paid in recent years to trimming trees back near electric lines. During the last big ice storm in 1996, it took the town three days to restore power to all of its residents.

Feature 3
Not-So-Bright Beginnings
Third-grade pupils fail to excel on tests

Charlotte-Mecklenburg Schools recently released end-of-year reading and math test scores for third-grade Bright Beginnings participants that showed students in the program did not perform any better than the other nonparticipants.
The group of students, enrolled in 1997-1998, was the first to reach the third-grade tests, where the effects of early-intervention programs usually begin to fade out.

In every past year, school officials reported that Bright Beginnings participants outpaced eligible nonparticipants by impressive margins. Hopeful proponents of the program anticipated similar results for the third-grade end-of- year tests for this original prekindergarten group.

Bright Beginnings is a preschool initiative begun in 1997 by former Charlotte-Mecklenburg Schools Superintendent Eric Smith. The program has been lauded as an innovative local pilot program and as an alternative to former Gov. Jim Hunt’s initiative, Smart Start.

Bright Beginnings’ proponents claim that, unlike Smart Start, Bright Beginnings is more clearly focused on academics and was designed to be evaluated yearly as students entered the Charlotte-Mecklenburg Schools system. Smart Start primarily uses statewide taxpayer dollars to subsidize child care. Bright Beginnings shifts money away from child-care subsidies, using it instead to provide academic preparation to a smaller number of truly needy children.

Bright Beginnings has been touted for its academic focus, an element many preschool programs lack. Superior Court Judge Howard Manning cited Bright Beginnings as an example of how North Carolina should be serving its at-risk preschool population. But so far, the program does not appear to have lived up to expectations. It has not been able to escape many problems seen in preschool intervention.

On their third-grade state tests, both end-of-grade and pretests, the Bright Beginnings participants did not perform as well as they had in earlier years. Both Bright Beginnings participants and eligible nonparticipants had 69.5 percent of students performing at or above grade level overall on end-of-grade tests.

The Bright Beginnings students performed slightly better than their peers in math, 63.4 percent, compared to 60.8 percent at grade level, but participants and eligible nonparticipants had exactly 70 percent performing at or above grade level in reading.

Especially telling is that among groups that are most likely to benefit from early-intervention programs, Bright Beginnings participants actually performed worse than their nonparticipating peers.

Of the 881 black students in the original pre-K group, only 66.7 percent performed at or above grade level in reading, compared to 71 percent of their eligible peers and 69 percent of all other black third-graders.

Of the original 781 Bright Beginnings participants eligible for school lunch, a common measure of low-income status, 65.8 percent performed at or above grade level on reading tests, compared to 68.3 percent of their eligible nonparticipating peers and 63.9 percent of all other third-graders from low-income backgrounds.

The small pilot program has cost North Carolina taxpayers $62 million over the five years during which it has operated.

On The Cutting Edge

Hostility and the Heart

• Hostility levels may be a better predictor of heart-disease risk than factors such as high cholesterol, high blood pressure, smoking, or being overweight, suggests a new study. The nearly 800 men in the study are part of ongoing aging research that began in 1960. The men have thorough medical exams every three years and receive ongoing preventive health-care advice.

Researchers found that heart attacks, chest pains, or other signs of heart disease occurred much more frequently among men who measured as hostile on a personality test than in men who clearly had more traditional risk factors.
The researchers found that men scoring highest in hostility were most likely to develop heart trouble. The only measurement that predicted heart disease risk more accurately than hostility was HDL, “good” cholesterol levels.
While some health experts might debate hostility’s “ranking” as a risk factor, few would argue against the evidence that suggests hostile people are more prone to heart disease.

People with high hostility levels have shown more pronounced blood pressure and heart-rate responses when they are put into situations designed to make them angry. Hostile people are also more likely to practice habits that increase heart-disease risk.

Men in their mid-40s who scored highest for hostility on the same personality test were more likely to be smokers, have high cholesterol levels and high blood pressure, lower HDLs, and have a higher body mass index.

Reported in WebMD Medical News, Nov. 18, 2002 based on Raymond Niaura, et al., “Hostility, the Metabolic Syndrome, and Incident Coronary Heart Disease,” Health Psychology, November 2002.

The Fed’s Accuracy

• According to a report by the Business Roundtable, a majority of executives don’t expect the economy to recover next year, and are planning accordingly. Federal Reserve Chairman Alan Greenspan and other Fed officials say it’s getting ready to accelerate. Whom should we believe?

Researchers at the University of California at Berkeley have compared the performance of the Federal Reserve in predicting economic variables with that of private sector economists. The Fed wins hands down, according to economists Christine and David Romer. Their paper, “Federal Reserve Information and the Behavior of Interest Rates,” was published in the June 2000 edition of American Economic Review.

What gives the Fed its edge?

The Romers reject the explanation that the Fed gets inside information, as well as the possibility that it gets its data earlier than the private sector.

They say the most likely explanation is that the Fed devotes “far more resources to forecasting than even the largest commercial forecasters.”

It enjoys the advantage of considerably more staff and much more experience. Those advantages make it a superior predictor of inflation, while better access to data probably explains its advantage in predicting output growth.

It must be noted that the study mostly covers a period before the Greenspan era, which commenced in 1987. The Romers’ study covers the period 1965 to 1991.

The Romers study attributes Greenspan’s forecasting successes to “a finely tuned sense of how ordinary ingredients should be combined.”

Reported in the New York Times, 11-21-2002.

Economic Status

• In the 1980s, University of Chicago economist Gary S. Becker pioneered the theory of intergenerational transmission of economic status and found that the correlation of a father’s and son’s incomes was about 0.15.

This meant that if a father’s income was twice the average, his son’s expected income would be 15 percent above average, and his grandson’s just 2 percent above average.

Later studies put the correlation between fathers’ and sons’ incomes at about 0.40 or higher.

A recent study by Thomas Hertz at American University finds that there is less income mobility from one generation to another than previously believed.

Hertz found that a child born in the bottom 10 percent of families ranked by income has a 31 percent chance of ending up there as an adult — and a 51 percent chance of ending up in the bottom 20 percent. One born in the top 10 percent has a 30 percent chance of staying there — and a 43 percent chance of being in the top 20 percent.

In another study, David I. Levine of Berkeley and Dr. Bhashkar Mazumder of the Federal Reserve Bank of Chicago found that the impact of parental income on adult sons’ income increased from 1980 to the early 1990s.

Some scholars say that perhaps three-fifths of the intergen-erational transmission of economic status can be explained by transference of cognitive ability and similarity of educational level attained.

Other factors might include race, geographical location, height, beauty, health status, and personality.

Reported in the New York Times, 11-14-2002.

Coming Up

• On Jan. 27, the John Locke Foundation will welcome renowned author and reporter Bill Gertz to speak at a special luncheon. The national security and defense writer has just released his new book, Breakdown: How America’s Intelligence Failures Led to September 11.

Gertz is an internationally recognized newspaper reporter who has specialized in writing major stories on a wide variety of defense, intelligence, and international security issues.

A veteran defense writer who specializes in coming up with inside stories, often based on classified documents, he is widely viewed as one of the best reporters in his field. His sources within government are extensive. Gertz has broken a number of stories with international implications. As former CIA Director R. James Woolsey put it, “When I was DCI [Director of Central Intelligence] Bill used to drive me crazy because I couldn’t figure out where the leaks were coming from. Now that I’ve been outside for two years, I read him religiously to find out what’s going on.”

For more information or to pre-register visit the new John Locke Foundation Website at or contact Kory Swanson or Thomas Croom at (919) 828-3876 or [email protected].

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