In This Issue:
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Feature 1 – The Tax Machine Rolls
Feature 2 – Zapping Telemarketers
Feature 3 – Read Between the Lines
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Feature 1
The Tax Machine Rolls
Easley tells legislators to maintain tax, work on budget
Panic emerged at the General Assembly and at the governor’s office last week. The politicians’ fear? That the “temporary” half-cent sales-tax increase installed two years ago would disappear as scheduled July 1.
The House and the Senate have not agreed on a budget for the new fiscal biennium, which will begin next month. Without the plan in place, the extra levy would be removed.
Wednesday, Gov. Mike Easley tried to pre-empt the nightmare on Jones Street by telling the legislature to enact a continuing resolution to keep state government operating.
“Every day that we delay action risks in (sic) a loss of up to $1 million to the state,” Easley said in a statement. “The money that the state may lose as a result of legislative inaction would pay the salaries for 23 school teachers, or cover 2,000 children under the Health Choice program.
“The General Assembly must act immediately.”
The Senate responded quickly Thursday by approving a plan to continue current spending levels and maintaining the higher tax.
If the extra sales tax, in addition to a temporary personal income-tax increase, were returned to taxpayers as promised, the state budget gap would increase by $384 million in 2003-04. Legislators would need to cut programs or find other sources of revenue.
Easley said that the House and Senate were not close to concurrence on a budget plan, so they must “enact the revenue actions” on which they already agree. Both chambers support the continuation of the “temporary” taxes for two more years.
A return to the 6 1/2 percent sales tax July 1 without enough prior notification to retailers could cause problems for merchants.
“If this tax sunsets,” said Fran Preston, president of the North Carolina Retail Merchants Association, “we’ll be collecting more than we should.”
Two years ago lawmakers also raised income taxes “temporarily” on the highest-earning bracket, and made it retrospective to Jan. 1 of that year. The backdating drew a lawsuit from Raleigh lawyer Gene Boyce, because the state constitution prohibits retroactive taxation. The lawsuit is pending.
If legislators allow the income-tax increase to expire and raise it later when they forge a budget agreement, they could be subject to a similar lawsuit.
“I think they know better than that,” Boyce said. “Enough of a red flag has been waved in front of them. But we’ll keep an eye on it.”
Ahead of the Curve
• The Daily Advance of Elizabeth City reported that the North Carolina Northeast Partnership, one of the state’s seven regional economic development agencies, refused to provide copies of its tax returns as required by law. Northeast Partnership President Rick Watson used delaying tactics to withhold the returns from The Daily Advance, the newspaper said. Nonprofits must provide Form 990s upon request if asked for in person, or within 30 days if requested in writing. The Daily Advance first requested the returns May 2, but after the delays Watson told the newspaper he wouldn’t provide the copies until the matter was considered by the partnership’s board on June 18. In May, Carolina Journal reported that Watson refused to provide requested expenditure information because he said the partnership was not a public agency, despite a 1999 North Carolina attorney general’s opinion to the contrary.
• The North Carolina Global TransPark Authority hired a new executive director last week, replacing acting Director Charles Edwards. Darlene Waddell, the authority’s chief financial officer, was promoted to the top spot. The TransPark has fallen far short of creating the thousands of jobs that advocates of the project had promised. The General Assembly has appropriated millions of dollars to the TransPark, but it may eliminate funding. Waddell, echoing similar statements of past TransPark leaders, told The News & Observer of Raleigh that an aggressive effort to generate revenue will turn things around.
Feature 2
Zapping Telemarketers
N.C. bill would ‘dovetail’ with federal restrictions
The General Assembly is considering a bill that would increase protections against unwanted telephone calls from telemarketers. Sponsored by Sen. Scott Thomas, D-New Bern, the measure would place restrictions on telephone solicitations and empower the state attorney general to investigate complaints alleging violation of the law.
Currently, a resident of North Carolina who requests placement on the Do Not Call Registry, which will open in July, may still be subject to telemarketers calling from outside the state.
Senate Bill 872 was filed April 2 and introduced before the House Public Utilities Committee on Tuesday. Attorney General Roy Cooper spoke before the committee and addressed concerns that the measure would impair the ability of local newspapers and cable TV operators to communicate with customers. Thomas said he thinks the bill will be approved by the Assembly and be ready for Gov. Mike Easley’s signature by the end of the current legislative session, in time to complement the Do Not Call Registry, which the Federal Trade Commission will fully implement by October.
“It is important for citizens to be able to tell telemarketers to not call them. They have a right to peace and privacy in their own home,” he said.
Opposition to the measure has come chiefly from newspapers, cable TV operators, and realty organizations. Cooper said his office would be able to effectively address their concerns before the bill is ready for final passage. Thomas characterized some of those as “technical matters” that should not lead to any substantial changes.
“This bill is a dovetail to the federal legislation and will address some of its gaps,” he said. “It’s important to get it passed because the FTC regulations do not cover intrastate calls.”
Should the bill become law, no telephone solicitor would be able to call a household number listed under the latest edition of the Do Not Call Registry. Exceptions are made for established business relationships, tax-exempt nonprofit organizations, and under limited circumstances, such as the arrangement of meetings between a solicitor and subscriber.
Every solicitor would be required to implement “systems and written procedures” to prevent contact with those on the list. In addition, restrictions on the use of automatic dialing and recorded message players would make it unlawful for telemarketers to employ them for commercial solicitation.
Excluding charitable or civic groups, political parties and candidates, government officials, and polling organizations, no part of a call may be “used to solicit or encourage the purchase or rental of, or investment in, property, goods, or services.”
Little public controversy has surrounded the present bill. The federal no-call legislation follows a trend first begun by the states, more than half of which had registries in place before the FTC took up the matter. Until this spring, neither North Carolina or South Carolina had formally sought to join them. A similar measure failed to get out of committee last year. But Thomas said overwhelming citizen support of the idea, as well as the popularity of the lists nationwide, will overshadow the small amount of opposition that has arisen this session.
Under the legislation, vendors would face a $500 fine for the first violation, $1,000 for the second, and $5,000 for any violation thereafter.
Capital Quotes
• “If you get a speeding ticket, you don’t focus on changing the speed limit… In asking for this change, the industry is basically admitting that the system doesn’t work.”
— Molly Diggins, director of the Sierra Club’s North Carolina chapter, talking to the News & Observer of Raleigh about 400 notices of violation issued to hog farms this year for having overfilled waste pits. The N.C. Pork Council, in turn, is asking the General Assembly to relax waste-pond regulation by increasing the amount of waste farmers can have in ponds without a violation occurring.
• “Absolutely we’re a public agency. I don’t see how you can't be with the reporting requirements.”
—Paul Butler, director of the Southeastern North Carolina Regional Economic Development Commission, commenting to The Daily Advance of Elizabeth City on the status of his agency. In 1994, the General Assembly authorized three regional economic development commissions. Under a 1999 interpretation by the Attorney General’s Office, the commissions are subject to the state’s public records laws. While the Southeast and Western commissions do regard themselves as public agencies and as covered by the law, the paper notes the Northeast Partnership does not.
• “You have to be making that average to show you are making the effort.”
— Jeff Hollamon, Onslow County Public Schools finance officer, as quoted by Jacksonville Daily News, on the Onslow County Commission’s decision to reduce property tax rates by a penny per $100 valuation. Hollaman was concerned that the school system would lose state “low-wealth” funding, which serves to equalize funding between high-income and low-income counties. Among the factors that go into determining how much each school system gets is the property tax rate.
Feature 3
Read Between the Lines
N.C.’s exclusion of pupils allowed test scores to rise
Thursday’s release of 2002 reading test scores from the National Assessment of Educational Progress has prompted North Carolina politicians to claim significant achievement gains since 1998 — but most or all of the gains may well have nothing to do with a real improvement in student learning, according to a preliminary analysis by a Raleigh-based research group.
Policy analyst Karen Palasek of the North Carolina Education Alliance said that the reported nine-point gain in the state’s average NAEP score for reading in the fourth grade from 1998 to 2002, and a three-point gain for eighth-graders during the same period, may appear significant and worthy of celebration. But North Carolina’s policies for testing and excluding its public-school students are so different from the national norm that, even according to the federal officials releasing the scores, it may be impossible to make valid comparison over time and among states.
“Educators, political leaders, reporters, and parents need to greet these reported test scores with great skepticism, and to read the fine print in the NAEP report,” Palasek said. “The reality is far different from what you might see in press releases or superficial reports about the scores.”
The main issue is how North Carolina and other states decide which students should be assessed and which should be excluded, in the latter case either for having a learning disability or for a limited proficiency in English. According to the 2002 NAEP report, only 7 percent of fourth-graders nationwide were excluded from the reading tests for one of these two reasons. Moreover, the same percentage was excluded nationwide in 1998, making the reading scores for the two years roughly comparable.
In North Carolina, however, there was a much greater likelihood of these students — who typically score poorly on the test — being excluded from the NAEP sample. Fully 12 percent of the state’s fourth-graders were excluded in 2002, which was the highest exclusion rate in the nation. Perhaps more important, only 7 percent of the state’s fourth-graders were excluded in 1998. Thus, with a much greater proportion of low-scoring students excluded from taking the reading test in 2002, Palasek concluded, North Carolina’s average score should have jumped significantly regardless of whether the average student was improving or just staying the same in reading ability.
“It is simply not valid to suggest, as a statistical matter, that the 2002 results demonstrate a real gain in achievement for North Carolina students,” Palasek said. “There may have been a small gain, there may have been no gain, or there actually have been a small loss.”
Nor can the statistics be properly used to prove that North Carolina’s average scores (222 for fourth-graders) necessarily exceed that of neighboring states such as South Carolina (214), Tennessee (214), or Georgia (215), she said. These three states, and most others in the nation, test a far greater proportion of their low-achieving students than North Carolina does. In the fourth grade, for example, North Carolina excluded 12 percent, but South Carolina excluded only 5 percent, Tennessee 3 percent, and Georgia 4 percent.
Palasek wrote an analysis in the June 2003 edition of Carolina Journal about the NAEP exclusion issue. For more information about the 2002 NAEP scores in reading and North Carolina’s exclusion policy, call Palasek at 919-828-3876.
On The Cutting Edge
Military Housing
• The U.S. military has turned to the private sector to renovate or replace inadequate base housing in an effort to recruit and retain more of the all-volunteer force.
More than half of the 1.2 million enlisted personnel in today’s military forces are married.
With about 270,000 housing units, base housing accommodates only about one-third of military families, who otherwise use their housing allowances in local communities. Military families may wait two to four years to get into base housing.
The armed forces have undertaken a $7 billion effort to upgrade military housing nationwide. A 1996 law is turning construction and management of base housing over to the private sector, enabling the military to stretch its housing budget.
The Pentagon identifies about 60 percent of military housing units, including 163,108 for military families, as inadequate or too costly to modernize.
Defense planners estimate it would take 20 years and about $16 billion to complete the required renovations and improvements through its regular military construction program.
However, the goal is to revitalize, replace, or demolish all inadequate housing by 2007 with private-sector help.
As of April, the Department of Defense has awarded 18 housing privatization projects nationwide, totaling 27,884 units. These include detached new homes that are landscaped and equipped with garages, microwave ovens, and ceiling fans. There are playgrounds, jogging trails, basketball and tennis courts, and community pools.
Private companies build and manage the housing, which is free to military families.
According to one Defense Department study, the re-enlistment rate at bases with high-quality housing is about 15 percent higher than at places with low-quality housing.
Reported in the Dallas Morning News, 5-11-2003.
• Environmental rules have so hamstrung the U.S. Army, they now affect 84 percent of the training land at Fort Hood, Texas. And on 77 percent of that land, training practices are actually influenced by the laws.
So far, the Army has been able to work around the environmental restrictions, but that could change if another endangered species is discovered on the base.
Sixty-eight environmental laws now affect Fort Hood. The Army has told the House Armed Services subcommittee on military readiness that 64 percent of Fort Hood’s training area is affected by rules that restrict digging.
That means soldiers are forgidden to dig fighting holes or equipment emplacements during basic and intermediate training.
Also, large sectors of the base are preserved for birds. Protections for the golden-cheeked warbler and the black-capped vireo restricts training on more than 66,000 acres (33 percent) of training land. The restrictions forbid digging, tree or brush cutting, and “habitat destruction.”
Reported in Human Events, 5-5-2003.
• The Census Bureau estimates that 41 million Americans have no health insurance. But the Congressional Budget Office said the bureau’s figure “overstates the number of people who are uninsured all year,” while understating the number who are insured for only part of the year.
Although more than 240 million Americans have private health insurance or are covered by government health programs, CBO researchers estimate that 57 million to 59 million people, “about a quarter of the nonelderly population,” lacked insurance at some time in 1998, the most recent year for which reliable comparative figures are available.
At the same time, government surveys suggest that the number of people uninsured for the entire year was 21 million to 31 million, or 9 percent to 13 percent of nonelderly Americans.
The widely used figure from the Census Bureau is based on interviews conducted by the government as part of the Current Population Survey in March of each year.
The Census questions about insurance are meant to identify people who were uninsured for all the prior calendar year. But the CBO says that many people "report their insurance status as of the time of the interview, rather than for the previous calendar year as requested."
Congressional Budget Office Director Douglas J. Holtz-Eakin says that “the uninsured population is constantly changing. While many people are chronically uninsured, many more are uninsured for shorter periods of time.”
How long do people go without coverage when they are uninsured? The CBO estimates that of those who became uninsured from mid-1996 to mid-1997, 45 percent were uninsured for four months or less, 26 percent were uninsured for five to 12 months, and 13 percent lacked coverage for 13 to 24 months. Sixteen percent were uninsured more than two years.
Reported in the New York Times, 5-13-2003.
Coming Up
• The John Locke Foundation will welcome former U.S. Attorney General Edwin Meese III for a Headliner luncheon at noon July 8 at the Brownstone Hotel in Raleigh.
Meese is a distinguished visiting fellow at the Hoover Institution. He was the 75th attorney general of the United States, under President Ronald Reagan, from February 1985 to August 1988.
Before serving as U.S. attorney general, he was counselor to the president from 1981 to 1985. In this capacity he functioned as the president’s chief policy adviser and had management responsibility for the administration of the Cabinet, policy development, and planning and evaluation.
Meese is an expert on the U.S. legal system, law enforcement and criminal justice, intelligence and national security, and the Reagan presidency. His current research focuses on the criminal justice system, federalism, emergency response management, and terrorism.
The cost of the luncheon is $25 per person. For more information or to preregister, contact Summer Hood at (919) 828-3876 or events@johnlocke. org.
Material published here may be reprinted provided the
Locke Foundation receives prior notice and appropriate credit is given.
