agriculture, Commentary, Environment

The Great Recession was a “wonderful blessing” and other bizarre takes from an oversight committee

(Photo: taxrebate.org.uk)

Except for the people who benefit from others’ misery — Wall Street short-sellers, pyramid schemers and prosperity gospel profiteers — the Great Recession was difficult, painful, even life-altering.

But not for Rep. Jimmy Dixon, a Republican from Duplin County. The chairman of the Joint Oversight Committee on Agriculture, Environment and Natural Resources, Dixon proclaimed yesterday afternoon that the “Great Recession was a wonderful blessing.” His point was that a sudden financial belt-tightening in 2008-09 benefitted state government, turning it into a lean, mean machine, albeit one that left several departments running on fumes.

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“Our bad decisions come when the money is flowing,” said Dixon, who, over the past 20 years, has received $21,000 in federal farm subsidies to help cushion him against life’s ups and downs.

As a hypothetical, let’s say that Dixon’s pronouncement is true. The logic follows that, flush with a $550 billion surplus this year, the legislature made a very poor decision in cutting the budget of NC Department of Environmental Quality by $1.8 million through 2019.

The recent budget bill directed DEQ to achieve this by Reorganization through Reduction program. Stripped of its Orwellian overtones, RTR means doing more with less, begging employees to take early retirement, shifting workloads so one person does the work of two, and probably shaking the printer cartridges to milk every single precious drop of cyan.

These cuts have occurred while the state budget overall has increased and the environmental crises facing North Carolina — GenX, coal ash, emerging contaminants — have become more complex. Forgive North Carolinians if they forget to count their blessings.

Assistant Secretary of the Environment Sheila Holman told the oversight committee that to reach the required RTR benchmark, DEQ will pay nearly $468,000 in severance and $58,000 in health insurance to 12 employees who took the buyout and whose positions are state-funded. This equals an average of $39,000 each in severance, which is based on length of service, plus $4,833 apiece for health insurance.

Even with the payouts, the RTR is projected to save $446,400 in appropriated funds.

Sen. Angela Bryant, a Democrat from Nash County, asked for an “upfront and transparent report of the impacts.”

Such details weren’t available at the meeting, but Holman told the committee that positions within administration, coastal management, customer service, waste management, and energy, mining and land resources were eliminated.

The Division of Water Resources remained unscathed because the budget directive came down in June as the GenX crisis was escalating. The resources required to grapple with the contaminated drinking water ” highlighted the shortages” in that division, Holman said.

Rep. Pricey Harrison, a Guilford County Democrat, noted that 31 positions throughout the agency have been redirected to deal with GenX and emerging contaminants. Those employees, in water resources, waste management and air quality now spend 70 percent of their time working on that issue and 30 percent on their usual duties, Holman said.

“How are we covering for current obligations?” Harrison asked.

Read more

NC Budget and Tax Center

Experts conclude: New tax legislation is full of tax games, roadblocks, and glitches

As Congress continues to go against the will of the people by pushing a tax framework that most Americans are not in favor of, it is worth noting that a number of leading tax academics, practitioners, and analysts have issued a 35-page report describing various tax games, roadblocks and glitches in the tax legislation.

According to the report:

“The complex rules proposed in the House and Senate bills will allow new tax games and planning opportunities for well-advised taxpayers, which will result in unanticipated consequences and costs. These costs may not currently be fully reflected in official estimates already showing the bills adding over $1 trillion to the deficit in the coming decade. Other proposed changes will encounter legal roadblocks that will jeopardize critical elements of the legislation. Finally, in other cases, technical glitches in the legislation may improperly and haphazardly penalize or benefit individual and corporate taxpayers.”

The report highlights various problems with the bill in the following areas:

  • Using Corporations as Tax Shelters: If the corporate tax rate is reduced in the absence of effective anti-abuse measures, taxpayers may be able to transform corporations into tax-sheltered savings vehicles through a variety of strategies.
  • Pass-Through Eligibility Games: Taxpayers may be able to circumvent the limitations on eligibility for the special tax treatment of pass-through businesses.
  • Restructuring State and Local Taxes to Maintain Deductibility: The denial of the deduction for state and local taxes will incentivize these jurisdictions to restructure their forms of revenue collection to avoid this change. This could undercut one of the largest revenue raisers in the entire bill.
  • International Games, Roadblocks, and Glitches: The complex rules intended to exempt foreign income of domestic corporations from U.S. taxation present a variety of tax planning and avoidance opportunities.
  • Money Loophole Machines: The variety of tax rates imposed on different forms of business income in different years invite arbitrage strategies, whereby taxpayers can achieve an economic benefit solely based on the timing and assignment of their income and deductions.

The report concludes with a serious warning:

“Further problems with the bills are likely to emerge. These tax games will reduce tax revenues and thereby increase the true cost of the legislation and make the legislation more regressive than it now appears. Furthermore, additional tax complexity will be necessary in order to police the new rules and to prevent these abuses, ensuring that this legislation will move us further away from the goals a simpler, more equitable, and more efficient tax system. Finally, the IRS and Treasury may be overwhelmed in their efforts to police the new and manipulable rules during a period of reduced funding and budgetary constraints.

“We urge the members of the Senate and House to reassess the tax reform process and the resulting legislative proposals, and to undertake a more deliberative approach to far-reaching legislation that will significantly affect our economy and taxpayer behavior.”

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

Courts & the Law, News

UPDATED: State Supreme Court Chief Justice recused from Board of Education, Mark Johnson case

State Supreme Court Justice Mark Martin

Note: This story has been updated to reflect a response from the Administrative Office of the Courts.

North Carolina Supreme Court Chief Justice Mark Martin has been recused from hearing a dispute about a transfer of power from the State Board of Education to Superintendent Mark Johnson.

Martin’s wife, Kym Martin, is Executive Director of the Center for Safer Schools, which was previously housed under the North Carolina Department of Crime Control and Public Safety but transferred last year as part of House Bill 17 to the Department of Public Instruction.

Parts of HB17 are at the core of litigation between the Board of Education and Johnson that is expected to be heard by the state Supreme Court.

The transfer of Kym Martin’s program is not challenged in the lawsuit but she is an employee of both the Board of Education and the Department of Public Instruction, which Johnson controls, according to Bob Orr, the Board’s attorney. He said the recusal issue subsequently surfaced and Martin is now recused.

Orr said the recusal is in compliance with the judicial rules dealing with conflicts and appearances of conflicts.

Sharon Gladwell, a spokesperson for the Administrative Office of the Courts, confirmed that Martin issued a “Disclosure of Potential Disqualification” pursuant to Canon 3D of the North Carolina Code of Judicial Conduct, which the clerk of court sent to the parties in the case.

“In the Disclosure, the Chief Justice stated that his wife works for the North Carolina Center for Safer Schools,” Gladwell wrote in an email. “He also stated that the Center for Safer Schools is administratively housed in the Department of Public Instruction, of which Mark Johnson is the superintendent. Because all parties and lawyers to the case did not agree in writing, pursuant to Canon 3D, that the Chief Justice could participate, he is recused from the case.”

NC Policy Watch has emailed follow-up questions about which attorneys did not agree in writing and asked for a copy of the disclosure document.

It’s unknown if Martin has been recused from any other cases since taking the bench on the state’s highest court, but he told the Indy in a 2014 interview that he had recused himself on several occasions during his 21 years of judicial service.

“I have done so, and will continue to do so, in proceedings where my impartiality could reasonably be questioned,” he told the Indy.

The Supreme Court announced last week that oral arguments in the case would be heard and that Martin was recused.

Arguments in the case will center on the constitutionality of the General Assembly transferring power from the Board of Education to Johnson, which was done in HB17. The Supreme Court will likely determine whether the Board or Johnson will be in control of the state’s public school system, it’s 1.5 million students and $10 billion budget.

News

Saine takes helm of national conservative group ALEC

N.C. Rep. Jason Saine, a Republican from Lincolnton,
is the new chairman of the national conservative group ALEC.

The American Legislative Exchange Council has a new chairman – North Carolina Rep. Jason Saine.

The corporate backed ALEC is a national conservative group that proposes model legislation for state legislators. The group’s model bills frequently make it to the N.C. legislature virtually unchanged. Saine, a Lincolnton Republican, begins his one year tenure as head of the national conservative group on January 1.

Currently the head of the House Finance Committee, Saine is well connected with the GOP leadership in the legislature – but he also has his critics on the left and the right.

Notoriously Saine, who himself depended on state unemployment checks for more than a year before joining the House in 2011, voted to cut those benefits once in office.  At the time, North Carolina had the fifth highest unemployment rate in the nation.

Saine was saved from unemployment after 15 months when he was appointed to a vacant House

seat by his county’s Republican party, which he chaired.

There are those on the political right who have long-criticized Saine as self-dealing and hypocritical, questioning everything from his campaign finances to his purity as a conservative.

The conservative Daily Haymaker website, a frequent critic, had some harsh words this week for Saine and ALEC. The site said Saine’s leadership guarantees “ALEC’s continued slide into that sinkhole called irelevancy.”

Commentary

Editorial blasts Berger and Moore over cynical response to prison tragedy

In case you missed it, be sure to check out the lead editorial in today’s Charlotte Observer“Phil Berger and Tim Moore play politics in the face of tragedy.” In it, the authors rightfully blast the two legislative leaders for their convoluted attempt to deflect blame that ought rightfully to be directed their way for the recent tragic murder of a prison guard. According to Berger and Moore, it’s not the horrific conditions and pathetic underfunding that plague our prison system that are at the heart of the problem; it’s the general demise of the death penalty (and the supposed failure of Governor Cooper and Attorney General Stein to aggressively push for its reinstatement) that are to blame. Here’s the conclusion to the Observer editorial:

“North Carolina’s de facto death penalty moratorium – which is in place for reasons far beyond Cooper and Stein – has little to do with the deaths of the four prison employees at Pasquotank Correctional Institution or that of officer Meggan Callahan at Bertie Correctional Institution.

The real problem, as multiple experts have explained to Observer reporters Ames Alexander and Gavin Off, is skeletal staffing, numerous vacancies and minimal training for officers who are put in dangerous situations. Low pay exacerbates the state’s inability to attract people to the job.

Justin Smith was the only correctional officer in a sewing plant at the Pasquotank prison watching more than 30 inmates who had access to scissors and other potential weapons when an escape attempt began. In Bertie, Callahan had half the number of staffers under her as she was supposed to have when an inmate beat her to death with a fire extinguisher. About a quarter to a fifth of positions have been vacant at those prisons.

A national study of prison management by Duke University released last week urges North Carolina to increase hiring, in part through referral and signing bonuses. It also found that North Carolina needs to beef up its officer training, which is shorter than that of most other states Duke reviewed. It also cited the state’s low pay for prison officers, which is about $8,000 below the national average at maximum security prisons despite recent raises.

Rep. Bob Steinburg, a Republican who represents Pasquotank County, is wisely pushing for these kinds of solutions and others.

Those are the kinds of reforms that the state’s prisons and its vulnerable officers need. What it doesn’t need are the legislature’s so-called leaders trying to score political points amid tragedies.”