Governor Beverly Perdue nixed the $19.7 billion state budget put on her desk by the General Assembly Sunday, winning herself a place in state history.

She is the first governor to veto a budget since veto powers were granted in 1997, and she told lawmakers that education was the impetus for her action.

“For the first time, we have a legislature that is turning its back on our schools, our children, our longstanding investments in education and our future economic prospects,” said Perdue in a statement and speech last Sunday.

Perdue’s veto is unlikely to hold, however. The GOP is expressing confidence that it has the votes necessary to override her historic thumbs down. Five House Democrats voted with Republicans to pass the budget, enough to override the veto if they continue bucking their party. Republicans have a tight enough grasp of the Senate not to need Democrat help for an override vote in that chamber.

Perdue posited that the budget as-is would cause “generational damage” by cutting funds to K-12 schools, preschool programs More at Four and Smart Start and elderly care.

It takes a super-majority of 60 percent to override the Governor’s veto.

In the House, that means 72 votes. There are 68 Republicans in the House — four short of what’s needed to buck the Governor’s veto. But five Democrats had previously sided with Republicans in voting for the budget, and Representative Phil Haire, D-Sylva, doesn’t think those five Democrats can be persuaded to come back to their own party.

“Some of them were promised something in the budget,” Haire said.

Haire personally voted against the budget proffered by Republican leadership.

“I think it is going to have a devastating effect on North Carolina, and it will takes us years to regain the status where we are now,” said Haire.

In the Senate, there are 31 Republicans compared to 19 Democrats, one more than needed to meet the super majority criteria.

The Governor and Democrats in the legislature are pushing to keep a 1-cent sales tax that Republicans want to eliminate. Keeping the extra sales tax, say Perdue and other Democrats, could raise $900,000 to fill the more than $2 billion funding gap facing the state.

Haire doubts Republicans will capitulate on their position on the sales tax.

“Not no, but heck no. If they do that they renege on their whole campaign promise,” Haire said.

Sen. Jim Davis, R-Franklin, said keeping the sales tax, billed as a “temporary measure” when it was put in place two years ago, is non-negotiable.

“It expires June 30, and if they thought that they needed a tax for longer than that, they should’ve voted for it. If the legislature wanted to have a penny sales tax, they’d have to introduce a bill and vote on it, and that’s just not going to happen,” said Davis.

With Republicans unwilling to compromise on the sales tax, Perdue’s veto, if it stood, would accomplish little but a prolonged stalemate.

“The first of July you get to a shut down if you don’t have a budget,” Haire said.

It’s no secret that the state budget is in a tight spot. In the few weeks the General Assembly has been in session, a raft of new laws already have hit the legislative floor, most proposing cuts in varying degrees of severity.

But perhaps the most debated has been Senate Bill 13, a Republican-penned proposal called the Balanced Budget Act of 2011. The bill calls for several money-moving measures that would dip into special pots of money in an effort to relieve the deficit — the most controversial being a proposal to raid the coffers of the Golden LEAF.

Golden LEAF has handed out hundreds of millions in grants during the past 12 years. Its purpose: use proceeds from the lawsuit against tobacco companies to help tobacco-dependent communities transition away from the ever-diminishing returns of the once-bumper crop and into other economic markets.

As the crown jewel of King Tobacco’s reign, few areas have benefited from the funds as much as the western counties. Haywood County alone has received more than $2.7 million in grants from Golden LEAF to fund projects such as the new Regional Livestock Market, a covered arena at the fairgrounds, a sewer line upgrade along Champion Drive in Canton and the Buy Haywood program, which helps local growers market and sell their products.

Jackson County has gotten more than $3.5 million to fund projects, though a good share of that was for regional efforts such as WNC EdNET, a program to bring broadband technology into public schools in six western counties.

Over the years, Golden LEAF has taken in $867 million and doled out just more than half of that as grants and scholarships, keeping the rest invested. Every year, the pot gets another influx of funds from the structured tobacco settlement, and that money is invested for future use.

For WNC, said L.T. Ward, that money has been invaluable, and losing it would be a hefty blow. Ward is the vice president of WNC Communities, the group that, among other things, is the driving force behind the Regional Livestock Market that’s scheduled to open next month in Canton.

The market will offer a place for local cattlemen to sell their livestock, something that’s currently missing from the regional landscape. Such a market is vital for the many former tobacco farmers who have now turned to cattle to replace their lost or dwindling profits.

That particular project got $600,000 from Golden LEAF, and more than that from the Tobacco Trust Fund, whose yearly allocation is also on the chopping block in SB13.

“If the Golden LEAF was not there, the numerous innovative ideas that are continuing to come forward would not because of lack of funding or encouragement,” Ward said. “We obviously would’ve been short of budget considerably.”

But lawmakers in favor of the bill — Republicans all, the vote was split directly down party lines — are quick to point out that no one is proposing a permanent shutdown of Golden LEAF. It’s more, they say, like a one-time emergency payment.

“We’re just taking this year’s allocation for the Golden LEAF,” said Rep. Jim Davis, R-Franklin. “The Golden LEAF still has $560 million. Their principal is still there.”

And while Davis stopped short of praising the fund outright, which many Republicans, particularly those outside rural areas, are wont to refer to as pork spending and corporate welfare, he was adamant about the proposal’s status as a temporary budget measure to cover this year’s shortfall.

But for those closest to Golden LEAF and its benefits, they’re afraid that the one-time measure will be a gateway to endless diversions of the foundation’s money away from the economically depressed communities it was created to help.

And it’s important to note that the money would be diverted for this year’s budget, which is already balanced. Next year, a $2.4 billion deficit, according to the most recent estimates, still lies in wait.

Robbing Peter

If you’re looking for a more vehement opponent of SB13 than Dan Gerlach, it would likely be a futile search. As president of Golden LEAF, he’s understandably worked up about the idea of swiping the foundation’s annual paycheck, and he’s worried that it won’t stop there.

He’s sympathetic, he said, to the legislature’s plight. There’s a pretty big gap between what they’ve got and what they need, and the cash to fill it has to come from somewhere. But he’s concerned that funneling it away from long-term economic drivers such as  Golden LEAF will only lead to more fiscal heartache in the future.

“The thing we’re defending against is the precedent that it would set,” said Gerlach. “Once you start diverting funds from their original purpose into the state’s general fund, it’s easier for this to happen again and again and again. We’ve been good stewards of this money, we should be allowed to continue to do so.”

That is precisely the argument that Democratic lawmakers are making, that while once in an emergency might be appropriate, it opens the floodgates to a slippery slope of fund rediversion that will eventually bleed the original funds dry.

“The first dip into that money is the hardest,” said Rep. Ray Rapp, D-Mars Hill. After that, he said, a dip back into the well becomes easier every time.

Unintended consequences

For Rapp, however, opposition isn’t just about the slippery slope argument, but about the unintended consequences that he sees this bill fostering.

“The funds just are not going to make that significant a difference in the overall savings, but it sends that chilling effect. We’re losing funding from a key economic development source, so it’s especially hurtful for us,” Rapp said.

That chilling effect he’s talking about is one Mark Clasby knows well. Clasby is the economic development director in Haywood County, so he spends a lot of his time courting businesses from around the region and around the nation to set up shop in Haywood County. And diversions like this that take money away from funds that could — and do — entice businesses into the region create a sense of uncertainty that could frighten away potential industry.

“Golden LEAF has been instrumental in recruiting businesses,” said Clasby.

“If you don’t have that kind of funding, then you have almost stagnation. You don’t have the opportunity to have development so you can create new jobs so you can make life better for individuals.”

Not everyone agrees, of course. Brian Balfour, an analyst at conservative thinktank Civitas, has long followed — and opposed — Golden LEAF precisely because it does offer government incentives to businesses.

“I would argue that the use of these incentives causes more uncertainty,” said Balfour, because it creates an economic picture that’s at the mercy of politicians, rather than the market. “It creates an uneven playing field. What that does is it politicizes more of the entrepreneurial decisions and the way the economy grows.”

Instead of incentives, said Balfour, what the state’s economy really needs is deregulation.

Proponents of funds such as Golden LEAF, however, would counter that, after tobacco’s quick exit, WNC in particular desperately needed some help to fill the massive economic gap the departing crop left in its wake.

To hear George Ivey tell it, Golden LEAF, along with the Tobacco Trust Fund and the NC Agriculture Development and Farmland Preservation Trust Fund, have been invaluable in helping revitalize rural areas left destitute by tobacco.

Ivey is a grant writer, consultant and project manager in Haywood County who has been closely involved with many of the area’s Golden LEAF recipients, including the Regional Livestock Market.

“Those three funds are really the primary funders of a lot of projects throughout the state and throughout this region,” said Ivey. “Without them, I honestly don’t know where you turn, because they both have the money and understand the role that farming plays, not only for farmers but in the larger community.

“Those three funds understand that tobacco is gone but agriculture is still the No. 1 driver of the North Carolina economy.”

And that’s pretty much the argument made by the foundation itself: we’re helping to revitalize the rural economy at no cost to the taxpayer; let us keep doing it. Indeed, it is the ready defense Dan Gerlach has for his foundation’s mission and existence.

“Our investment earnings have been over $214 million on the investments that we make,” said Gerlach. “We have paid for grants that didn’t have to come from any taxpayers pocket.”

The subtext there is clear: isn’t a 12 percent return that’s being put back into economic development better than just dumping cash into the general fund?

And that’s a hard argument for Republican lawmakers to counter. In fact, few are trying to do so. But many are pointing at the $2.4 billion hole that’s looming on the horizon in next year’s budget, making the strong point that it has to be filled somehow, and it’s easy to see why Golden LEAF is an enticing cash cow indeed. Compare that to cutting teachers, for example, or community college budgets.

“We have to get our fiscal house in order,” said Davis. “It’s going to be painful, and our job and our mission is to spread the pain.”

What is the Golden LEAF fund?

A quick look at the history of Western North Carolina will show that there is no crop more important than tobacco. The plant has left an indelible mark on the mountain landscape, first with the streams of money it brought, and then the economic hole it has left.

Today, though tobacco itself no longer occupies a place of prominence, its economic effects are still rippling through the mountains, mostly in the form of grant money from Golden LEAF.

For the last 12 years, the region’s tobacco-dependent communities have been reaping the spoils of a massive lawsuit brought by 45 states against major tobacco companies over healthcare costs caused by tobacco use.

In North Carolina, that’s totaled nearly $1.7 billion so far, with 50 percent going straight to the Golden LEAF. The foundation — officially dubbed the Long-Term Economic Advancement Foundation — was set up to funnel that money back into the state’s tobacco-dependent communities.

While other states dropped their settlement cash straight into the general fund from the outset, North Carolina shied away from that approach, setting up Golden LEAF and other stewards — notably the Tobacco Trust Fund — to look after and dole out the settlement cash to tobacco-dependent areas in an effort to foster economic growth.

Local spending

Haywood County Agriculture and Activities Center Association, Inc.: $275,000

Construction and upgrades at the multi-purpose arena at the Haywood County Fairgrounds.

Haywood Community College: $1,573,109

Establishment of the Western Regional Advanced Machining Center at the Regional High Technology Center (RHTC).

Haywood County: $60,000

Created the Buy Haywood Market Development Project to develop a comprehensive plan to brand Haywood County tomatoes and peppers.

Haywood County Schools Foundation: $250,000

Expanded the machinist training program at Pisgah High School to meet the demand for highly skilled machinists.

Haywood County Economic Development Commission: $85,000

Funded the Buy Haywood Market Development Project which helps develop markets for Haywood County farmers.

Haywood Vocational Opportunities, Inc.: $300,000

Helped Haywood Vocational Opportunities, Inc. (HVO) expand its operations and secure additional contracts for production of medical supplies.

Haywood County Economic Development Commission: $15,000

Funded statewide feasibility study to identify demand for a poultry and rabbit processing facility in WNC.

Haywood County Schools Foundation: $50,182

Purchased an office mill and lathe for Pisgah High School metals program.

Town of Canton: $100,000

Expand and upgrade the Canton’s wastewater infrastructure in the I-40 Corridor at Exit 31.

Southwestern Community College: $75,000

E-commerce marketing plans and strategies for a three-county area.

North Carolina Center for the Advancement of Teaching: $930,186

Funding for the North Carolina Center for the Advancement of Teaching’s continuing effort to increase the number of National Board Certified Teachers.

Jackson County: $135,000

Funding for the Jackson County Green Energy Park.

Western Carolina University: $200,000

Western Carolina University’s innovative product development plan for the health care industry.

Western Carolina University: $37,000

Support for the Kimmel School Construction Training Program at Western Carolina University.

Southwestern N.C. Planning & Economic Development Commission: $2,205,539

Funded high-speed broadband connections to schools and counties in a six-county area.

Total: $6,291,016

Most people predicted that this session of the North Carolina General Assembly was going to be fast and furious, and it appears that is indeed the case. The GOP-led General Assembly is advancing legislation that Democrats have traditionally not supported, like raising the cap on charter schools and opposing the federal health care law passed last year by Congress.

In addition, the $3.7 billion projected budget shortfall is also forcing lawmakers to look all over for money, a challenge that is also highlighting the different philosophies of both parties.

The Golden Leaf as a golden egg

It appears a move is afoot to snag money that is supposed to be headed for the Golden LEAF Foundation.

This fund was established from the tobacco settlement proceeds and is supposed to be used to promote the “long-term, economic advancement of rural, economically distressed, and tobacco-dependent counties.” That said, the $68 million annual settlement payment is being eyed by GOP leaders in the General Assembly as a piece of the deficit-reduction puzzle.

On Thursday, the Senate gave tentative approval to a plan that would take proposal that would take money from approximately 20 state accounts and the three funds supported by the 1998 national tobacco settlement — Golden LEAF gets half the tobacco settlement money, and two sister funds, the Health and Wellness Trust Fund and the Tobacco Trust Fund, share the other half.

The vote was 30-18 to take what would amount to about $142 million in all.

An email was sent out yesterday by the Golden Leaf Foundation president saying the idea was a bad one, and that other states have taken similar actions with bad results.

“That’s not the answer. Other states have used their tobacco settlement funds long ago to patch their budget. Now their money is gone, and they face the same issues we face but don’t have access to the assets you currently do through the Golden LEAF Foundation to create jobs and expand economic opportunity. Golden LEAF has helped create an anticipated 4,300 jobs and over $900 million in capital investments in the last two years alone, wrote Golden Leaf president Dan Gerlach.

A Western North Carolina source who is involved in an economic development project funded by the Golden Leaf Fund told The Smoky Mountain News on Thursday that conference calls were held around the region on Thursday to discuss the possibility the fund would be raided and ongoing projects might be stopped in their tracks.

So far this issue has been mostly split right down party lines, with Republicans supporting taking the money and Democrats — along with Gov. Bev Perdue — insisting the money stay where it is. Some Republicans have suggested that the Golden LEAF Fund should be dissolved and all of its $600 million in assets go toward deficit reduction.

N.C.’s own health care debate

Rep. Ray Rapp, D- Mars Hill, wrote in his e-newsletter that debate on repealing the federal health care law was one of the two dominant topics from the General Assembly’s first full week in session (the other was the economy).

Republicans in the House introduced and passed a bill to block the requirement in the federal health care law that requires everyone to buy health insurance by 2014. The bill — which passed essentially along party lines, 66-50 — would force Attorney General Roy Cooper to join other states in challenging the federal law.

“It only seems fair that we ask everyone to take personal responsibility for their own health by purchasing their own insurance so that we can require insurers to cover people with pre-existing conditions, allow young people to stay on their parents’ health policies until age 26, eliminate life time limits and provide tax credits for small businesses that want to cover their employees,” said Rapp, who has been appointed Democratic whip for this session of the General Assembly.

Rapp and other Democrats point out that the Attorney General has said it would cost $344,000 to join the suit, tough money to come by in the face of the projected budget shortfall. Both Rapp and Rep. Phil Haire, D-Sylva, voted against the bill. Rep. Roger West, R-Marble, voted for the bill.

In other General Assembly news

• As reported in the Asheville Citizen-Times Friday, Feb. 4, bills are progressing in both the House and Senate that would ban the practice of involuntary annexation, which forces residents near town limits into the town’s jurisdiction. Annexations typically mean additional city taxes and are usually accompanied by more services.

However, towns now have the right to grow their boundaries even if the residents to be annexed don’t support the move. These laws would ban that type annexation.

“I believe that people should have the opportunity to vote whether or not they should be included in an adjacent municipality,” said rep. Tim Moffitt, a Republican lawmaker from Buncombe County.

The bills would halt all involuntary annexations until July 1, 2012, during which time GOP leaders want to craft a new set of laws governing annexation.

• The Associated Press is reporting that Republicans are in support of a bill to lift the cap on charter schools and allowing proceeds from the state lottery to be used to build new charter schools.

State laws governing charter schools have changed very little since a bill passed in 1996 allowing for up to 100 charter schools in North Carolina. Because of the cap, charter school supporters say students in 53 of the state’s counties don’t have charter schools. The current 100 schools have a waiting list of 20,000 families, according to Darrell Allison, president of Parents for Educational Freedom in North Carolina.

Charter schools don’t charge tuition and have open enrollment. They are run by private boards and exempt from many of the rules that are in place in traditional public schools. The state money allocated for each student follows that student to a charter school, but so far charters have not received any lottery money.

Opponents also worry that lifting the requirement that enrollment in charter schools reflect the general racial and ethnic composition of a county could lead to problems. They argued for slowly raising the allowable number of schools rather than a blanket lifting of the cap.

“What I do not want to do is create a dual system of schools and charter schools,” said Sen. Malcolm Graham, D-Mecklenburg.

The bill is currently in committee.

With Gov. Beverly Perdue reversing her stance on her previous suggestion to privatize liquor sales, towns can rest assured they’ll probably not soon see this important revenue stream go dry.

In Waynesville, beneficiary of about $170,000 in annual profits from its ABC store, Perdue’s announcement might give the local ABC board the reassurance it needs to decide how to best handle cramped quarters. Should Waynesville build a new store as previously considered near the big, new Super Wal-Mart; or, should Waynesville simply expand its existing ABC store? said Town Manager Lee Galloway.

The state’s ABC commission in March approved Waynesville’s request to build a second store. Indecision over whether the state might privatize liquor sales put the plan into limbo, however.

Though, truthfully, Galloway wasn’t all that worried about this looming financial threat to the town’s coffers. He said he believes if the proposal moves forward, which seems highly doubtful now without Perdue’s backing, the state would find another method of reimbursing towns for the docked dollars.

Perdue made her I’m-now-against-privatization announcement last week at a meeting of county commissioners attending a legislative goals session in Durham. In the audience was Macon County Commissioner Ronnie Beale, whose primary concern centered on consumption, not revenue. In this, the local Democrat had an ally in the Christian Action League of North Carolina, which bills itself as having the largest networks of members, volunteers and churches of any Christian public-policy group in the state.

The Christian Action League opposed privatization on the grounds people might drink more if access wasn’t state controlled. Walter Harris, president of the Association of ABC Boards, flatly stated he, too, believed privatization would result in increased imbibing.

“I think it is a wise decision not to put liquor at every stop,” Beale said, adding that North Carolina’s less-than-happy experience with privatizing mental-health care raises serious questions about such initiatives.

Billed as “reform,” many critics — including Beale — have said the new mental-health care system in North Carolina fails to provide the state’s most vulnerable residents with basic, much less adequate, care.

Some highly placed Republicans in the now GOP-controlled legislature had expressed their concerns, too, about letting private business owners sell liquor out of grocery stores or other retail stops. North Carolina currently controls every aspect of the more than $5 billion business, but the governor was eyeing privatization as a means of generating dollars to help with the state’s $3.7 billion shortfall.

Adding fuel to the idea of letting vendors handle liquor sales were a number of lurid headline-generating stories about high times by, and high salaries of, some ABC board members downstate.

Such issues, Beale said, can best be handled through other means than simply handing off sales to private business owners.

Franklin Mayor Joe Collins said he believes the current system works, and that by confining liquor sales to (in Franklin’s case) a single store, “certain challenges” surrounding alcoholic beverage sales are more easily controlled. The mayor added he was pleased that, after study, the governor was willing to squelch her own idea.

Canton Town Manager Al Matthews said he isn’t so sure the matter is closed, however, and said the issue merits continued monitoring. Canton, particularly, might have been in a bit of a pickle if privatization had occurred — it has a relatively new ABC store, and sales revenue is being used to offset the building costs.

“Somebody was going to be stuck with a debt,” Matthews said.

2010 gross sales at area ABC stores

Canton    $964,474

Maggie Valley    $1,588,210

Waynesville    $2,107,992

Sylva    $2,610,265*

Franklin    $2,434,888

Highlands    $1,567,570

Bryson City    $1,751,508*

SOURCE: North Carolina ABC Commission

* Bryson City and Sylva sales include alcohol purchased by Harrah’s Cherokee Casino

The Department of Transportation isn’t sure how long it will take to investigate anonymous allegations of fraud among road maintenance contractors and DOT employees in Haywood County, according to a spokesperson for the agency.

A second anonymous letter was distributed last week alleging favoritism by DOT’s maintenance supervisors in awarding contracts for roadwork in Haywood and Jackson counties, prompting DOT officials in Raleigh to ratchet up the caliber of their internal investigation.

Routine maintenance such as cutting brush from roadsides, hauling gravel, cleaning-out ditches and even building secondary roads is not done in house by DOT maintenance crews, but instead is done by private contractors.

The letter alleges that one private contractor who pulls down the lion’s share of the work overbills the DOT, while the DOT maintenance division looks the other way. The letter details several examples of jobs where DOT maintenance supervisors were complicit in overpaying the contractor.

After receiving the first anonymous letter, Joel Setzer, the head of the 10-county division of the DOT that includes Haywood and Jackson, initially assigned someone in his own office to conduct the internal investigation. However, DOT officials in Raleigh have turned it over to the office of inspector general, an autonomous arm of the DOT that handles internal investigations.

“We take every report of any kind that we get very seriously, whether they come from employees internally or people outside DOT,” said Greer Beaty, director of communications for DOT in Raleigh.

The DOT’s office of inspector general is a recent creation under the administration of Gov. Bev Perdue, who has pushed for openness and accountability of state government. It has eight fulltime investigators — seemingly a large staff to do nothing but look into allegations of wrong-doing within a single state agency, but DOT is a massive operation.

DOT has between 12,000 and 14,000 employees, a budget of $4 billion and hundreds of contracts it oversees.

Many allegations don’t pan out. But in the process, the office of inspector general will make recommendations on new ways of doing business, Beaty said.

“There are going to be instances where we can do things better,” Beaty said. “The investigation will point out where we might strengthen a policy or procedure.”

That might indeed be the case with this investigation, where the way in which DOT maintenance divisions award work to contractors will undoubtedly be examined.

“It will be a good time for us to look and say ‘This policy is appropriate,’ or ‘Gosh, we could make this policy stronger by doing this,’” Beaty said.

Investigators are handicapped when looking into anonymous claims, Beaty said.

“There is no way to ask questions or get supporting documentation. We have to start from ground zero and turn over every rock,” Beaty said.

While the letter names DOT maintenance employees and specific contractors, The Smoky Mountain News will not print those names unless the allegations are substantiated.

There are many issues to discuss in the wake of the tragedy in Arizona that left six dead and 13 wounded.

The ugliness of the political discourse in this nation is one. We took that subject up last week in news article and column form in The Smoky Mountain News, and I suspect we’ll probably explore this particular topic in greater depth in the future. Gun rights might be another subject to eventually tackle. Though I, frankly, find this particular angle as a potential outcome to the Arizona shootings less than convincing. Perhaps because I own firearms, my family owns firearms, and I grew up in these mountains where almost everyone I knew growing up had guns in their homes, too.

Having acknowledged my tepid interest in the debate concerning gun ownership, I do concede controls of a sort might be worth discussion — such as whether we should truly allow the insane easy access to weapons such as a semiautomatic handgun with a high-capacity ammo clip.

Which ties neatly into what I believe is the single most important lesson being offered in the wake of the Arizona shootings: the consequences of denying the mentally ill the care and monitoring required. The potential outcome of such neglect has been spelled out in graphic, heartbreaking detail. We can ignore what happened in Arizona only at great peril. And, if we choose to do so, I think it should be openly acknowledged that a repeat of what happened there could easily happen elsewhere, and probably will.

Just making sure we’re all on the same page: does anyone have the smallest doubt, simply by looking into the alleged Arizona killer’s eyes in that creepy mug shot taken a short time after police say he gunned down so many, that this young man is seriously mentally ill?  

I’ll give a nod of approval to the community college he once attended. After Jared Lee Loughner exhibited bizarre, scary behavior, they apparently acted properly and promptly. Officials expelled him, and agreed they’d let the 22-year old back into school only if he underwent a mental health evaluation (and, I assume, passed it, if one “passes” such a thing).

Then what happened, though? There the storyline of attention paid to Loughner seems to end. At least until all the dead and wounded piled up outside a Tucson grocery store.

In case you’re curious, North Carolina doesn’t offer much support to the mentally ill or their families these days, either. In the name of savings, the state largely dismantled a not-that-great-to-begin-with system a few years ago. Here’s a bit of what I wrote in 2008 in a series of investigative articles on the state’s mental health system for a local newspaper chain. We were examining North Carolina’s then new (translation: cheap) approach to helping the mentally ill:

“Reform, to hear proponents tell it, would empower people with choices. No longer would patients be shut out and shut up when it came time to decide on treatments. Now they would get to pick from a virtual smorgasbord of choices, all conveniently located in their hometown or county.

This, taxpayers were told, would save money – lots and lots of money. Millions, in fact, because more people would be treated in their own communities instead of being admitted to one of the state’s four psychiatric hospitals.

Who could argue with empowerment and saving money? Actually, a few people did, but not effectively enough for anyone in power to heed their warnings.

The result?

A mental health system that has wasted, not saved, millions of tax dollars. And worse, many of the state’s most vulnerable residents are unable to obtain adequate treatments. For those people and their families, the price has been incalculable.”

It is time — it’s past time — to face honestly what we are potentially unleashing with our neglect, and in the name of saving pennies. Take a look again at the massacre in Arizona.

Granted, most of those with mental illnesses do not buy guns and start shooting — God knows, I’m not saying that, so please don’t think I’m stigmatizing those who deserve compassion and help.

What I am saying is that we have a responsibility, a duty, to care for and monitor those who potentially pose a danger to themselves and others. The economic costs of doing so be damned — we need a mental-health system in place that works.

(Quintin Ellison can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..)

Don’t expect business as usual when the state’s General Assembly convenes January 26: not with an epic power shift from left to right and a crippling $3.7 billion shortfall to contend with.

Despite the staggering budget crisis, Republicans — who own a majority in both the state House and Senate for the first time in more than a century — are expressing confidence in their ability to make meaningful progress on other issues.

Such as redrawing voting districts, which could pave the way for conservative dominance to continue for at least the next decade if reworked to the Republicans’ advantage. Or possibly increasing the number of charter schools allowed in the state above the current 100. And returning more control to the local level, where many of these new state leaders found their start in politics, and where those who did experienced firsthand the difficulty of meeting unfunded mandates from on high.

Meaningful legislation, however, simply won’t be possible without working closely with the Democrats, including Democratic Gov. Beverly Perdue, acknowledged newly elected state Sen. Jim Davis, R-Franklin. The professional orthodontist and longtime Macon County commissioner defeated incumbent Sen. John Snow, D-Murphy, in November’s election.

“I can partner with anybody and anyone if necessary,” Davis said. “The challenges we face are too daunting for us to presume we have all the answers.”

From the other side of the aisle, veteran lawmaker Rep. Ray Rapp, D-Mars Hill, places bi-partisan partnership high on his list of priorities in this new, radically different political landscape. The season, he said, for political gamesmanship is gone.

“It’s a very narrow band of issues that tend to divide us, but I think the important thing is that my job as a representative is to represent this district and do it in a way which reflects the will of this district,” said Rapp. “We’re in the governing season, so we need to work together for the good of North Carolina. This is not the political season.”

Nuts and bolts

Republicans rode a tide of dissatisfaction this past November, making significant gains all the way from Congress down to the most local and basic levels of government. Two boards of commissioners in the state’s westernmost counties, Jackson and Macon, both swung right for the first time in many years. In Jackson County, for example, Democrats relinquished a 16-year iron grip — in the previous election, by contrast, Republicans had been unable to win a single seat on that board.

Voters, dissatisfied with economic hardships and what many dubbed empty promises by Democratic leaders, responded to conservative assurances of fiscal responsibility, fat cutting and generalized messages of change.

Now state Republican leaders must pay the bill after winning those elections, knowing full well that high tide can as easily turn to low tide if frustrated voters decide they can’t govern any more effectively than the Democrats they swept from power. Davis said House leaders have already warned members not to introduce legislation containing new spending.

Francis De Luca, president of Civitas, a right-leaning North Carolina thinktank, said he believes that it is important to note this historic power shift extends beyond simply counting up Republicans in both chambers of the General Assembly. De Luca believes the House and Senate will prove more philosophically aligned this go-around than at any other time in recent history. Although Democrats held control of both chambers, De Luca said Democratic senators often proved more liberal than their Democratic counterparts in the House, and so the two chambers subsequently sometimes foundered when passing legislation.

“There will be more cooperation,” De Luca said flatly. “And priority No. 1 and priorities numbers 2 and 3 will be — balance the budget.”

Oh, that pesky shortfall

The number is so large — $3.7 billion — the outcomes can be difficult to comprehend. But here’s what those numbers, in concrete fallout for North Carolina residents, could mean. Sam Greenwood, a longtime county manager in Macon who now serves as town manager of Franklin, pointed to the following issues: possible privatization of the state-run Alcoholic Beverage Control; the looming threat of the state forcing counties and towns to take over maintenance of secondary roads; elimination of state funding that towns rely on to repair or build local streets and sidewalks (called Powell Bill money, it comes from a portion of the gas tax that’s distributed back to local jurisdictions each year).

“Essentially, we are just along for the ride,” Greenwood said.

Gov. Perdue proposed the possibility of privatizing the ABC system as one means of generating additional revenue. The idea has received some support from incoming Republicans, though not from all. Local governments have been busy lately passing resolutions opposing such a move. This amidst worries yet another local revenue stream would dry up.

North Carolina is only one of 18 control states in the nation. This means the state government regulates liquor sales, purchases, transportation, manufacture, consumption and possession, unlike in neighboring Georgia and South Carolina, where private businesses oversee most of those operations.

A report is expected this month by a Chicago-based consulting firm hired to analyze potential revenue gains of letting vendors overtake the business.

Rep. Thom Tillis, R-Cornelius, the Republican’s choice for House speaker, has said he expects the ABC privatization issue will be considered when the General Assembly convenes. He characterized such a move as possibly being in line with Republican intentions to streamline state government.

From a county government perspective, interim Jackson County Manager Chuck Wooten is expecting funding for social services, health and transportation to be reduced below current levels.

“If this happens, I would guess that the county can either provide additional funding or make reductions in these budgets,” Wooten said. “I suspect the latter will be the recommendation, since I don’t anticipate significant new revenues for the upcoming year.”

One important challenge for local governments involves timing, Wooten said, as in “when we know the actual (level) of support from the state. With such a large deficit to deal with, it could be late summer before a budget is finally adopted. At the same time, with a new majority in the General Assembly, they could expedite the budget process rather than delay the inevitable.”

School woes

Wooten, who just retired after 30 years of overseeing Western Carolina University’s finances, anticipates cuts to the state’s K-12 system and community colleges, and to universities such as WCU.

UNC system President Tom Ross has requested campuses plan for a 15-percent budget reduction.

“Since such a large portion of the budget is related to personnel costs, a 15-percent budget reduction could result in possible reductions in force. I’m sure this would be the last resort, but … it may not be able to be avoided.”

Wooten added that he doubts there will be any new money for capital needs and probably very little repair and renovation money. These needs, he said, are accumulating and threaten to become “a real issue statewide if funds are not provided to properly maintain existing facilities.”  

And, for the third year in a row, Wooten said he has serious doubts there will be pay increases for university faculty and staff.

On a secondary-school level, local school leaders are also concerned about what might soon play out. Dan Brigman, superintendent of schools for Macon County, worries more charter schools could mean additional drastic cuts in state allocations.

“Taking away more resources from the K-12 classroom will further undermine our mission — to educate all students who walk through our doors despite their socioeconomic status, nationality or disability,” Brigman said. “I see the charter school initiative as a form of re-segregation of our nation’s educational institutions, and hope legislators will ensure alignment of all standards and accountability for schools that received public funds.”

In anticipation of cuts, Brigman said the administration of Macon County Schools has been reviewing all departments and operations for efficiency and effectiveness.

“Any further reductions in our state or local funding levels will definitely impact the classrooms, as we will see more students per class, fewer teachers to provide the basic educational services to our children and more demands placed on school-level personnel,” he said.

Many legislators, however, have said that keeping classes safe is a priority for them, budget shortfall or not.

Sen. Ralph Hise, R-Spruce Pine, a newcomer to the state political scene and, at 34, the youngest member in the General Assembly, said that he’ll be pushing for cuts to earmarks and appropriations, as well as trimming back administration costs before going anywhere near education funding.

“We need to focus first and foremost on education,” said Hise. “I think there’s tremendous amounts of savings available in all areas of administration.”

Rapp echoed those sentiments, pointing to last year’s extension of an additional one-cent sales tax in an effort to stem the tide of education funding loss. Rapp said he’s not necessarily advocating another extension — something Hise and Republican compatriots are flat against — but wouldn’t be averse to it if all other options outside education are exhausted.

“The reason we put that temporary sales tax on is that after we made all the cuts we could make and we were literally approaching the classroom door, we said ‘We can’t, in good conscience, do that,’” said Rapp. “What you’re doing is eating your seed corn. You’re eating the future, and we cannot do that.”

He went as far as saying that, in light of the budget shortfall, safeguarding education at all levels was the biggest hurdle this year’s General Assembly would face.

“I think the biggest challenge is we protect the classrooms, from early childhood through K-12 to the community colleges and universities,” he said. “We’ve got to make that a priority.”

Drawing the lines

“The budget is obviously the elephant in the room,” Davis said, “but the other big issue is redistricting.”

That, perhaps, is the biggest prize Republicans won — the opportunity to oversee how voting districts are drawn. Districts are redrawn every 10 years when U.S. Census results show where the populations have grown or decreased.

What exactly is on the table? State legislators determine district lines for 170 seats in the General Assembly and for North Carolina’s 13 congressional seats in Washington.

With Republicans set to take control, Perdue (who lacks veto power over redistricting) suggested now certainly would be an excellent time for the formation of an independent commission, instead of Republicans, to oversee the process.

Not only was that suggestion unlikely to be followed for obvious reasons, De Luca maintained there simply isn’t enough time for such a commission to be formed and meet mandated deadlines.

“There are both legal and logistical reasons that couldn’t be done,” the conservative thinktank leader said.

De Luca said he believes the process will be fair — bear in mind, he pointed out, that the Democratically controlled U.S. Justice Department has to give any plan developed by state leaders the thumbs up.

Rapp said that he’d be in favor of a commission, too, which is unsurprising, given the tiny voice his party will be given in the process. However, Rapp said Republicans should be reminded that it’s their party that’s been clamoring for such a commission for nigh upon a decade, and that now’s their chance to make those dreams come true.

“They’re in power now, and they have an opportunity to enact and establish the very commission they’ve been calling for for a decade, and I think, truly, the ball is in their court,” said Rapp.

Hise isn’t exactly calling for an independent commission, but he is in favor of “fair” redistricting, which, by his definition, includes more whole counties, less chopping of communities.

“We want the provision of whole counties, that’s something that’s very important to drawing district lines,” said Hise. “I don’t think you’ve seen anything near that historically. I think we can focus on keeping communities together as a whole.”

They’ll have to wait until mid-February, however, when more complete census numbers are released, to see which districts will get the axe and which won’t.

Rep. Phil Haire, D-Sylva, did not return several phone calls to comment on this story.

Staff writer Colby Dunn contributed to this report.

By definition, the lottery is a gamble. There’s no guarantee of winning, no assurance that you’ll look back on your ticket purchase without regret.

Sure, it can pay out big sometimes, but you could just as easily come up empty. And in North Carolina, for the school districts the education lottery helps fund, it turns out the story of what happens to that money might be much the same.

For the last five years, regulations on what can be done with lottery money have been pretty strict. But with state and local budgets in crisis, the General Assembly last year lifted some of those strictures, allowing schools to pay other expenses that were losing state funding with lottery money; a consolation prize for losing the big pot. So many districts started clutching money they once spent freely, fearing state budget cuts that are just over the horizon and wondering if they’d made the right choices with lottery money given to them in the past.

SEE ALSO: GOP may loosen rules on lottery proceeds

In Swain County, lottery money has always gone to debt service, paying down notes taken out for school improvements. County Manager Kevin King said that’s what they’ll continue to put those dollars toward for the foreseeable future. The same is true for Macon and Jackson counties.

In Haywood County, however, they’ve taken fuller advantage of what the funding rules allow. The way lottery money allocation works today is pretty simple: school districts get a percentage funding based on their ADM, average daily membership, which is basically how many students are attending their schools. Districts used to get extra money based on their property tax rates, which put western counties with historically low rates at a disadvantage. However, after years of lobbying by school officials, the General Assembly removed that inequity during its last session.

Lottery money ‘icing on the cake’

But regardless of where it comes from, lottery funds have, in the past, been earmarked only for capital improvements. That means new buildings, repairs to existing facilities and, as in Swain County, debt service for similar projects that have already been paid for.

Back in Haywood County, they decided to use their funds to install artificial turf on their sports fields, a project that’s taken their yearly lottery funds, which average about $600,000 annually, since they started receiving them.

After last year, though, when the extent of state budget woes became increasingly clear, Assistant Superintendent Bill Nolte said they started saving as much of that money as they could, aware that the state would have to find $3.7 billion dollars in cuts somewhere, and schools might be first on the chopping block.

“You … want to save the lottery money because it’s the only source that you have as an emergency source,” said Nolte, noting that, after paying the remaining two turf payments that are still outstanding, Haywood’s lottery fund balance would leave about $600,000 to fund teaching positions or address liability issues and emergency facility needs, which is as low as he’d like to see the fund get.

“We’re down pretty close to a pretty uncomfortable level of having a reserve there,” Nolte said.

But when asked whether, retrospectively, the turf still seem like a sound decision, Nolte defended the choice. He said the school system used the money for one of the few things it was allowed to spend it on.

“It [lottery funding] was never intended for emergency crises, it was never intended to pay for teachers, it was never intended to buy paper. That [capital expense] was the only thing we could spend it on at the time. It was a very logical expenditure,” said Nolte. “If we had a crystal ball and we knew that two to three years later we would be in an economic crisis, we may have not done that project.”

But, as Nolte points out, crystal balls were in short supply, and in what seemed like a healthy economy, they would have been decried for saving the money then.

“Back when we did the fields, there was no opportunity to spend the funds in another manner. If we had saved those funds back then, people would have said, ‘what are you saving for?’” said Nolte. “At the time that we made those expenditures it was a very popular decision.”

Now, however, there is no decision more popular than holding onto what you’ve got, in case things continue to decline.

Hold on tightly

That’s the opinion voiced by several commissioners at a recent Haywood County Commissioners meeting, where they expressed concern about what’s happening to the county’s lottery money.

Commissioner Bill Upton, who was formerly a principal and superintendent in the Haywood County school system, questioned school officials on the wisdom of using lottery funds to fix decrepit bleachers instead of saving the money in case it’s needed for teacher positions next year. Commissioners eventually approved the bleacher repairs, which had been flagged as a safety hazard by the school’s insurer for several years, but their reluctance to dole out lottery money on non-essentials was clear.

“The ballgame’s changed and that’s my big concern,” said Upton in an interview. “In the past, you know, you had to use lottery monies for projects and all. I think that’ll change.

“The unknown is what bothers me, and you hate to make decisions that will come back and hurt you this summer [when the state budget is set].”

According to North Carolina State Superintendent June Atkinson, a lot of districts around the state are thinking along the same lines. She said that few chose the option to use lottery money for teacher funding or other non-traditional uses last year. There were more hoops to jump through, including extra scrutiny at the local level, and there was still some federal funding available that gave many districts a buffer for state losses.

But this year, said Atkinson, those federal appropriations will be long gone, to the tune of $1 billion statewide, and the $3.7 billion hole at the state level is going to hit schools hard. This year, she expects many more districts to take the General Assembly up on any offer of unrestricted lottery funding they choose to make.

“In the leadership in our schools, people are making a concerted effort to stretch every dollar as far as they can go. When those federal dollars dry up, I’m sure school districts will be looking at those lottery funds,” said Atkinson.

However, she doesn’t think the lottery will ever become a staple to school funding — no matter how many restrictions are removed — because it’s just not enough to make up for what’s being lost.

“The lottery really is just icing on the cake,” said Atkinson, “because it is an unstable source of dollars. It changes based on the whims of people that buy lottery tickets … the percentage of the lottery dollars is such a small amount of money in comparison to the total amount [needed for school funding].”

And, just as in other retail sectors, those ticket-buying whims have been severely curtailed by the economy. Lottery revenue saw about a $44 million drop last year, and if those patterns continue, schools will have even fewer dollars to deal with.

But as for the money that’s left, Atkinson said she’s confident that lottery funding in the future, at least in the short-term, will surely be re-routed to needs other than capital projects, which would leave the state’s school facilities languishing.

Feeling the budget squeeze

Nolte said they’re already experiencing that squeeze in Haywood County.

“We swallowed very hard and did not do a building replacement at Waynesville Middle because we knew we might need that fund for schools or teachers,” said Nolte. That decision, he added, was pretty unpopular.

But they’ve been told to brace for a 10 to 15 percent cut from the state this year, so they’re hanging onto what they’ve got.

Nolte said he knows people might look at Haywood’s past lottery decisions as questionable, but would counter that argument by pointing out that the school system has long been recognized as fiscally responsible, running every project on time and on budget.

“I know that people want to make the arguments of bleachers versus teachers, or they want to make the argument of athletics versus academics, or they want to make the argument of don’t do anything to buildings, just keep people in jobs,” said Nolte. “But I hope people understand that we make the best decisions we can make with the information we have at the time.

“It’s real easy to second guess, and I just hope that people understand that we’ve got a long history of making very good decisions when it comes to capital expenditures. We’re taxpayers too, so we want to be very prudent with the revenues that are allocated to the school district.”

Statewide, Superintendent Atkinson hopes that lottery funds will help schools survive, but concedes they are a band aid on a hundred bullet wounds, and schools will have to shore up for a hard hit that’s coming soon, prioritizing student success over all else in the face of a bleak financial future.

“We’re at the point where we can’t make cuts without harming students. North Carolina ranks about 42nd in the nation as far as school funding. We’ve mad a lot of progress, and I just hate to see our not being able to continue that progress,” said Atkinson. “Money does matter.”

Staff Writer Quintin Ellison contributed to this report.

With the GOP takeover of the state General Assembly, lottery money and how schools use what they’re given will come under new scrutiny.

“I wouldn’t have voted for a lottery, but it is the law now and it needs to be done properly,” said Jim Davis, an incoming freshman Republican senator from Franklin.

Davis unseated Democratic incumbent Sen. John Snow in November, helping Republicans — for the first time in more than a century — take control of the House and Senate.

“I think the research will show the poor counties have a higher per-capita lottery purchase, and those people can’t afford (to play the lottery),” Davis said. “But it is here now.”

Davis, a former longtime Macon County commissioner, is an unwavering, unapologetic supporter of local control. Though Davis said he finds Haywood County’s decision to use lottery money for football stadium upgrades difficult to rationalize, “if the school board wants to do that and commissioners OK the choice, they ought to be able to do that.”

Incoming state senator Ralph Hise, R-Spruce Pine, said he would support allowing schools to use their lottery funding for items other than capital improvements again this year.

“I wouldn’t just limit that to lottery funding,” Hise said. “I think that we have to give local school boards more options in using their funding. We know the level of cuts, and as we get more specific information, we hope to be able to give as much flexibility to state departments and others with their own budgets.”

That would be a welcome change to Macon County Schools Superintendent Dan Brigman.

“I would love to have more lottery dollars,” Brigman said. “The formula definitely needs to be revised.”

Money from the North Carolina Education Lottery is divided among school districts based on enrollment. Counties with a higher tax rate used to get a higher percentage of lottery money, meaning Western North Carolina with its historically low tax rate got penalized. That was changed by the General Assembly two years ago.

— By Quintin Ellison and Colby Dunn

An anonymous letter alleging corruption — including bribery, embezzlement, overbilling and theft of state materials — among contractors hired to do roadside maintenance for the N.C. Department of Transportation in Haywood County has been widely circulated in recent weeks.

County commissioners, law enforcement, state politicians, media outlets and the DOT itself received copies. While the letter isn’t signed, the allegations are detailed and specific — specific enough that it has prompted the DOT to conduct an internal investigation.

“They are some serious accusations that have been made,” said Joel Sezter, head of the DOT for a 10-county area that includes Haywood.

When Setzer got a copy of the letter in late December, he assigned a staff person from his own office to start an internal investigation. But Setzer’s boss has since taken charge of the inquiry, and it is now being orchestrated out of the Raleigh office.

Terry Gibson, the State Highway Administrator in Raleigh, has pledged to get to the bottom of the accusations.

“The allegations do concern us very much. We will not stop until we are sure things are running like they ought to out there,” Gibson said. “We don’t want to hurt anyone that is innocent, but if someone is doing something that is not right we want to deal with it.”

Gibson said he assigned his Chief Engineer John Nance, essentially the second in command over the DOT, to spearhead the investigation. But he has also brought in the Inspector General for the highway department, which acts as an autonomous review body.

“We asked them to make sure it is an independent look,” Gibson said.

Setzer would not speculate on who wrote the letter. But whoever it was has a working knowledge of DOT maintenance operations. The letter mentions the names of several DOT employees and contractors, as well as specific contracts and purchases.

Gibson said chasing down claims in anonymous letters can sometimes be difficult since there is no original source to interview.

But, “This one is so specific that it should help us try to determine the validity,” Gibson said.

How aggressive DOT will be with its internal investigation remains to be seen. However, ignoring the letter — particularly since it was so widely disseminated — would have been difficult.

The letter was sent to all five Haywood County commissioners, who in turn passed it to District Attorney Mike Bonfoey.

“We don’t have the authority to do a criminal investigation as a county board. That’s a law enforcement issue. If they deem it necessary for a law enforcement investigation, that is their decision,” County Manager Marty Stamey said.

Bonfoey, in turn, passed the letter on to Sherriff Bobby Suttles.

“I sent it along to the sheriff for him to act appropriately,” Bonfoey said.

Bonfoey declined to comment on why he sent it to the sheriff rather than the SBI, which would be better equipped to handle an investigation into possible public corruption.

Sheriff Suttles said an investigation of a state agency like the DOT would have to be done at the state level, presumably the SBI, and not his office.

“I don’t see an investigation from the sheriff’s office on it at this time,” Suttles said.

Beside, since the letter was anonymous, there is no clear starting place, Suttles said.

“It doesn’t give you too much to go on,” Suttles said.

Setzer said he won’t hesitate to call for a criminal investigation by the SBI if his agency finds the allegations have any merit.

“If any laws were broken then I will be making a reference to the SBI, but I don’t if they have been yet or not,” Setzer said. “Right now it is hard to know what is accurate and what is inaccurate in that letter, and I don’t want to speculate.”