Kirk resigns as chairman of State Board of Education

Saying he simply was tired after working 16- and 18-hour days for the past five years, NCCBI President Phil Kirk resigned Thursday as chairman of the State Board of Education, effective May 1. Kirk, who will continue as head of NCCBI, had held the volunteer post since being appointed to the position by Gov. Jim Hunt in 1997 and had led the state board for the second-longest period in state history. Gov. Mike Easley is expected to name a replacement soon.

”The past five-and-one-half years have been exhilarating, challenging, and most enjoyable,” Kirk said in a statement. “Our public schools are leading the nation in progress and North Carolina has won much-deserved national recognition by so many groups and in so many different areas. I researched Yogi Berra's philosophy to try to find a statement which best summarized my reasons for resigning at this critical juncture in our state's history. I found none so I went to my next favorite philosopher — Lefty Driesell. When he retired as a college basketball coach a couple of months ago, he said he was doing so because he was tired. Well, after working 16-18 hour days, seven days a week for five-and-one-half years, I am just tired.”

Gov. Easley said “Phil Kirk has been an outstanding chair keeping North Carolina in the unique position of linking business closely with education and workforce training. His resignation will leave a huge void. He has set the bar high with his endless commitment and boundless energy by visiting more than 750 schools across the state. I am very grateful to him for his service.”

Kirk said he was proud the State Board of Education had accomplished many goals during his tenure as chairman. “We can document substantial progress in every grade since the ABCs began. Our students are clearly learning more in math, reading, writing, computer technology, and other subjects. Our dropout rate has fallen three years in a row. Our SAT scores are improving faster than any other state. We are supporting our teachers more with salaries, for example, going from 43rd in the nation to 21st. We have implemented a mentoring program for beginning teachers, salary increases for those with enhanced master's degrees and national board certification with our state ranking first in the nation in the number of teachers meeting this rigorous standard. We have been ranked first in the nation in improving teacher quality two of the past three years.”

And he said he was proud to have accomplished some personal goals, including visiting all 117 school systems in the state at least once. Kirk personally visited more than 750 individual schools. ”I am most grateful to North Carolina Citizens for Business and Industry -- our remarkable staff and volunteers -- for allowing me to serve on the State Board of Education,” Kirk said. “However, keeping NCCBI growing, successful, and effective needs my full attention and energy. This will be a most difficult and challenging session in the General Assembly and U.S. Congress. I need to be focused on meeting the needs of our members at NCCBI.”

He said he would remain committed to education in several capacities, including chairing the Workforce Development and Education committee of the North Carolina Economic Development Board. Kirk’s complete statement on his resignation is reprinted below.

Former Gov. Jim Hunt, who appointed Kirk to the board, said, "Phil Kirk has done a superb job as Chairman of the State Board of Education. He has made an historic contribution in pushing for high academic standards in North Carolina schools and under his leadership, our test scores reflecting student learning have gone up more than in any other state. His tenure also has seen the standards for public school teachers raised and salaries have advanced from 43rd to 21st in the nation. I am deeply grateful for his leadership and urge his continued strong involvement in improving education and the economy in North Carolina."

State Superintendent Mike Ward said that Kirk has been a hard-working and successful leader for public schools. "While it is tough to see Phil leave this role, we're proud of his legacy as state board chair and confident that he will continue to be a strong advocate for our students."

Easley proposes budget that raises spending by 4.7 percent
Gov. Mike Easley said the $15.032 billion budget plan he’s recommending for 2003-04 reflects his three priorities – stimulating the economy, making progress in education and reducing the size of state government. At his Wednesday news conference, the governor said: "I am presenting a solid, balanced budget plan that reflects our values. This budget is about educating our children, creating jobs and helping the least of our people. It contains no cuts to our classrooms. It cuts $800 million more in spending. It includes money to replenish our Rainy Day Savings Account and for renovations and repairs. And it has no tax increase. This budget is not based on gimmicks or sleight-of-hand. It is balanced with the discipline we need to maintain our AAA bond rating."

Bottom line, Easley's budget assumes economic growth of 3.5 percent and raises General Fund net spending by about $700 million, or 4.7 percent. That’s $165 million below his self-imposed budget cap linking growth in state spending to the 10-year average growth in personal income. Personal income grew 5.9 percent in North Carolina over the past 10 years.

Most of the higher spending goes to education. He would increase public school funding by $170 million or 2.9 percent; increase community college funding by $31 million or 4.6 percent; increase university operating and capital funding by $98 million or 5.6 percent; appropriate $25 million to hire 571 additional second grade teachers to reduce class size; and earmark $8.6 million to expand his More At Four pre-kindergarten program. In all, education takes up more than $8.5 billion in the budget.

Easley also would provide 1.6 percent pay raises for state workers and freeze tuitions for college and university students. Easley would spend $111 million to open three prisons, add $100 million to the Rainy Day Fund and devote $50 million to renovating state buildings. His budget robs $268.8 million from the highway funds.

Easley said the total gap between revenues and expenditures would be $1.7 billion in the fiscal year beginning July 1 (see chart at right). He proposed closing the gap by cutting $836 million in scheduled state spending and by delaying for two years planned reductions in existing taxes worth $460 million. Most of that would come from continuing the half-cent sales tax scheduled to expire July 1 and the top rate on state income tax rates. Easley also would provide no inflationary increases for Medicaid reimbursements, a savings of $41 million, and eliminate about $60 million in construction money for local schools.

The final budget recommendation is $15,032 million for 2003-04 and $15,612 million for 2004-05. Overall General Fund operating and capital appropriations would increase by 4.7 percent in 2003-04 and 3.8 percent in 2004-05 from recommended 2003-04 levels.

Compared to January 2001, General Fund appropriations for over half of the state agencies have been cut by more than 10 percent. Excluding education, there are 2,000 fewer state employees today then there were in 2001.

The governor proposes full funding for enrollment increases in the UNC system ($46.6 million), private colleges and universities ($2.8 million), and the community college system ($29.8 million), as well as financial aid for needy UNC students ($10.3 million). In addition, Easley recommends providing funds for additional teachers to reduce class size in the second grade and to support an additional 2,400 slots to prepare at-risk four year olds for success in school through the More at Four Program. The budget also provides funds for the annual step increase for public school teachers ($48.1 million) and for ABC bonuses earned in the 2002-03 school year ($101 million).

The governor’s budget provides over $200 million in 2002-03 for a 1.6 percent pay increase for state employees as well as an additional 0.5 percent pay increase for community college faculty and staff. The budget also begins repayment of the funds withheld from the Retirement System in 2000-01 due to the budget crisis. Finally, the Governor’s budget recommends a 1.5 percent cost-of-living adjustment for state government retirees.

The governor’s budget is based on an economic forecast that assumes North Carolina’s economy will improve in near lockstep with the U.S. He assumes that total non-farm employment will increase by 0.8 percent in 2003 and that the unemployment rate will recede to 5.7% by year-end. The services sector will be the engine of job creation in North Carolina, increasing by 2.7 percent in 2003, the Easley budget says.

Democrat Easley sounds Republican in State of the State speech
Gov. Mike Easley veered right and then left in his second State of the State speech Monday night, proposing some initiatives that pleased Republicans – a cap on state budget increases, a line item veto and new economic development programs – and some that soothed Democrats – stronger support for education and health care. Easley's 40-minute speech drew several rounds of applause from both sides of the aisle and standing ovations when he praised the military. The budget cap proposal attracted loud applause from all but a few Democrats. As expected, the Democratic governor didn’t propose any new taxes but said he wants the General Assembly to continue some that are scheduled to expire (see budget story and chart above).

Easley again asked the General Assembly to pass a state lottery, with the revenue earmarked for class size reduction, More at Four, and as much as $200 million a year for new school construction. His other initiative, Moving Ahead, would steer $700 million in Highway Trust Fund money to fix roads and bridges across the state.

Easley seems to have become a budgetary Bill Clinton. Just as President Clinton wowed Republicans a few years ago when he said, “the era of big government is over,” Easley likewise wowed Republicans when he announced that he wanted to "guarantee that the overspending of the last boom never happens again."

Below is a recap of the four major initiatives the governor proposed in the speech. The full text of the State of the State speech is reprinted below.

Government Reform: Limit the length of legislative sessions; mandate a cap on state spending growth linked to long-term economic growth; give the governor line-item veto power; and identify and eliminate inefficiencies, duplication in services, or programs that are not part of state government’s core mission.

Economic Development: Easley said he has a plan to create more than 100,000 new jobs and improve North Carolina’s infrastructure. In addition to reforming the R&D tax credit to attract growth industries, and capitalizing on the state’s commitment to biotechnology, he said the plan consists of four components:

 North Carolina Moving Ahead! He wants legislative approval to divert $700 million in bonds approved by voters in 1996 for urban loops and other specific purposes for highway resurfacing and other modernization projects.

 Complete the Wilmington harbor project. Dredging the harbor to allow faster and larger ships to utilize the port will expand North Carolina’s share of the international import/export market.

 Issue the rest of the university and community college construction bonds remaining from the $3.1 billion package approved by voters in 2000.

  Approve a state lottery with proceeds earmarked for public school construction. He proposed up to $400 million in school construction aid to counties over the biennium, funded the net proceeds of an education lottery.

Education: Continue class size reduction efforts from kindergarten and first grade to all second and third grade classrooms by fall 2004 (third grade will be in place in 2004-05). Expand More at Four to serve 10,000 at-risk four-year-olds next year; fund teacher salary increases; freeze tuition hikes at UNC System campuses and community colleges.  Provide full funding for enrollment growth at North Carolina’s community colleges and universities.

Health Care: His  “Healthy North Carolina” initiative included promoting wellness programs, especially targeting asthma, diabetes and heart disease; increasing the amount of the wellness benefit in the State Health Plan by one third; developing model programs in conjunction with local communities and faith-based organizations to close the healthcare gap in minority and female populations; hiring more school nurses; expand the North Carolina ACCESS program to serve additional children and adults eligible for Medicaid; and expanding senior prescription drug management programs.


Legislative Actions

Bill makes SUTA dumping a felony
Legislation introduced Wednesday by Sen. David Hoyle (D-Gaston) would make it a felony for anyone who assists or tries to help firms create shell corporations in order to pay lower unemployment insurance (UI) taxes. S. 326 Soliciting SUTA Dumping a Felony was referred to the Senate Judiciary I Committee. SUTA dumping is a practice of creating a shell business unit or subsidiary and then transferring employees of the parent company to it. Because it would be new and have no history of layoffs, the new business unit would enjoy a low UI experience rating and therefore the parent company would pay low UI premiums.

State tax auditors have said they're investigating several companies suspected of using SUTA to lower their tax bills. Current state law makes it a misdemeanor for a company to deliberately make false statements to reduce its UI payments, but it’s unclear if SUTA specifically is illegal. “The Employment Security Commission will actively pursue and prosecute employers engaged in this activity and has the authority to subpoena records and individuals in its investigations,” the agency said. “The maximum punishment is a fine imposed in the court’s discretion and 45 days confinement.”
Because the Unemployment Insurance Trust Fund is rapidly depleting, employers in North Carolina have lost the 50 percent UI tax credit enjoyed for many years. In addition, large numbers of layoffs over the past several months have also adversely affected many employers’ tax ratings, and, in turn, increased UI taxes owed.


Black, Morgan hear ideas on economic recovery
Several state leaders made presentations Tuesday at an Economic Recovery Seminar sponsored by House Speakers Jim Black and Richard Morgan. Hundreds of business leaders, legislators and lobbyist attended. Speaker Black said that the General Assembly was looking at “what we can do to keep jobs in North Carolina.”  Speaker Morgan echoed this sentiment, saying, “we are concerned about the loss of jobs. We are soliciting ideas on how to make North Carolina more efficient.”

Making presentations were State Budget Director David McCoy, N.C. Biotechnology Center President Leslie Alexandre, State Treasurer Richard Moore, State Community Colleges President Martin Lancaster, HHS Secretary Carmen Hooker-Odom, Secretary of Commerce Jim Fain, UNC System President Molly Broad, State Superintendent of Public Instruction Mike Ward and Revenue Secretary Norris Tolson. At the end of the two-hour meeting, Black and Morgan announced that there would be another meeting on economic recovery on Tuesday, March 18, and at that time they wanted to hear from business leaders and other interested citizens about their ideas on the budget, state government efficiency and economic development.

The state’s budget challenges, the need for North Carolina to continue moving forward, and concerns about economic development and creating jobs were consistent themes throughout the remarks make by the presenters.

McCoy touted “budget discipline in North Carolina” as the reason we are ahead of most other states in dealing with our budget challenges. Alexandre talked about the role biotechnology is playing and should continue to play in North Carolina’s economic recovery. She noted “today more than 150 biotechnology companies are headquartered or have operations in the state, employing 18,500 people and generating an estimated $3 billion in annual revenues. This industry has triggered the creation of many thousands of other high-paying jobs in fields that support biotechnology, including design, construction, engineering, instrumentation, supply, consulting, staffing, real estate, law, and finance.”

Broad and Lancaster both talked about the impact of higher education on economic growth and development in the state. Broad told legislators that the quality of the university is an advantage in economic recovery. She pledged the continued support of the UNC System in assisting with economic recovery. Lancaster talked about the important role the community college system plays in training workers as the state moves from a manufacturing economy to a knowledge based economy.

The next session hosted by Speakers Black and Morgan will be held on Tuesday, March 18, from 1:00 - 3:00 p.m. in the auditorium in the legislative building. Business leaders are encouraged to attend.

 
Bills of Interest Introduced This Week

 H. 208 (Wright) Managed Care/Health Benefits Clarifying-AB - An act to amend the prompt pay law to clarify that a "claimant" under the law includes "an insured"; that thirty days references are to thirty calendar days; that the ninety-day deadline for responding to additional information requests from an insurer only applies to claims not already denied; to require, under the prompt pay laws, a status report when claims are not paid or denied within sixty days even when the insurer is awaiting information requested from the claimant; to remove from the uniform credentialing statute an unnecessary provision; an to amend utilization review laws to clarify that a second-level grievance review panel can consist of one or more persons.
 H. 233 (Miller) Medicaid Prior Approval/Prescription Drugs - An act to require the Department of Health and Human Resources to impose under the Medicaid program prior authorization restrictions on all name-brand prescription drugs for which there is a generic equivalent that is less costly than a brand-name drug.
 H. 253 (Setzer) Continuing Care Retirement/Technical Changes - An act to make technical and related substantive changes to the continuing care retirement (CCR) laws to eliminate the unnecessary provision allowing for accredited but unlicensed providers of CCR services; change references from "facility" to "provider" where appropriate to accommodate the situation where an entity operates more than one facility; change "forecast" to "forecasted" where found; change the operating reserves statute by rewording some provisions technically; change references to "registration" of a facility to "licensure"; make gender neutral changes to CCR laws; clarify that a provider must hold semi-annual meetings with residents of each facility operated by the provider; and make other technical and conforming changes to Article 64.
 H. 273 (Glazier) Adverse Reactions To Smallpox - An act to ensure that state employees who volunteer for vaccination against smallpox incident to the administration of smallpox countermeasures by health professionals under Section 304 of the Federal Homeland Security Act of 2002 and any family members living in the homes of these vaccinated employees will be able to recover for any adverse medical examinations due to the vaccination.
 H. 283 (Nye) Property And Casualty Insurance Omnibus - An act to require real property warranty companies to carry contractual liability policies; require motor vehicle and home appliance service agreement companies to use a specific format on all written materials submitted; mandate all required submissions to the Department of Insurance to be in a specific format if in writing; require warranty companies to comply with Article I of Chapter 58 of the General Statutes; define mechanical breakdown service agreements and require all mechanical breakdown service agreement companies to comply with Article I of the Chapter 58 of the General Statutes and with the rules regarding motor vehicle and home appliance service companies; and provide that a bad check constitutes nonpayment of premium of a motor vehicle liability insurance policy.
 H. 305 (Bell, B. Allen, Eddins and Munford) Retirement Contribution Rates - An act to provide for biennial appropriations to cover the rate of normal contribution and any rate of accrued liability contribution, as determined by the Board of Trustees of the Teachers' and State Employees' Retirement System.
 H. 320 (McComas, G. Allen, Hill, Holliman, Luebke and Wainwright) IRC Update - An act to update the reference to the Internal Revenue Code used in defending and determining certain state tax provisions.
 H. 338 (Adams and Jones) Greensboro Vehicle Tax - An act to authorize the city of Greensboro to collect a tax on motor vehicles resident in the city.
 H. 342 (B. Allen, Eddins, Munford and Ross) Constitutional Amendment/Employer Contribution Rates - An act to amend the Constitution of North Carolina to protect employer contribution rates budgeted for the Teachers' and State Employees' Retirement System in the same manner as retirement system funds.
 S. 289 (Reeves) OK to Use Community College Funds for Literacy Labs-AB - An act to permit the community colleges to use literacy funds to procure computers for literacy labs.
 S. 290 (Dorsett) Clarify Certain Building Code Requirement - An act to clarify that cities may order owners of residential property to repair rather than vacate housing to meet minimum code standards.
 S. 291 (Dorsett) Greensboro Construct Roads Outside City - An act to authorize the city of Greensboro to expend funds on roads outside the corporate limits.
 S. 292 (Stevens) Raleigh Electronic Notice - An act authorizing the city of Raleigh to use electronic means to provide public notice for certain public hearings.
 S. 293 (Thomas) Sales Representative Commissions Revisions - An act to amend the law governing sales representative commissions.
 S. 315 (Horton) Minor's Entertainment Contracts - An act relating to contracts of minors for artistic or creative services.

State Government

Supreme Court tosses out benefits for fence-jumper
The N.C. Supreme Court reversed an Appeals Court decision granting workers’ comp benefits to a Parkdale Mills worker who broke his leg climbing a fence to sneak out of work early. The high court, per curiam, reversed and remanded the case, citing the dissenting opinion written by Judge John Tyson. NCCBI loudly criticized the Appeals Court over the case and praised the Supreme Court for tossing out the decision.

The case, Arp v. Parkdale Mills, Inc., (311A02), became a flashpoint last May when the Court of Appeals, in its 2-1 decision, greatly expanded employers’ liability for accidents occurring on their property, regardless of the circumstances. The court ruled that Parkdale must pay disability benefits and medical expenses to an employee who, not wanting to be seen leaving work early, left by the plant’s back door. The rear parking lot was enclosed by a six-foot chain link fence topped by 18 inches of barbed wire. The employee climbed the fence, slipped, fell and broke his leg. The Appeals Court concluded that leaving work early and climbing the fence was a reasonable activity related to the worker’s job. Judge James A. Wynn wrote the opinion in the case, which was concurred by Judge Patricia Timmons-Goodson. Judge Tyson issued a blistering dissent.

What apparently most troubled Tyson, and NCCBI, was the Appeals Court majority gave so little credence to the principle that workers’ comp benefits are for people injured while actually performing their jobs. “Scaling a seven and one-half foot tall locked chain link and barb wire gate is an unreasonable activity for plaintiff to exit defendant’s property when a safer method was provided to and known by plaintiff. There was no evidence that any other employees, including plaintiff, ever exited defendant’s premises in this manner. Plaintiff’s activity was not in actual performance of a direct job duty. Plaintiff’s activity was so remote from customary or reasonable practice that is was not causally related to his employment and is not compensable as a matter of law,” Tyson said in the dissent. 

The Supreme Court obviously agreed.


LLCs now can file annual reports via the Internet
For the first time, limited liability companies can skip the mailbox and submit their annual reports to the Secretary of State’s office through the department’s web site. Every LLC registered to do business in North Carolina must file an annual report by April 15. Traditional paper forms already have been sent to the 62,474 LLCs needing to return reports. But each one also was given a unique filing number allowing the report data to be filed over the Internet at www.secretary.state.nc.us/aronline. A required fee of $204 also can be paid online through one of several options. Companies that want to continue filing the traditional paper reports may do so.

In other news: North Carolina won't join more than a dozen other states in challenging the Bush Administration’s New Source Review rules. The guidelines would let many industries, including nearly 400 in the Carolinas, avoid installing additional pollution controls if their emissions increase. Despite heavy pressure from advocacy groups, the N.C. Department of Environment and Natural Resources said it won't fight the rules, which become effective in North Carolina in 2006, time enough for the state to develop stronger rules on its own, the department said. New Source Review won't affect the state's Clean Smokestacks law adopted last summer. 

Names in The News

 William Campbell Woodson, son of NCCBI Director of Governmental Affairs Julie Woodson and State Farm Bureau lobbyist Steve Woodson, was born Wednesday in Raleigh. Steve, Julie and the baby are doing fine. Everyone on the NCCBI staff extends their best wishes to the new parents.

 Michael Decker Jr., son of Rep. Michael Decker (D-Forsyth), was hired as an administrative assistant to his father at a salary of $46,000 a year. The move outraged some Republicans, who said it was evidence of a quid pro quo for Rep. Decker’s switch to the Democratic Party. Democratic House Speaker Jim Black said he approved the hiring because Decker was slated to be named one of two chairs of the House Ways and Means Committee.

 
Washington Update
A monthly briefing on where things stand in Congress,
provided by the National Association of Manufacturers

Economic Growth & Tax Relief: Hearings on President Bush’s 10-year, $674 billion economic-growth package began in early March. With accelerated individual and S-corporation rate cuts, elimination of the double taxation of dividends and significantly expanded Sec. 179 expensing for small businesses, it is a worthwhile package. Swift committee action is likely in the House, but it will face a challenge in the Senate, where the President will need 50 votes. The target time for having a bill on the President’s desk is Memorial Day.

Pension Funding Interest-Rates: The business community continues to work with policy-makers in advocating a permanent solution to the problem faced by defined-benefit pension sponsors because of artificially low interest rates on 30-year Treasuries. The President’s FY 2004 budget proposal did not propose a fix, but upcoming tax legislation could be a vehicle. A temporary solution was passed in March 2002, but that will expire 12/31/03. Without a permanent fix, employers will have to make inflated pension contributions and pay larger variable-premium payments to the Pension Benefit Guaranty Corporation.

Asbestos Litigation: In a significant decision, the American Bar Association in February adopted by a more than 2:1 margin a resolution that advocates medical criteria to guide courts in settling asbestos claims. The resolution, passed despite the strong objections of the trial bar, closely tracks with the views of industry’s Asbestos Alliance. That could prompt lawmakers to take quick action on asbestos legislation, such as S. 613 (Nickles -- R-OK). Hearings on asbestos began 3/5 in the Senate Judiciary Committee.

Multi-Emissions: Expect hearings this spring on President Bush’s Clear Skies initiative. Senate Environment Committee Chair Jim Inhofe (R-OK) calls it “the most aggressive presidential initiative in history to reduce power plant emissions.” Clear Skies would significantly curb SO2, NOX and mercury emissions by 2018 and is a marked improvement over S. 366 (Jeffords -- I-VT). That bill sets unreasonable emissions reduction targets on top of existing regulations and would cap CO2 emissions, a concept vigorously opposed by industry.

Metal Products & Machinery (MP&M): In a victory for common sense, EPA’s final MP&M regulation won’t look anything like the proposal unveiled during the final days of the Clinton Administration. The 2003 rule contains sensible guidelines and pretreatment standards for wastewater discharges at 2,400 industry operations nationwide. By contrast, the Clinton rule could have forced thousands of companies (89,000 facilities in 200 SIC codes) to spend $200,000-$500,000 annually in new compliance costs. EPA’s own estimates showed the costs outweighed the benefits by a 3-to-1 margin.

Mobile Machinery: On 2/27, the IRS’s proposed mobile machinery rule was dealt a big blow. Treasury Asst. Sec. Pam Olson sent a letter to Sens. Charles Grassley (R-IA) and Max Baucus (D-MT) stating that this proposal will not be made final until language regarding the definition of highway vehicles is included in an enacted highway reauthorization bill. This gives Congress time to weigh in on the definition of a highway vehicle. The IRS’s version would have meant higher taxes on industries including: oil or water drilling, utilities, commercial construction, timber, tower erecting, equipment leasing and mining.

Time for Governor, General Assembly to Lift Hood
And Give State Government a Serious Tune-Up

  By Jim Hyler

It’s time for Gov. Easley and the General Assembly to lift up the hood, roll up their sleeves and do what’s necessary to get state government operations running smoother than the engine of a NASCAR pole winner.

More than 25 years have passed since state government has had a full tune up. Since then every governor and General Assembly, urged on by various constituencies and special interests, have added new layers of bureaucracy and spent more on state government programs, policies and procedures. It has been much easier to add on than to change. The operation of state government has become Rube Goldberg-like with such things as 40 separate computerized payroll systems that can’t talk to each other.

Fortunately, there are encouraging signs that Gov. Easley and the General Assembly recognize the problems and seem ready to embrace some efficiency reforms. Gov. Easley made such efficiency reforms a cornerstone of his State of the State speech this week. The new Speakers of the NC House also held a public forum this week on “how to alleviate the state’s budget crisis and promote state government efficiency.”

Toward that goal, a year ago in February Gov. Easley created a Commission to Promote Government Efficiency and Savings on State Spending. I was fortunate to chair the group of business and legislative leaders from across the state. Good progress has been made since last February. Before the Commission was barely off the ground the General Assembly’s 2002 short session adopted efficiency recommendations that will produce more than $25 million in savings.

In December the Efficiency Commission made nearly 100 recommendations that, if implemented, could reduce state spending, allow a focus on core services and significantly reduce the budget deficit. For example, just a slight improvement in the present disarrayed information technology expenditures could save $70 million in spending.

Some of the Commission’s recommendations touch historic “turf” issues that will result in considerable debate. They include:

• Prospectively eliminating longevity pay.
• Selling certain state properties.
• Zero-based budgeting along with incentives to control costs.
• Privatizing additional state government services.
• Consolidating administrative functions of small school systems and small community colleges.
• Aggressively working toward the elimination of positions that become open as a result of attrition.
• Consolidating the many workforce preparedness programs.

Gov. Easley immediately followed up on these recommendations by directing his cabinet agencies to respond to them before the end of February.

While legislative members of the Efficiency Commission have indicated that several bills will be introduced to make improvements based on our recommendations, we realize that they all can’t be adopted this year.

We all believe, however, that the quantum changes necessary in this environment of budget gaps demand aggressive and proactive implementation by the Governor and General Assembly. Improving government to provide better service to taxpayers and save money should be a non-partisan issue that all can embrace. Progress on these reforms should be monitored and measured by an independent entity that may warrant some decision-making powers.

In February, Gov. Easley proposed a cap on state spending. That’s a step in the right direction. But the efficiency issue isn’t just slowing down spending or cutting budgets. It goes back to the basics. Throwing money at a problem can no longer be our government’s initial reaction. Instead our first answer to problem-solving must be to maximize the productivity of what exists. Our review makes it clear that an emphasis on efficient productivity has taken a back seat to spending far too long, hampering our abilities to meet new challenges and provide the services the public needs.

One thing is for sure. Unless the public demands action, state government will continue to muddle along, doing as well as it can with archaic practices and irregular and inconsistent funding patterns. North Carolinians deserve better than that. And our elected officials seem ready to deliver more than that. They’re off to a good start. Let’s hope they put the pedal to the metal and cross the finish line. For additional information about the Commission’s efficiency recommendations contact NC BEST at www.nccbi.org/ncbest.

Jim Hyler of Raleigh is vice chairman and chief operating officer if First Citizens BancShares Inc. and First Citizens Bank. He recently served as chair of the Governor ’s Commission to Promote Government Efficiency and Savings on State Spending. He is the 2002-03 chair North Carolina Citizens for Business & Industry (NCCBI), which serves as the state chamber of commerce.

Statement by Phillip J. Kirk, Jr.
Chairman, State Board of Education
President, North Carolina Citizens for Business and Industry

I have submitted my resignation as chairman of the State Board of Education, effective May 1, 2003, to Governor Easley.

The past five-and-one-half years have been exhilarating, challenging, and most enjoyable. Our public schools are leading the nation in progress and North Carolina has won much-deserved national recognition by so many groups and in so many different areas.

This has unquestionably been a team effort with the hard-working members of the State Board of Education leading the way. I have been tremendously proud to be a member of this board. As I have said many times, I have never been a member of a board that is so dedicated to children and educators, so willing to work hard and to take controversial positions while being so respectful and collegial with honest differences of opinion than this State Board of Education.

I researched Yogi Berra's philosophy to try to find a statement which best summarized my reasons for resigning at this critical juncture in our state's history. I found none so I went to my next favorite philosopher — Lefty Driesell. When he retired as a college basketball coach a couple of months ago, he said he was doing so because he was tired.

Well, after working 16-18 hour days, seven days a week for five-and-one-half years, I am just tired. In the future, I need to go to Rex Wellness Center at 5:45 a.m. more often than going to the office to read and answer e-mails.

It has been my honor to serve as chairman for the second longest period of time in state history. Dallas Herring served for 20 years and I never had any intention of topping that remarkable record.

Working as a team, I have been able to reach many of the goals I set when I met with Governor Hunt in 1997, visiting all 117 school systems at least once and more than 750 schools, begun the process of restoring respect for the teaching profession and public schools in general, implemented a Good News Presentation at the beginning of every State Board of Education meeting, helped to maintain and enhance public school initiatives in accountability, and worked to improve the salaries and working conditions for educators.

I am most grateful to North Carolina Citizens for Business and Industry -- our remarkable staff and volunteers -- for allowing me to serve on the State Board of Education. However, keeping NCCBI growing, successful, and effective needs my full attention and energy. This will be a most difficult and challenging session in the General Assembly and U.S. Congress. I need to be focused on meeting the needs of our members at NCCBI.

But I want you to know that I will never reduce my commitment to public education. I will maintain a high profile and heavy involvement in education as the chairman of the Workforce Development and Education committee of the North Carolina Economic Development Board, as well as being a member of its executive committee. There are no greater issues facing our state as we try to rebuild our economy and create jobs for our hard-working, productive citizens. I will also be able to resume being active on the board of directors for the Public School Forum, the North Carolina Travel and Tourism Board and Coalition board, and other groups I have neglected in recent years.

Time does not permit a complete listing of the progress we have made together in the past. However, we should all be proud of our remarkable record in increasing student achievement and student learning. No matter what our critics say, we can document substantial progress in every grade since the ABCs began. Our students are clearly learning more in math, reading, writing, computer technology, and other subjects. Our dropout rate has fallen three years in a row, but it is still unacceptably high. Our SAT scores are improving faster than any other state, but they are still unacceptably low.

We are supporting our teachers more with salaries, for example, going from 43rd in the nation to 21st. We have implemented a mentoring program for beginning teachers, salary increases for those with enhanced master's degrees and national board certification with our state ranking first in the nation in the number of teachers meeting this rigorous standard. We have been ranked first in the nation in improving teacher quality two of the past three years. The teacher turnover rate declined last year; however, it is still unacceptably high. I commend Governor Easley and the Education Cabinet for taking on this issue. It is most important.

The advances we have made in achieving safe, orderly, and caring schools; strong community, family, and business support; and effective, efficient operations are unparalleled in this nation.

There are many things I will miss -- working daily with the members of the State Board of Education, the tremendous State Board staff, our outstanding State Superintendent and good friend Mike Ward, and the dedicated employees in the Department of Public Instruction. I will miss the hugs from the children; the T-shirts, caps, and coffee mugs from the schools; the letters of praise and complaint who just want someone to listen to them, someone to answer their letters and to return their phone calls. As the soon-to-be chairman emeritus, I look forward to maintaining a close, but different relationship with each of you.

I am grateful to my employer, North Carolina Citizens for Business and Industry – its staff and volunteers -- for allowing me to serve in this position. To Governor Hunt for going out on a limb to appoint me to the State Board of Education and to the members for electing me four terms to serve as your chairman and to Governor Easley for continuing that support level and confidence level. To the administrators, support staff, and classroom teachers who have welcomed me beyond belief and expectations into their schools and classrooms. To the many pro-education groups with whom Superintendent Ward and I have had the unique pleasure of working with together. To our colleagues in the 59 community colleges and on the campuses of our public and independent colleges and universities.

Of course, I am most grateful to my family -- my wife, Margaret, who is completing her sixth year as co-president of a PTA, and four daughters, Angela, Wendi, Ashlee, and Allison. They have endured a lot, and I am grateful to them. However, none of us can ever recapture the time lost from doing some of the things we perhaps should have done in the past.

But today is also about the future! I am convinced that our state's leadership in business, in government, and in education remains committed to the notion that ALL children can learn and that MOST can learn at higher levels than we have expected in the past.

I am convinced that we will all remain committed to high standards and high expectations and that we will work together to be sure adequate resources -- both in money and in volunteer time -- are available to meet these goals.

Thank you and God bless you.

Text of Gov. Mike Easley’s State of the State Speech

Mr. Speaker, Sen. Basnight, Mr. Speaker, Lt. Governor Perdue, Members of the General Assembly, Chief Justice Lake, Members of the Court, Council of State and Cabinet; honored guests and fellow citizens. Thank you for your warm welcome. Before I start, I would like to acknowledge my family -- my wife Mary and my son Michael --- who are here tonight. I thank them for their love and support.

The shadow of war dominates our thoughts tonight. Brave young men and women are serving abroad, risking their very lives for American freedom. We pray for their safe return and for their families who wait in hope to see their loved ones soon. To the airmen at Seymour Johnson and Pope Air Force Base, the Marines at Cherry Point and Camp Lejeune, the soldiers at Fort Bragg, the National Guard and Coast Guard who are here tonight -- We are proud of you, and North Carolina is proud to be the most military-friendly state in America.

I last had the privilege of addressing this body two short years ago. Much has changed, but our values have stayed the same. A startling series of events has challenged us -- deadly acts of terrorism on our own soil, a prolonged national recession and an incredible number of natural disasters. North Carolina is the only state paying for a flood while we are in a drought and recovering from three ice storms. But what has stayed the same throughout this adversity is our faith in God, love for our families, respect for our fellow man, and the unshakeable belief that we can, and should, make tomorrow for our children better than today.

Those same values inspired our forefathers four centuries ago to sail rough waters in search of better days. Those same values inspired us to be the only state to keep schools open during the Great Depression and to open the first state university. Those same values helped man fly the first plane on our shores one century ago this year. Our forefathers were guided by a faith and love that inspired them to make this great state an even better place for their children. They demonstrated their belief that their children's dreams would not be sacrificed to temporary difficulties caused by factors beyond their control. Our accomplishments in these trying years demonstrate those same values. We are not only meeting the challenges; we are overcoming them.

For the past two years, all states have been stifled by budget deficits. We made the tough choices to get our finances under control. Other states are working to find billions to balance their books by June. But in North Carolina, we balanced our budget and protected our priorities at the same time. Other states are cutting back to four-day school weeks, slashing the classroom and releasing prisoners on the streets. Not in North Carolina. Not on my watch, and not on yours.

Our strategy is different. We reduced the size of government while we expanded educational opportunity. We have built on our strong educational foundation by adding two essential ingredients of academic success for our children.

Two years ago, we were one of only two Southern states that had no pre-k program. Today, we have More at Four, which will serve 10,000 four-year-olds in 91 counties this year. We had kindergarten classes packed with 30 students. Today, kindergarten and first grade classes have been reduced to 18, and we are starting on second and third grade this year. More children are staying in school as our dropout rate has fallen dramatically for the third year in a row. Test scores are up, attendance is up, and our competitive advantage is up. Character education is now taught across the state. Children are not only learning how to write, but what is right. Dress codes are working. Students are looking better and so are their test scores.

Our economic development prospects are also improving. Site Selection magazine praised North Carolina for our new job creation bill. And, for the second year in a row, they named North Carolina number one in business climate. Our landmark Clean Smokestacks Bill is a national model. We proved you can have cleaner air without higher electric bills. We tackled the skyrocketing costs of prescription drugs for our seniors. Our new Senior Care program helps them get their medication while they keep their health. People said we could not afford to go forward in this economy, but North Carolina will protect the greatest generation in any economy.

And while Washington still debates this issue, North Carolina passed the strongest Patients Bill of Rights in America.

And we have kept our people safe. Within days of that fateful attack when terrorists struck our nation, North Carolina took action. We did not wait for help from Washington. You gave me the authority to spend up to $30 million for equipment, response and training. A national survey recently showed that North Carolina has done more for homeland security than any other state in America. And our North Carolina National Guard has deployed and placed on alert over 6,000 troops who operate everything from Apache attack helicopters to Bradley fighting vehicles.

And we are not just talking about soldiers, troops and battalions -- but North Carolina families -- like Major Mike Hill, an Apache attack pilot. He is the husband of Rhonda Hill and the father of Michael, Brandon and Cameron. Rhonda is with the Guard's family support program. She and her children are here tonight. And Rhonda, all of North Carolina is proud to support you and all of our military families, as well as the troops. You should be proud of all this good work. But now, we must set our sights on what we can further achieve.

I challenge you, as you make decisions about this year's budget, to set aside thoughts about the problems of the moment and be guided instead by those same values that guided our forefathers.

We have made great strides, but there is more to do. And we will do it together. The prospect for bipartisan cooperation in both chambers has never been better. For that, I am grateful and excited about the opportunity to work with all of you, regardless of party. People do not know or care who makes progress -- they just care that progress is made.

Our budget is not just a numbers game. It reflects our values. For we know, where a man's treasure is, there also is his heart. Budgets are about educating our children, training our workers and helping the least of our people. We balanced our budget by cutting more than $1 billion a year and we reduced the state operating budget for the first time in 33 years. You had the courage to face reality and deal with adversity. We must continue to be disciplined ... setting our priorities.

First, protect all children and their rights to a quality education. No cuts to the classroom -- from pre-k through the university. Our economy now demands lifelong learning and we will provide it -- from the high chair to the rocking chair. This is a North Carolina value, and it will not change.

We will hire new teachers and pay them well -- we have moved from 43rd in the nation to near the top 20 in teacher pay. They are entrusted with our most precious resource, and their compensation should reflect that. Our Community College professors are 47th in the nation in pay. We must cure that inequity if we are to remain competitive in worker training. We cannot do it all this year, but we will get started. We will continue to reduce class size so teachers can teach and students can learn. If you give kids lower class size, they will give you higher test scores.

And college will stay affordable. Tuition will not increase this year.

We will make sure at-risk four-year-olds attend pre-k through More at Four. This program is working. We have kids who show up unable to speak English or recognize colors, shapes, numbers and letters. They leave ready to learn in any school in America. Some may say that we cannot afford to invest in every child's future in tough budget times. When it comes to protecting our classrooms, we draw the line. We will not sacrifice any child's future in any economy. But make no mistake; we do need change if we want our success to continue. We need to reform the way we develop our budget.

First, we must recognize that the surplus politics of the 90s are over. State tax collections will not grow in double-digits, and we cannot fund all programs for all people. As a government, we must focus on our core mission and strive to do it well. The budget I will submit meets that challenge and makes tough choices again. It cuts $800 million more in spending. It includes money to replenish our Rainy Day Savings Account and for renovations and repairs.

And it has no tax increase. My budget has no gimmicks or slight-of-hand. It is balanced with the discipline we need to maintain our AAA bond rating. You have made tough choices and the right choices over the past two years. It will not be for naught. I promise you that the first unbalanced budget or reckless spending bill sent to me will be vetoed the minute it hits my desk.

We cannot just budget from one election to the next. We must have a long-range plan of budget discipline to support our priorities. Our budget must be balanced for years to come. Here is what I believe we must do: First, state government must keep working to be more efficient. I am bringing together the best minds of the public and private sector. And my Cabinet, a great team that has stayed together and stayed focused, has become more efficient. A majority of state agencies have been cut by double digits since I took office. State employees have answered the call as well. They have done more with less without reward. They will not be overlooked in my budget this year.

Our state's business leaders have stepped forward too. The chair of NCCBI is heading a group creating a plan for long-term efficiency. Our retired state workers, the real experts on the system, have responded as well. Hundreds have offered their time and advice. Every dollar must go further this year than it did last year. Second, we must get off the old familiar road and be willing to embrace change. In that spirit, I have proposed a cap on state spending. The size of state government cannot grow faster than our economy. My new budget will be well below this cap, as it has been for the past three years. But without a mandatory cap, we could soon abandon budget discipline when the economy recovers. I want to guarantee that the overspending of the last boom never happens again.

Third, we have to eliminate politics as usual. I -- and future governors -- must cut unnecessary spending. The people deserve a line-item veto to cut the spending we cannot afford and do not need. I do not expect a line-item veto to be popular in these chambers, but I do ask you to let taxpayers vote on this measure. Fourth, I have met with the new legislators from both sides of the aisle and both chambers. The freshmen bring a fresh look to legislative life. They want to be home with their families sooner, instead of spending ten months on a budget that can be done in three. I agree. Let the people vote on session limits for the General Assembly. The Senate has already acted, and I challenge the House to act quickly to do the same. The current system is broken and cannot be defended. As much as I love seeing you, I don't need to see you on Halloween.

Efficiency must start here. Over 8 million citizens depend on your work. Until your budget is done, schools cannot buy books or hire teachers. State employees and local governments cannot balance their checkbooks. The legislature must be on the same calendar as the rest of the state.

And finally, we must get health care costs under control. We cannot allow federal mandates to destroy education and public safety investments. Let me be clear -- our health care programs help our most vulnerable citizens. We know that we will all be judged by how we treat the least of our people. But if we fail to control costs, and try to be all things to all people, we will soon be unable to provide anything for anybody. The only viable long-term solution is prevention. It works in the private sector and it can work in government. Diet, exercise and checkups prevent health problems. An ounce of prevention is worth a pound of cure -- and a pound of cure is getting too expensive to waste.

It is wrong to ask others to take care of us if we are not willing to take care of ourselves. Tonight I am proposing that the state increase its wellness benefit by one-third next year. It is the right investment to provide incentives to stay well. We will help those on Medicaid as well. Under our new ACCESS initiative, health providers will emphasize prevention, and begin enrollment this year. It will cost us less and provide patients more. If we cap spending, are more efficient, and control health care, we go a long way toward solving our budget problems. But these steps alone are not enough. We cannot just cut or tax our way out of a recession. We must grow our way out. That means getting North Carolina's economy headed back in the right direction.

We all realize that North Carolina is caught in a national recession. Too many Americans cannot find work tonight. Behind every unemployment number is a real person and a hurting family. That is why we have to act now. We know the national trade policy is exporting North Carolina jobs, especially textiles. Now I, and other Governors, will continue to ask Washington to stop hurting our workers. But the loss of low-skilled jobs is destined to continue. We need to face this reality, deal with it, and change our economy to provide new jobs. Now, we are not going to make any excuses. Yes, we have been dealt some bad cards -- but we have to play them, and we can win with them.

One state cannot control the national economy, but there are some things that North Carolina can do for North Carolina. And I suggest we get about the business of doing it. Tonight, I am proposing an aggressive economic stimulus strategy that will bring new jobs and long-term economic growth to our state. First, the near-term strategy will create 100,000 new jobs by investing in the state's infrastructure beginning immediately. I want to accelerate road improvement projects across North Carolina. Two weeks ago, I announced our plan called "Moving Ahead" so that we can use bonds -- already approved -- to fix thousands of miles of roads and bridges. The cost is already covered. This plan will create 33,000 new jobs right away. It will not only stimulate the economy, but it will save money and save lives.

Second, we must complete the expansion of the Wilmington Harbor to make the port available for more cargo. The expansion will increase our share of the import/export market and create 25,000 new jobs statewide, especially in the Piedmont where we depend so heavily on exports. We must finish this project by December to guarantee these new jobs. It will be in my budget. Industries across North Carolina are waiting for this gateway to international trade -- so we can do what we ought to be doing, export North Carolina products, not North Carolina jobs.

Third, our growing enrollment in education means more buildings at our universities and community colleges. That is why voters approved a $3.1 billion bond. These facilities will ensure colleges and universities continue to produce the workforce we need to compete. This year, we will issue bonds for capital projects that will create 43,000 new jobs and make our colleges more competitive. And fourth, as I visit public schools, I am struck by the number of trailers being used as classrooms. Far too many of our local governments are financially strapped. It is time for the state to help with school construction again. We need a new revenue source to support a state investment in school facilities.

I propose the state help those counties that are struggling this most -- coping with Medicaid costs, low tax base, and no way to borrow. The emphasis must be on low-wealth counties. It is the only way to build One North Carolina, and it is the only solution that is right, just and fair. But where do we go to get the money? We do not have to go anywhere to get the money; we just have to keep the money, here in North Carolina. Now you knew this was coming. Two years ago, I stood here and told you we are spending hundreds of millions of dollars building new schools in Virginia and Georgia while we are packing our kids in trailers at home.

Tonight, I tell you that we are also paying for schools in South Carolina and soon in Tennessee.

When you are sitting here this year, struggling with the budget, just remember that your colleagues in 39 other states have a revenue source that you do not have. That makes it more difficult for you to improve education and keep taxes down. Now I heard you loud and clear last year that you do not want a lottery in the budget. But now you hear me -- and a strong majority of our people -- loud and clear. We want to keep North Carolina education money in North Carolina.

Because next year another 100,000 five-year-olds are going to show up at the schoolhouse door. They deserve more than an overcrowded classroom and an overworked underpaid teacher -- and you don't have the money to pay for it.

The people want a separate Education Lottery Fund, just like the Highway Fund. If we keep our education money in North Carolina, we can reduce class size, provide pre-k, and still have $200 million a year for school construction. And create new jobs where they are needed the most.

Now, education and infrastructure are critical to economic growth. But we must be competitive at every level. Within days after I signed the new job creation bill, business began to call our Commerce Department. The incentive bill helped level the playing field for North Carolina in the competition for jobs. But we must create an environment that rewards discovery and innovation, and knowledge and technology.

We can do this by reforming our R&D tax credit to attract growth industries. We can do this by capitalizing on our commitment to the Golden LEAF Foundation. Golden LEAF has an aggressive biotechnology initiative. We are one of the few states poised to be the biotech capital of the world.

This initiative puts us in a great position to lure new business, research, jobs, and investments across the state. And the North Carolina Biotechnology Center, in partnership with the universities and community colleges -- with a modest state investment -- will send the message in a loud and mighty voice that North Carolina workers plan to lead the world in biotechnology and we will not be denied.

But the most important ingredient to attracting new jobs is a prepared workforce. Those businesses that look here -- who want to invest hundreds of millions in North Carolina -- demand a skilled workforce. The North Carolina workforce of today, tomorrow, and the next decade will be highly skilled. They know the investments we are making, and they know they are paying off.

Now, contrast that with the majority of other states that are cutting education -- 29 are cutting higher education and 23 are cutting K-12, while we are investing more in education. Our strategy is simple: In the future, the most skilled workforce in America will be found within the borders of this state. I like North Carolina's position. But we have to stay disciplined and true to our values.

I want you to be proud of what you are doing for the people of North Carolina.

We must make sure that every North Carolinian has a fair chance to succeed, whether their ancestors arrived centuries ago or just last week. And I say if you come here for freedom, if you come here to work hard and raise your family in a land of opportunity, and if you come here to make this a better place than when you arrived -- then I say welcome. "Todo aquel con buena voluntad esta bienvenido en Carolina del Norte." In other words: All people of good will are welcome in North Carolina. We need your talents, your skills, and your hard work. That is not just good policy. That is a North Carolina value. We are making the right choices. We are getting the state turned around, but we must finish the job.

I started tonight by remembering our brave soldiers performing their mission abroad. It must be our mission at home to be worthy of their service and their sacrifice. So let us pledge tonight to build the One North Carolina that we all want and they fight to defend. We can start by fixing our budget, growing our economy, and keeping our promise in education. We cannot rest until the achievement gap is gone, jobs are plentiful, and people are secure. These are goals worthy of a great state and a great people. They are the people you represent. They have entrusted their hopes, their dreams and ambitions in our hands. We must embrace their aspirations as our own -- embracing and renewing our commitment to the values of our generation. Thank you, and God bless North Carolina.


END OF NEWSLETTER