Legislative Bulletin for March 21, 2003


MARCH 21, 2003	ISSUE. No. 8	2003 LONG SESSION
*Published every Friday during legislative sessions exclusively for NCCBI members*

Governor asks NCCBI leaders to head up effort
to implement government efficiency measures

Gov. Mike Easley came to NCCBI’s Annual Meeting on Wednesday to thank the association for its support for his budget reform and efficiency efforts and to announce that he is naming a permanent council of business leaders to study ways to reduce government spending. Easley said the Business Council for Fiscal Reform mainly will work to ensure the implementation of recommendations advanced by the Governor’s Efficiency Commission, which issued its final report in December.

Easley appointed several NCCBI figures to the Business Council for Fiscal Reform, including Jim Hyler of Raleigh, whose year as NCCBI chair ended at the Annual Meeting. He led the Efficiency Commission and has stressed the need for some mechanism for ensuring that the commission’s proposals are adopted. Easley also appointed Sue W. Cole of Greensboro, the U.S. Trust Company of North Carolina president and CEO who was installed as NCCBI’s new chair at the Annual Meeting. Others the governor appointed include Bill Coley, the former Duke Power president; Jim Hance, vice chairman and CFO of Bank of America; and Ken Thompson, president and CEO of Wachovia Bank. Easley said he would appoint additional members soon.

"This council will be comprised exclusively of business leaders, with the goal of ensuring that government operates as efficiently as possible," said Easley. "Only with a sustained effort toward reducing the costs of government can we lower taxes in the future."

The Governor's Commission to Promote Government Efficiency and Savings on State Spending in December issued its final report on how to make government more efficient. By mid-February, state agencies had reviewed the recommendations and were constructing plans or offering alternatives to implement the recommendations. The council will oversee progress toward action on these recommendations.

"You know, and I know, that too many of these reports sit on the shelf," the governor told the thousand or so people attending the NCCBI luncheon. "These commissions form in bad times, make their reports in time for the recommendations to be forgotten in good times. The cycle repeats itself, and the cycle must be broken. Efficiency cannot wait – and these business leaders will not let it wait until the next recession."

Cole takes NCCBI gavel pledging to focus on basic issues
Sue W. Cole of Greensboro, the president and CEO of U.S. Trust Co. of North Carolina, was installed Wednesday as 2003-04 chair of NCCBI during the association’s 61^st Annual Meeting in Raleigh. She told the Board of Directors that she would focus on such basics as membership services, lobbying for core business issues and enhancing the association’s financial structure. Cole becomes the first woman to lead the organization in its 61-year history. She succeeds Jim Hyler of Raleigh, the vice chairman and COO of First Citizens Bank.

In her remarks during the board’s annual business meeting, Cole said, ”My personal bias is to create new things, to create change. But what we need to do is to focus on the basics. We need to maintain and improve the financial basis of the organization. We need to focus on membership, and remember that retaining a member is as important as getting a new member. We need to listen to our constituencies, which includes lobbyists and legislators. We need to expand our influence with legislators and we need to focus on some basic business issues.”

U.S. Trust Company of North Carolina has offices in Greensboro, Charlotte and Raleigh and maintains about 750 client relationships in the Carolinas, Georgia, Kentucky, Tennessee and West Virginia. The private banking firm has assets under administration exceeding $3.4 billion.

Cole downplays the importance of being the first woman to lead NCCBI, which serves as the state chamber of commerce and state manufacturers association. “You wear a tie, I wear high heels,” she is fond of saying. “I contend that both are pretty uncomfortable and inconvenient.” In a cover story about her to be published in the April issue of the North Carolina Magazine, she says: “The image of North Carolina — and thus NCCBI — over the years has been that of a more conservative, white-male environment. NCCBI has, and should, reflect the business community at large. Today, the number of female lawyers, doctors, professionals, business owners, board members and management trainees — they’re all rising. NCCBI’s membership reflects that and will continue to do so, and thus the association’s leadership is following suit.”

Cole is a 1972 graduate of the University of North Carolina at Greensboro, where she majored in business administration and economics. She earned her master’s of business administration from UNC-G in 1977. Before joining U.S. Trust in 1987, Cole served as a senior vice president at North Carolina National Bank, where she oversaw corporate banking services in the Greensboro area and managed the retail branch system.

Cole currently serves as a trustee of UNC-G and is a member of the CEO Advisory Council for Guilford Technical Community College. She was chairman of the Greensboro Area Chamber of Commerce in 1993. She also has served as chairman of the UNC-G Bryan School of Business & Economics Advisory Board, chairman of the Guilford College Board of Visitors, and president of the Greensboro Center City Corporation. Cole and her husband, Gordon, have two daughters.

Bob Ingram delivered a stirring keynote address at the Annual Meeting. The speech contained many surprising statistics on the role that pharmaceuticals play in the rising costs of health care. A text of his speech is reprinted below. NCCBI will offer video streaming of portions of the speech at its web site next week.

Members praise decision to drop Annual Meeting’s sit-down dinner
Responding to suggestions from members voiced in last summer’s satisfaction survey, NCCBI dropped the sit-down dinner at its Annual Meeting this year and switched to a two-hour reception held amid a jammed-packed trade show. Judging by the comments of dozens of members, the switch was a total success. Many said they liked having the time to catch up with old friends from around the state and to make new business contacts while strolling the Expo and sampling food and beverages.

About 1,000 people attended the luncheon and roughly 700 returned for the reception. There were 84 exhibitors at the daylong Expo trade show, which was a complete sell-out.

The Annual Meeting activities actually began Tuesday with an afternoon orientation session for new members of the Board of Directors, which was followed by reception for the full board. The meetings were held at the N.C. Museum of Art. The evening concluded with drawings for prizes to the directors who had recruited the most new members in the past year. Kelly King of BB&T brought in 15 new members and John Forlines of Bank of Granite was close behind at 13.

NCCBI ending its fiscal year slightly in the black
NCCBI took in roughly $2.7 million in revenue from all sources over the past 12 months and should end the year slightly in the black at the end of its fiscal year on March 31, Treasurer Horace Johnson of Raleigh, the Ernst & Young executive, reported to the Board of Directors during its annual business meeting. That’s a pretty good result, he said, considering that the budget anticipated that NCCBI would barely break even because of the stagnant economy.

Johnson pointed out, though, that the association actually had a deficit of about $25,000 over the year but the red ink was more than covered by profits from the North Carolina Magazine. For tax and other reasons, the magazine is treated as a separate profit center within the association’s overall budget. Johnson said magazine expenses were almost exactly on budget but much higher than expected advertising revenue allowed the magazine to post a year-end profit of around $142,000. Taken together, NCCBI as a whole likely will end the year in the black, but little of that is in actual cash, he said, and mostly results from strict accounting methods which nonprofits like NCCBI are required to follow. However, that compares very favorably with the less than $1,000 left on NCCBI’s books at the end of last fiscal year.

For the first 11 months of the fiscal year, membership dues revenues were $186,000 above budget, Johnson pointed out. However, the association had higher expenses for the year, particularly in steep increases in the cost of providing health insurance to the staff.

Johnson was repeatedly praised for his volunteer work over the past seven years as NCCBI’s treasurer. He relinquished the post to Steve Zaytoun of Cary, the insurance broker who heads Zaytoun and Associates. Johnson will continue serving as chair of the NCCBI Finance Committee, the group of board members that meets quarterly to review association finances and advise it on budgetary issues.

New officers, board members begin service
The new officers and board members who will serve in the year ahead were announced at the Annual Meeting. They are as follows:

First Vice Chair: Barry W. Eveland, IBM’s top executive in North Carolina, will replaces Bill Coley, the Duke Power Co. president who retired last month. A career IBM employee, Eveland is a native of Pennsylvania and a graduate of Lehigh University. He has managed IBM’s operations in North Carolina since 1993.

Second Vice Chair: Stephen Miller of Asheville, senior vice president of The Biltmore Company, will serve as NCCBI’s Second Vice Chair in the year ahead and will lead the association’s annual membership campaign. Miller has worked for The Biltmore Company since graduating from UNC-Chapel Hill. Miller, who oversees the new Inn on Biltmore, is active in civic affairs in the Asheville area, especially in the healthcare field as chair of the Memorial Mission-St. Joseph’s Hospital board.

Treasurer: Stephen K. Zaytoun of Cary, president of the Zaytoun & Associates Inc. insurance brokerage company, will serve as NCCBI treasurer in the year ahead. He succeeds Horace Johnson of Ernst & Young in Raleigh, who has given several years of beneficial service to the association in that important volunteer role. Zaytoun, a 1979 graduate of UNC-Chapel Hill, is active in civic affairs in Cary and is a former chair of the Cary Chamber of Commerce.

New and Re-elected Board Members: FOUR-YEAR TERM: David S. Brody, Brody Associates, Kinston; Michael R. Coltrane, CT Communications Inc., Concord; J. Keith Crisco, Asheboro Elastics Corporation, Asheboro; Sharon A. Decker, Doncaster, Rutherfordton; Michael Edwards, Weyerhaeuser, Fort Mill, SC; Marye Anne Fox, North Carolina State University, Raleigh; Julie A. Garella, McColl Garella LLC, Charlotte; Glenn R. Jernigan, Glenn R. Jernigan & Associates, Fayetteville; Chief Leon D. Jones, Eastern Band of Cherokee, Cherokee; Dr. Nannerl O. Keohane, Duke University, Durham; James R. Konneker, The Kelly-Springfield Tire Co., Fayetteville; Robert F. Lowe, Lexington State Bank, Lexington; Robert L. Mattocks II, Jenkins Gas & Oil, Inc., Pollocksville; Louise F. McColl, McColl & Associates, Wilmington; Henry A. Mitchell, Smith, Anderson, Blount, Dorsett,, Mitchell & Jernigan, Raleigh; Charles D. Owen III, Charles D. Owen Manufacturing Co. Inc., Swannanoa; C. Steve Parrott, Sprint, Wake Forest; J. Eric Pike, Pike Electric Inc., Mount Airy; Orage Quarles III, The News & Observer, Raleigh; Joseph E. Thomas, Stallings & Thomas Inc., New Bern; Dennis A. Wicker, Helms Mulliss & Wicker, Raleigh; John G. Winkenwerder, South Asheville Hotel/Hampton Inn Suites, Fletcher; Dr. Phail Wynn Jr., Durham Technical Community College, Durham; ONE-YEAR TERM; John L. Atkins III, O’Brien/Atkins Associates, Research Triangle Park; Mary Clara Capel, Capel Inc., Troy; Lynn M. Lail, Hickory Furniture Mart, Hickory; C. Michael Fulenwider, Fulenwider Enterprises Inc., Morganton; TWO-YEAR TERM; William F. Forsyth, Murphy Electric Power Board, Murphy; THREE-YEAR TERM; R. Horace Johnson, Ernst & Young LLP, Raleigh; Douglas L. Stafford, Lowe’s Motor Speedway, Concord.

NCCBI restates its opposition to higher taxes
Former legislator Art Pope of Raleigh, a Republican who served four terms in the House before retiring last fall, distributed an open letter to many business people on Wednesday sharply criticizing NCCBI for supporting Governor Easley’s budget reform and efficiency initiatives. Pope and his father, John W. Pope Sr., who are president and chairman, respectively, of Variety Wholesalers, signed the letter.

The letter specifically criticizes NCCBI for supporting a half-cent increase in the state sales tax in 2001, a position the Executive Committee took unanimously to help protect North Carolina’s Triple A credit rating. The letter also criticizes NCCBI’s more recent actions to help solve the state’s budget crisis.

Last week the NCCBI Executive Committee voted unanimously for a package of budget framework initiatives advanced by the governor. The package includes:

In announcing the package, Jim Hyler, the outgoing NCCBI Chair, said, “We believe these proposals, taken together, constitute a road map that will help return North Carolina to a sound financial footing and set the stage for a more efficient, more accountable state government in the near future.”

The letter erroneously implied that NCCBI has endorsed a new tax that will generate more than $1 billion over the next two years. That apparently refers to the fact that NCCBI reluctantly agreed, as part of the package above, not to oppose a two-year delay in a sunset of the half-cent sales tax and the higher state income rate on wealthy individuals.

Last week Hyler said deciding not to oppose continuing the existing tax structure “was a tough decision for us because NCCBI is opposed to higher taxes. But the times demand some flexibility. The Governor has taken a reasonable approach in his budget that during this economic downturn deserves an in-kind response from not only NCCBI, but also everyone. We’re all in this together.”

Hyler emphasized that NCCBI’s position on continuing the taxes “is built on good faith that the Governor will hold the line on his proposed cap on state spending, follow through on spending cuts and begin implementing steps to bring about structural reform to take cost out of state government.”

NCCBI officials would welcome the opportunity to discuss these issues further with any member who has concerns. Please call Phil Kirk as 919-836-1407, Leslie Bevacqua at 836-1406 or any member of the Executive Committee.

Legislative Actions

Hyler touts efficiency ideas to House leaders
House Speakers Jim Black and Richard Morgan on Tuesday held the second of their seminars to hear ideas from business leaders on economic recovery. In addition to the speakers, several members of the House attended to hear the suggestions offered by the business community. Speakers included NCCBI outgoing chair Jim Hyler; Joan Myers, executive director of the North Carolina Electronics and Information Technology Association (NCEITA); Erica Upton-Peterson, executive vice president of the North Carolina Agribusiness Council; Dale Carroll, representing the North Carolina Economic Developers Association; and Gerry Hancock, representing the North Carolina Travel and Tourism Coalition.

Jim Hyler spoke in his role as both NCCBI’s chair and as chairman of the Governor’s Commission to Promote Government Efficiency and Savings on State Spending. Hyler gave background on the commission’s charge and pointed out a few of the recommendations the commission has made including: prospectively eliminating longevity pay for state employees, selling certain state properties, privatizing additional state government services, consolidating administrative functions of small school systems, and aggressively working toward the elimination of non-essential positions in state government. He noted that about half of the nearly 100 recommendations need legislative action to be implemented and urged members of the General Assembly to move forward on these items. State agencies have already been asked to address recommendations that don’t require legislative action. You can download a copy of the Efficiency Commission recommendations from the NCBEST website by clicking on www.nccbi.org/ncbest.

Hyler also shared some of NCCBI’s positions on economic development and pointed out ways to help make North Carolina competitive with other states. Included in this list was: supporting efforts to make state regulations consistent with federal regulations throughout all state agencies, and looking closely at the state’s infrastructure needs, including water, sewer and roads. Hyler said “when companies look at locating a new facility, they need to know that the infrastructure is going to be in place to support their facility. In addressing transportation needs, real efforts need to be made to get the Department of Transportation and the Department of Environment and Natural Resources working together to get projects permitted in a timely way so projects that have been planned for years can move forward.” He encouraged members of the General Assembly to support economic incentives that will help keep North Carolina competitive with other states and to maintain a balance between new and existing industry when utilizing incentives.

Carroll offered these comments: “Our recommendations today focus on increasing North Carolina’s ability to retain and attract the quality jobs provided by business and industry. We have based them on the findings in the 17^th Annual Corporate Survey conducted by Area Development magazine and studies completed in recent years in North Carolina by Ernst & Young, Anderson Economic Group, and KPMG.

“The Area Development Survey for 2002 confirmed that quality of life issues, while important, are secondary to factors related to the cost-effectiveness of starting and operating a facility. Benchmarking the 2002 results with the 2001 survey confirms that a skilled workforce and a productive workforce remain as the top two site selection factors. Using this information, the NCEDA board recently approved a Legislative Agenda for 2003 and supports the following:

“In addition to these financial-related economic development programs, NCEDA has also focused its resources on workforce development. Our top recommendations are to:

Consolidate workforce-training programs.
Emphasize retention of existing businesses.
Review the best practices for delivering workforce training, unemployment insurance, business climate, and economic development.
Encourage career opportunity training in middle and high schools.

“NCEDA is eager to work with you to enhance our ability to create new jobs and investment and help North Carolina become a leader in economic development again,” Carroll concluded.

Almost half of North Carolina’s high-tech companies have either shut down or moved to other states over the past two years, NCEITA President Myers told the legislators. She said that trend would continue unless the state does more to help technology companies, including a new tax credit for businesses that add technology jobs and cash grants to high-tech companies that hire university graduates from North Carolina. Myers told the legislators that number of high-tech companies in North Carolina has declined 45 percent in two years, from 4,311 to 2,392. She said NCEITA is proposing that technology companies get a 5 percent tax credit for all R&D expenditures in North Carolina. A 5 percent R&D tax credit already is available under the Bill Lee Act, but it only applies to companies that are profitable and thus pay state income taxes. Most high-tech startups lose money for several years so the credit does them no good, Myers said. She also proposed that technology companies that hire graduates of North Carolina colleges get a rebate of up to 25 percent of the income taxes paid by those workers. Myers said the tax credits will more than pay for themselves in lower unemployment and higher wages.

Speakers Black and Morgan indicated that they would take remarks made by the presenters into account when looking at legislative issues and urged the participants and others attending the seminar to get any additional recommendations to them in writing. If NCCBI members have recommendations about economic recovery that they would like to send to Speaker Morgan and Speaker Black, they can do so by mailing their suggestions to:

James B. Black                         Richard T. Morgan
Speaker of the House                 Speaker of the House
Legislative Building                     Legislative Office Building
Raleigh, N.C. 27601 – 1096        Raleigh, N.C. 27601-1096

House passes bill giving schools flexibility on making up snow days
The House voted 94-13 Thursday to give final approval to legislation that would allow school systems to have longer school days to make up for days missed because of winter weather. H. 340 School Calendar Flexibility/Inclement Weather now moves to the Senate. State law requires schools to be open 180 days a year and to meet a minimum of hours each day. But several school systems would have to keep schools open well into June to meet both requirements. The bill waives the 180-day requirement for school systems hit with "unusual and extraordinary" bad weather but require them to make up the lost class time by extending the school day. It applies only to the current school year.

'Smart Growth' committee, which never met, disbands
The legislative committee created two years ago and charged with recommending "smart growth" ideas to the General Assembly has disbanded without ever meeting. The Growth Strategies Oversight Committee was supposed to carry on the work of a 37-member commission that spent most of 2000 examining ways to help local governments deal with urban sprawl issues. Senate President Pro Tem Marc Basnight appointed six senators to the committee in February 2002 but House Speaker Jim Black didn’t make his appointments until Dec. 30, less than a month before the commission’s charter was set to expire.

Senate committee approves leasing new prisons
The Senate Finance Committee on Tuesday favorably reported S. 227 Lease Purchase Three New Prisons, a bill that would build three prisons, each with 1,000 beds, through a lease-purchase contract with Carolina Corrections, a private company. It would cost the state $390 million to lease-purchase the new prisons if the contract is finalized before June 30. After that date, a new building code takes effect that prison officials estimate could add as much as $22 million to the cost. The state will open three new prisons later this year, all built and operated by Carolina Corrections, but projections indicate that, because of North Carolina’s growing population, it will have about 7,000 more inmates than beds by 2010. The new prisons are in Alexander, Anson and Scotland counties.

House panel considers extending law on utility territories
The House Public Utilities Committee on Wednesday took up H. 356 Remove Sunset/Municipal Electric Service, legislation that makes permanent a temporary law that gives cities the power to choose which utility provides electricity in newly annexed areas. Currently, when cities annex areas where the electricity provider is different from the primary provider for the rest of the municipality, the city may choose to give the incumbent utility rights to continue serving that area. That law, however, is scheduled to expire Dec. 31. The N.C. Association of Electric Cooperatives is advocating the legislation. ElectriCities has taken no position on the bill.

Session Limits: The Senate on Wednesday gave second- and third-reading approval to S. 274 Session Limits Conforming Change. The bill by Sen. David Hoyle (D-Gaston) would move the start of the biennual General Assembly session to the first Wednesday in December from the second Monday in January, if voters approve a session limits constitutional amendment. The bill now goes to the House.

Banking Commissioner: The Senate on Wednesday gave second- and third-reading approval to S. 327 Confirmation of Banking Commissioner, a bill by Sen. R.C. Soles (D-Columbus) confirming the appointment of Joseph A. Smith as state banking commissioner through March 31, 2007. Smith was appointed roughly two years ago to complete the term of the retiring Hal Lingerfelt.

Honoring Larry Justus: The Senate Judiciary II Committee favorably reported a bill Thursday that would rename the Western Justice Academy in Edneyville after Rep. Larry T. Justus, a Henderson County lawmaker who died last fall. Justus, who was 70 when he died, served 18 years in the House.

Bills of Interest Introduced This Week

H. 548 (Michaux and Stam) Federal Election Funds Appropriation - An act to appropriate funds to the state Board of Elections to match federal funds on a 19-1 ration to implement the Help America Vote Act of 2002 (HAVA), so as to improve election administration, to meet maintenance of effort requirements of HAVA, and to establish the election fund required by the act.
H. 549 (Michaux and Stam) Establish Election Fund To Implement HAVA - An act to establish the Election Fund required by the Help America Vote Act of 2002 as a condition for receiving federal funds under that act.
H. 557 (Jeffus and Culp) State Health Plan: Increase Wellness Benefit - An act to increase the wellness benefit under the Teachers' and State Employees' comprehensive major medical plan. H. 560 (Holliman) Disapprove Certain Life Insurance Rules - An act to disapprove the administrative rules governing life insurance replacement.
H. 562 (Alexander and Rhodes) Charlotte Photo Speed Measuring Systems - An act to authorize the city of Charlotte to use photographic speed-measuring systems during a three-year pilot program in designated corridors; to authorize the city of Charlotte to establish civil penalties for speed limit and school zone speed limit violations; and to authorize the North Carolina Criminal Justice Education and Training Standards Commission and the secretary of Crime Control and Public Safety to approve standards for the photographic measuring systems.
H. 565 (Tolson) IT Gap Analysis/'Hack Attack' - An act providing for the evaluation of the state's information technology security policy and standards.
H. 566 (Gibson and Tolson) Disapprove Swift Creek Reclassification - An act to disapprove the administrative rule reclassification by the Environmental Management Commission of portions of Swift Creek and Sandy Creek in the Tar-Pamlico River Basin that would have the effect of imposing certain management strategies applicable to outstanding resource waters (ORW) in the watershed of these creeks.
H. 567 (Allred) Increase Out-Of-State Tuition/UNC System - An act to provide that out-of-state tuition must be set at a level to recover not less than the full cost of the education.
H. 578 (Moore) Eliminate Mandatory Retirement for Judges - An act to eliminate the mandatory retirement age for judges and justices of the General Court of Justice.
H. 583 (Wainwright) Wetlands Reimbursement/Local Tax Base - An act to require state and local government agencies that acquire land for Wetlands migration to reimburse the county in which land is located for its lost taxes due to the acquisition.
S. 464 (Hoyle and Clodfelter) Managing Debt Capacity - An act to create the Debt Affordability Advisory Committee and the Capital Projects Priority Committee.
S. 467 (Hartsell) State Pays 100 Percent of Medicaid/Phase In - An act to provide that the state shall pay one hundred percent of the nonfederal share of Medicaid costs phased in over a ten-year period.
S. 469 (Hartsell) Unfair Trade Practices/Life Insurance Sales - An act to provide that certain conditions placed on exclusive agency contracts for the sale of life insurance or financial services are unfair methods of competition and unfair or deceptive trade practices.
S. 470 (Hartsell) Compensation Of Trustees/Other Fiduciaries - A bill to be entitled a law affecting the compensation of trustees and other fiduciaries.
S.481 (Gulley) Adjust Workers' Compensation Award Schedule - An act to adjust and update the award schedule for injured employees seeking compensation under the Workers' Compensation Act.
S. 487 (Gulley) Durham Auto Tax - An act to authorize the city of Durham to collect a general municipal vehicle tax of up to ten dollars on vehicles resident in the city.

State Government

Commerce finds 15 counties are better off, 10 worse than a year ago
Ten counties around the state are worse off economically than they were a year ago but 15 are in better shape, the Commerce Department said Tuesday in releasing an updated accounting of economic conditions in all 100 counties. The county tier designation list is important because where each county ranks – from Tier 1 most economically distressed to Tier 5 wealthiest – determines the value of business tax credits that apply there. By law the list is updated each year and are based on population growth, unemployment rate and per capita income. The revised list is reprinted below.

In the 2003 evaluations, Richmond, Bladen, McDowell, Sampson, Burke, Cumberland, Wilkes, Davidson and Randolph counties moved down one tier level to a more-distressed designation, while Gates County moved down two tier levels. Hyde, Yancey, Cherokee, Hoke, Madison, Pamlico, Pasquotank, Pender, Haywood, Nash and Watauga all moved up one tier level to a less-distressed ranking. Davie, Clay, Camden and Ashe and moved up two tiers. All other counties remained at their 2002 tier levels.

Tier designations determine a variety of economic development opportunities available to each county in terms of the available amount of tax credits for job creation, worker training and investment in machinery and equipment. Businesses locating or expanding in counties that are more economically distressed receive greater tax credits than those that locate in more prosperous areas. Potential benefits to companies under each tier designation include:

In addition, counties in Tier 1, 2 and 3 are eligible to receive financial assistance through the state's industrial development fund, which provides new and existing firms with $5,000 in additional funding for each new job created, up to $500,000, to provide infrastructure to new or existing sites.

State recovers its stolen copy of the Bill of Rights
Gov. Mike Easley said Wednesday that North Carolina has safely recovered the state’s original copy of the Bill of Rights, a document that was stolen in 1865 during the Civil War by a soldier in General Sherman’s army. It is one of 14 original copies of the Bill of Rights that were owned by the 13 original colonies and the federal government. It was recovered Tuesday in Philadelphia through a collaborative sting operation involving the FBI and the National Constitutional Center. Around 1925, North Carolina’s Secretary of History refused to purchase the stolen document and demanded its return. Another offer to purchase the document was made in 1995 and was similarly rejected. The National Constitutional Center in Philadelphia recently received an offer to purchase the document for $5 million from an unknown seller. The center subsequently authenticated the document as North Carolina’s copy. Gov. Rendell of Pennsylvania advised Gov. Easley in late February regarding the document and the offer to purchase. Easley and his staff then set up a plan to locate and seize the document.

Visits to state parks climb 5%
A record 13.2 million people visited North Carolina’s state parks in 2002, an increase of 5 percent over 2001, according to the N.C. Division of Parks and Recreation. During the year, five of the system’s 33 parks and recreation areas logged more than one million visitors. Those are Jockey’s Ridge and Fort Macon state parks and Falls Lake, Jordan Lake and Kerr Lake state recreation areas. The state parks system has a field staff of 299, including 156 rangers and superintendents.

Supreme Court asks for more details on redistricting maps
The N.C. Supreme Court gave a Johnston County judge 40 days to explain why he ruled that redistricting maps drawn up last year were unconstitutional. The order, signed by Chief Justice Beverly Lake Jr., asks Superior Court Judge Knox Jenkins to provide "additional findings of fact" about his decision to reject maps drawn up when Democrats still controlled both chambers of the General Assembly. Jenkins then drew his own maps, which were used in last fall’s legislative elections.

Names in the News

Cong. Mike McIntyre (D-7^th) has been named to two subcommittees of the U.S. House Armed Services Committee. McIntyre was named to the Tactical Air and Land Forces Subcommittee, which is responsible for all aviation programs, ammunition programs and modernizing the National Guard and reserve forces. He was also named to the Terrorism, Unconventional Threats and Capabilities Subcommittee, which is responsible for Department of Defense counter-proliferation and counter-terrorism programs and special operations. McIntyre is co-chairman of the Special Operation Forces Caucus and represents the Armed Services Committee on the U.S. Naval Academy advisory board.

Andy Dedmon, a five-term Democrat from Cleveland County who was defeated for re-election last fall, has begun working as a contract lobbyist for Blue Cross Blue Shield last. Dedmon, a real estate agent, served on the finance and insurance committees last session.

Meredith Norris, a former top aide to Democratic House Speaker Jim Black, has started working for the N.C. Partnerships for Economic Development, the umbrella organization for the seven regional economic development organizations. She will focus on lobbying and communications. Norris was a top assistant to Democrat House Speaker Jim Black last year and left that job to briefly work for the Charlotte Chamber of Commerce.

Former Cong. Eva Clayton of Littleton has accepted a job as assistant director-general of the United Nations Food and Agriculture Organization. Clayton, who served 10 years in Congress and sat on the Agriculture Committee, will be based in Rome.

Text of Robert Ingram’s Keynote Address at NCCBI Annual Meeting

Good afternoon. I welcome the opportunity to have a few minutes to speak with you today, even though I suspect that some of you here have a bit of a love/hate view of the pharmaceutical industry. On the one hand, we all love what the pharmaceutical research companies give us: new medicines that lower our cholesterol and blood pressure, that fight our cancer, battle our viruses, and generally keep us and the people we love healthy and active.

But let’s face it - we don’t like paying for pills, no matter how innovative they are or how miraculous their effect on our life. Many of you have to pay for the health care of your employees, and you’re seeing those costs escalate while other pressures on your business are forcing you to find a way to cut costs overall. So where do you look? I’ll bet you look back to the money you spend on pharmaceuticals.

Over the next few minutes, I'd like to quickly give you a few reasons why prescription medicines - and the pharmaceutical research industry - provide value to you as an individual, and as an employer. And I’d like to do that by focusing on a few myths and realities about the industry in general.

The first myth: drug prices are skyrocketing.

The reality is that volume and new products, not price, are driving up costs. Today, the average life span is close to 80 years of age and counting. Thirty-five million Americans are now over age 65, and in just 30 years, that number will double to 70 million. The problem is that elderly patients consume more medicines - up to 12 prescriptions per year on average for a person aged 75.

More people, taking more medicines, leads to increased spending on prescription medicines. But increased drug spending is not the same as an increase in drug prices. In fact, of the total growth in sales of 13.6% in 2000, less than 4% was due to price increases. Almost 10% was due to increased use of medicines.

Which brings me to my second myth: pharmaceuticals are to blame for the rising cost of medical care.

The reality is that the more we spend on appropriate pharmaceutical care, the more we save in long term costs for health care. The most expensive item in the health budget is hospital care - 32 cents on the healthcare dollar - followed by physician costs at 22 cents. Prescription drugs only account for 9 cents of every dollar spent on health care.

The irony is that those 9 cents save a whole lot more money by avoiding the need for you or your employees to seek more expensive medical care - like going to the hospital to treat an asthma attack.

Take AIDS. In the early 90's, most AIDS patients died within two years of diagnosis. By 1996, AIDS dropped out of the top 10 leading causes of death in the United States. Why?

Because in 1984, scientists at Burroughs Wellcome discovered AZT – the first treatment to fight HIV/AIDS. In the first 16 months after AZT came to market, hospital inpatient care dropped 43%.

AIDS therapies today cost approximately $16,000 a year per patient. But before those therapies were available, an AIDS patient could rack up $100,000 a year in hospital bills - before they died.

Are we spending more today on AIDS medicines? Yes, but we are saving millions in the overall cost of medical care. And people with AIDS are living - and productive - members of our communities.

A second example: cardiovascular disease. Sixty-one million Americans have one or more types of heart disease, and nearly one million of them die each year. Heart disease costs almost $300 billion a year in healthcare and lost productivity. One way to treat the disease is surgery, at costs from $21,000 to $47,000 a pop. Alternatively, you can pop a pill at a cost of around $1,000 a year. And the added benefits are significant. Beta-blockers, for example, can reduce death rates by 35% and sharply reduce hospital admissions, stays, tests and procedures.

Are we spending more today on medicines to fight cardiovascular disease? Yes, but investing in prescription medicines to save all those additional costs - and suffering - sounds pretty good to me as both a patient and an employer.

But our critics tell us that we are not spending our money wisely - too much on Direct to Consumer advertising, for example. The truth is that DTC is a minor cost compared to R&D, and has an important role to play in educating the public.

You might be surprised to learn that the pharmaceutical industry is the main provider of patient and physician education. Often patients learn about disease symptoms and new treatments for their condition through DTC advertising, and are prompted to visit their doctor - so patients and their physicians see the value in this kind of advertising.

GSK’s migraine medicine - Imitrex - was the first innovation in migraine treatment in over 40 years. Until Imitrex, there was little reason to talk to the doctor - all sufferers could do was pop a pain pill and stay in a dark room for a day or two until the headache went away. But DTC ads informed patients that a new treatment was available. They visited their doctor, and if Imitrex was right for them, they had access to a powerful new medicine that relieved their pain and gave them back their daily life.

The industry also provides the vast majority of accredited continuing medical education for physicians. Approved by third parties, these programs keep doctors up to date on new trends and treatments - information that is key to helping them make the best diagnosis for a patient.

And spending on DTC is not out of line. In fact, the pharmaceutical industry spends 10 times more on R&D than DTC - $26 billion versus $2.5 billion in 2000. GlaxoSmithKline alone spends $4 billion a year on research. And that research yields benefits. Contrary to popular opinion, it is the research-based pharmaceutical companies - not government or academia - that are responsible for 93 of the top 100 most commonly used medicines in the US.

But isn’t it true that much of that R&D is wasted on “me-too” medicines that have little benefit over existing medicines? The reality is that sometimes even small enhancements can have important benefits for patients.

I sometimes say working in a pharmaceutical company is a lot like playing golf: It costs a lot and takes a long time to play. You will likely never hit a hole in one. And you always feel like you’re playing with a handicap.

By far the greatest percentage of R&D spend - 79% - is dedicated to the search for innovation. But more often than not, after years of testing, you learn that your medicine isn’t a breakthrough; but it may offer fewer side effects, work a little faster, or come in a pill that is easier for patients to swallow. These incremental advances can, and do, provide real value for patients.

Trizivir, for example, combines three existing AIDS drugs in one tablet. No scientific breakthrough, but taking one pill twice a day - instead of four or six pills or more - is a big breakthrough in terms of making it easier for patients to stay on treatment.

But if incremental breakthroughs are OK, then why is the pharmaceutical research industry so against generics? After all, we sue constantly to keep generics off the market, right? Not exactly. There is a place for generics, but only after the patents on brand name medicines from innovator companies expire. Generic companies are taking advantage of the system to challenge those patents earlier and earlier so they don’t have to wait for expiration to get to market.

Generics today make up about half of all prescriptions sold in the US. Under current law, generic companies can copy our science, make their own product, and be ready to ship to pharmacies the day the patent expires. In every other industry, a copier has to wait until the patent expires on a technology before they can even think about planning to copy that product. Generic drug companies also don’t have to do any clinical trials to prove their product is safe and effective. They only have to show the FDA that their product works about the same way a brand name product does - give or take 20%.

The first generic company to market gets 6 months without competition. During that time they often charge almost as much as the brand name drug. Once the other companies enter, the price drops to 90% of the brand name drug. So there’s a real financial incentive to be the first generic company to market.

The problem is, generic companies don’t want to wait until the patents expire. They challenge innovator patents in an attempt to declare those patents invalid so they can come to market sooner. In the case of our anti-depressant, Paxil, the first generic company challenged our patents just five and a half years into what should have been a 14-year patent term. In the next 3 years, seven other generic companies entered the fray.

We have to sue to defend our patent rights. The result is millions of dollars and years spent on litigation that would be better spent developing new lifesaving medicines. Meanwhile the time the innovator companies have to recoup their massive return on investment is getting shorter and shorter - in some cases down to 6 years from what is supposed to be a 20-year patent term for pharmaceuticals. It’s important to remember that generic companies do not discover new medicines - yet it’s the innovative pharmaceutical research industry that is at risk.

Which brings me to the final myth. Generic companies are often portrayed as being for the people, and the pharmaceutical research companies as caring more about profits. But in fact, the generic companies are designed solely to make profits. Pharmaceutical research companies put patients first - in our research, and in our programs to help people get access to medicines, here in the US and across the globe.

Last year, the pharmaceutical industry helped to fill 6.5 million prescriptions for more than 2.4 million needy patients through our patient assistance programs. That adds up to more than $1 billion worth of medicine. At GlaxoSmithKline, we gave away over $168 million in free medicines though our Patient Assistance Programs last year. GlaxoSmithKline was also the first company to create a senior savings card - the Orange card - which offers a way for Medicare eligible seniors without a drug benefit to save of 20-40% or more on our medicines. A similar card - Together Rx - offers savings on more than 150 medicines from 7 different pharmaceutical companies. The cards are free, and easy to get and use, but they are only a stopgap until comprehensive Medicare reform can pass Congress, which we are actively working to progress.

We favor reform to make Medicare look more like the marketplace. A template already exists in the benefits enjoyed by our Senators and Congress people - and those in private industry. A system like the Federal Employee Health Benefits Program would be menu-based, offering seniors a choice of the kind of plan that makes the most sense for them.

Of course skeptics will say that passage of real Medicare reform is a bit like the story of the doctor who went to heaven and met God. God granted him one question, so the physician asked, "Will health-care reform ever occur?" "I have good news and bad news," God replied. "The answer is yes, there will be health care reform. The bad news is, it won’t be in my lifetime."

We in the research-intensive industry hope passage of a meaningful benefit does occur, not just in our lifetime, but in this election year. So why should you care about the health of the pharmaceutical industry? First, because we discover and develop the medicines that keep you healthy and may someday lengthen or even save your life, and because we haven’t conquered disease just yet.

Second, the medicines we have today offer you a cost effective way to keep yourself and your employees productive, and save you a lot of money in the overall cost of healthcare. Third: we are significant employers in our communities. More than 72,000 state citizens work at pharmaceutical companies, biotech or contract research organizations. Those payrolls total almost $4 billion. The pharmaceutical companies alone pay about $400 million in taxes.

We also invest heavily in support of state and local programs. GSK makes clinical grants in North Carolina that total $27.5 million, corporate contributions of $8.8 million, and record total business expenditures here of $1.5 billion. But most importantly, we offer hope for millions of patients across the world. Particularly in a world where bioterrorism is added to the threat of disease that we still face, the pharmaceutical industry works daily to both protect and build a better world for all of us. Thank you.

ISSUE. No. 8

2003 LONG SESSION