JULY 6, 2001

State Government News

Commerce study analyzes tax credits on rural economic development
The state Department of Commerce on Wednesday released a study that found that of $62.4 million in tax credits claimed in 1998 and 1999 under the Bill Lee Act, $39.8 million or 64 percent went to the 21 wealthiest counties in the state. The study is expected to be sharply debated during a Tuesday joint meeting of the House and Senate Finance committees.

The Bill Lee Act, adopted in 1996 and named after the late chairman of Duke Power, is the state’s centerpiece economic development law that attempts to attract industrial investment and new jobs to the state’s poorest counties. The law divides the state’s 100 counties into 5 tiers according to their wealth and resources, and gives the biggest tax credits to companies investing in the poorest (Tier 1) counties. The smallest tax credits are available in the wealthiest (Tier 5) counties. Under the law, companies can receive tax credits for creating new jobs, investing in new equipment, for worker training programs, for R&D expenses and central office investments.

State Rep. Paul Luebke, a constant critic of the economic development policy, said the study proves the Bill Lee Act rewards companies for investing in the Triangle, the Triad and Charlotte -- affluent areas they would have chosen anyway. Commerce Secretary Jim Fain countered that it's not surprising that most of the benefits go to wealthy counties. "That the majority of the credits are taken in counties where economic activity and industrial concentration are greatest is neither a new nor a surprising fact — half the state's manufacturing firms are in Tier 5 (affluent) counties," Fain said in a letter to legislators.

Fain added that the state shouldn't deny tax credits for urban counties because Charlotte, the Triangle and the Triad compete with urban areas across the country. And he noted that the study also concludes that larger tax breaks for investments in poor counties appear to be steering more investment to those counties than expected. While the Bill Lee Act tax credits are responsible for the creation of 8,101 jobs in the state's wealthiest counties from 1997-99, they were claimed for creation of 1,001 jobs in the poorest counties — more than would be expected in those counties when adjusted for population.  "It looks like the act is being effective in pushing a larger share of job creation and investment to Tier 1 than would be expected. So that's a good start," Fain said.

Fain said that another study by Ernst & Young will compare North Carolina's industrial recruitment efforts to those in Georgia, South Carolina, Alabama, Virginia, Tennessee and Kentucky. He said he believes that study will show that North Carolina’s industrial development incentives are not as lucrative as those in other states.



Governor adds 5,000 children to low-cost health insurance program
Gov. Mike Easley on Monday announced that 5,000 children will be able to enroll in NC Health Choice, the state’s low-cost/no-cost health insurance program that has been frozen since January.

“There is no need to make these children wait when we can take action today that gets them enrolled quickly,” said Easley. “This is an extremely important program to North Carolina’s working families. It ensures that many of our children who would not otherwise have insurance get the medical care they deserve.”

”As many of you know, the House and Senate are not in total agreement on what next year’s budget should look like. This is one area where there is no disagreement—children need health coverage,” Easley said, referring to proposals in both the Senate and the House budgets to expand the program to 78,000 children.

When the program was frozen, 72,000 children were receiving benefits. As children left the program, they were not replaced, dropping the number of children receiving coverage to 57,000. The baseline budget allows the state to enroll 62,000 children; so 5,000 children can be added immediately.

Health Choice was created in response to 1997 federal legislation called the Children’s Health Insurance Program. Health Choice began enrolling children in October 1998.  NC Health Choice for Children is designed for working parents like contract employees; day care and nursing home workers and providers; state employees and entrepreneurs who work hard but cannot afford private insurance.

The amount of money families can earn and still qualify to participate in NC Health Choice for Children depends upon the number of people in each family. For example, a family of two can earn up to $23,220 annually while a family of four can earn up to $35,300 annually. Families with incomes near the maximum for their family size pay an annual enrollment fee of $50 for one child and $100 for two or more children. They also make small co-payments for services ranging from $5 for a doctor’s visit and $6 for prescription drugs, to $20 for a non-emergency visit to the emergency room.

State audits going online
State Auditor Ralph Campbell, making good on a promise to save paper and make documents more accessible to the public, said he will soon post audit reports on the department’s web site, http://www.osa.state.nc.us. Campbell said the electronic distribution, which will be phased in over time, will save money. The auditor’s office produces thousands of reports every year that are mailed out or delivered by hand to lawmakers, state agency officials, reporters and the public. The paperless system will initially be limited to legislators and news organizations until a fully automated system is put into place.