August 3, 2001

Letters page

Text of July 30 letter by 
NCCBI Chairman Gordon Myers
to members of the House Republican Caucus

I am writing in reference to Representative Daughtry’s letter dated July 25, directed to Phil Kirk and Leslie Bevacqua regarding our organization’s position on a 1/2-cent local option sales tax increase and a 1/2-cent statewide sales tax increase in order to maintain the state’s fiscal integrity and to protect the state’s Triple A bond rating. This was a unanimous vote on the part of our executive committee.

This position did not come without careful deliberation from our executive committee, which includes a diverse group of business leaders from across the state, and a mix of Democrats and Republicans. We put politics aside to determine what was the most responsible solution to the current budget crisis – and we do consider this a crisis.

Projected growth in last year’s revenues did not meet expectations and the estimates have been lowered for the next two years. In recent weeks revenue projections for the 2001-2002 fiscal year have been lowered to 4 percent. At the same time, Medicaid costs have increased $300 million, more than $100 million is needed to cover enrollment increases in public schools, community colleges and universities, and there has been a $150 million increase in state health insurance costs. North Carolina’s coffers have been strained by natural disasters – most recently the hurricane that devastated Eastern North Carolina. The economy is slowing down, unemployment is up, and the state has had to pay large amounts of money in lawsuits that have also added to the budget problems.

Major cuts have already been made in public schools, universities, health and human services and other state programs and agencies. The business community does not want to see our programs and services gutted. Even with additional revenue, the legislature is going to have to make more reductions in state spending because of the lower revenue projections and more difficult decisions are going to have to be made. Without competitive programs and services, like schools and roads, we cannot recruit and retain businesses and industries in North Carolina.

We must also work to maintain our state’s prized triple A bond rating, which North Carolina has held longer than any other state. As you are aware, on July 6, a letter was sent to State Treasurer Richard Moore from Renee Boicourt with Moody’s Investors Service indicating concerns about the state’s credit condition. The letter states that “Moody’s now has concerns that reductions in the level of state reserves, decline in the state’s audited GAAP year-end fund balances, and the slowness to restore long-term structural budget balance after a series of adverse financial events have established a negative state credit trend.”

If the state’s bond rating is lowered, it will cost state and local governments millions of dollars. This is a major concern to the state’s business community and we regret that some legislators do not take the significance of the Triple A bond rating seriously. North Carolina has enjoyed the triple A rating longer than any other state in the nation. We are one of only five states with this coveted rating and twenty-five percent of the local governments in the nation with this rating are in North Carolina. We are not only talking about saving tax dollars, but also preserving the prestige that accompanies such a high rating. Our industrial recruiters use this designation as one of the tools to sell our state as an attractive place to do business. We are also concerned about depleting the state’s rainy day fund and having no reserves should the economy continue to decline in coming years. This budget crisis must be addressed now or later, and the longer we wait the more difficult it will be to get our state on solid financial ground.

NCCBI has more than 2,300 members in 97 counties, including large and small businesses and organizations. There has been broad-based support from our members for this position on the sales tax increase. And our job is to represent our members. Our state’s fiscal integrity is at stake, and everybody is looking to see how North Carolina will respond.



Text of Phil Kirk’s July 25 testimony 
to the House Finance Committee on 
NCCBI’s support for a 1/2-cent local option sales tax increase

NCCBI’s Executive Committee voted unanimously to support the 1/2-cent local option sales tax in exchange for local government giving up their current reimbursements from the state. We voted to support this additional taxing authority for local governments only after careful deliberation.

The state's business community is concerned about the state's fiscal integrity. We believe that tough decisions must be made to insure that we keep the state’s Triple A bond rating and that important programs and services are not hurt. Without competitive programs and services, like schools and roads, we cannot recruit and retain business and industry in North Carolina.

I believe our Executive Committee was moved to support increased revenues primarily because of our concern about losing our Triple A bond rating. North Carolina has had a Triple A bond rating longer than any other state in the country and 25 percent of all local governments in the country who have a Triple A rating are in our state. This is something to be proud of and something we need to protect. If the state’s bond rating is lowered, it will cost state and local governments millions of dollars. But it’s more than dollars. Industrial recruiters use this distinction to help sell our state.

By passing the local option sales tax, you will be able to put additional revenue into the state’s rainy day fund and give us some security for the future. This should help preserve our bond rating.

At the same time, you will remove the dependency of local governments on the state reimbursements. This is an opportunity to substitute a local revenue source for the state reimbursement. It will help to keep property taxes down in cities and counties that have been forced to raise taxes because of their concerns about the reimbursement issue and it will give them a stable and growing revenue source. Our Executive Committee was also concerned that so many cities and counties raised their property taxes this year.

NCCBI’s Executive Committee also unanimously supports an additional 1/2-cent sales tax for the state with a three-year sunset, if this is necessary to maintain the Triple A bond rating.

On other tax issues, we oppose any increase in liquor taxes. Those who claim we’ll be taxing liquor like we do other goods by bringing it under the 6 percent sales tax are ignoring the fact that there is already a 28 percent excise tax on liquor in lies of sales tax.

We have no formal position on the addition of another tax bracket for higher income earners because this was no an issue at the time our Executive Committee met. The same is true for the increased tax on luxury vehicles.

I do have to add a concern that these new personal income taxes could have a negative effect on convincing CEOs to move their plants to North Carolina or to expansions of existing industry. Also, several financial institutions are already experiencing problems in this regard.

We oppose the HMO premiums tax. At a time when HMOs are suffering financially, when health care costs are skyrocketing, and when you will make that even worse if you pass the Patients Bill of Rights with an expanded right to sue, we would ask that you drop this new tax from the package.

We supported the closing of several tax loopholes which you have passed although we have some of our members who are not happy about this.

Finally, NCCBI would like to urge you to continue your efforts to cut out unnecessary spending and to reduce the size of government. In 1991 when you cut $600 million in spending, NCCBI supported $600 million in tax increases, including increases in the corporate income tax. However, we believe strongly that a formalized effort such as Governor Holshouser initiated in 1973 be undertaken as soon as early next year.

Only a few of you were here then, but Gov. Holshouser enlisted the services of 80 loaned business executive who spent 10 weeks looking at every aspect of state government. Many of their recommendations were implemented.

Now is the time to do another similar efficiency study with the help of the private sector. Thank you.

Op-ed column on health care cost increases by Phil Kirk

As head of the state chamber of commerce, North Carolina Citizens for Business and Industry, I’m paying close attention to the hard economic times that North Carolina has seen lately. These tough times have impacted all sizes of North Carolina businesses statewide – from Manteo to Murphy, from manufacturing to high tech industries – our state’s businesses are bearing the brunt of the current economic slump. 

Higher health care costs are also impacting North Carolina businesses across the board. North Carolina businesses have incurred dramatically higher health care costs in recent years.  Many North Carolina businesses, opting to carry health care coverage for their employees, are struggling to meet these rising health care costs. 

With increasing costs on health care coverage, it will be more difficult for businesses to provide health care coverage for their employees – potentially rendering North Carolina workers and their families uninsured. Members of NCCBI are very concerned about being able to continue providing decent coverage for their employees. But with the average increased cost of North Carolina’s health care premiums in the double digits this year, providing decent coverage for employees becomes more difficult.

We urge the North Carolina General Assembly not to pass legislation that will only add to the cost of providing health care -- without adding to the quality. Unfortunately, much of the legislation currently being considered only makes health care premiums more costly.

Two pieces of legislation in particular are likely to have a costly impact on businesses – the HMO premium tax and the state version of the Patients’ Bill of Rights, which contains a liability component.

There has been a debate on both the national and state levels surrounding Patients’ Bill of Rights legislation. NCCBI supports most of the aspects of the state’s version – including a strong independent review process allowing the designated review organizations to review appeals of health plan decisions. Most of the components, including the strong external review process, will serve to help patients receive a better quality of health care without significantly increasing the cost. 

But we strongly believe that the one aspect of the bill, liability, will only increase the number of lawsuits also increasing the cost of health care coverage. For the average business person, this does nothing to improve the quality of health care services employees receive. A study by Dr. Chris Conover of Duke University shows that the liability portion of this legislation could increase North Carolina’s health care costs by up to $750 million per year. 

The HMO premium tax that was incorporated into the Senate’s budget is another example of legislative action that will only increase health care costs – and not serve to improve quality. If implemented, this cost will be passed to employers, who will have to deal with yet another obstacle trying to provide adequate coverage to employees.  

The North Carolina General Assembly has a tough road this year trying to balance the state’s budget amidst decreasing revenues due to the downward turn of the economy. Much like many of the businesses that we represent, they’re certainly confronted with the daunting task of finding ways to make ends meet and having to find alternative ways to generate revenue for the state. 

On behalf of our 2,300 members, we ask the state’s elected officials to resist the urge to pass legislation that will make it more difficult for businesses to provide their workers with affordable, quality health care coverage. 

We also urge all businesses in North Carolina to contact their legislators to tell them how important it is to keep health care affordable. If legislators don’t hear from businesses, then how will they know that legislation, that might seem reasonable on the surface, really impede North Carolina’s businesses from providing quality health care to their employees?
 


Text of NCCBI letter to Gov. Mike Easley, 
Senate President Pro Tem Marc Basnight
and House Speaker Jim Black urging a government efficiency study

We are writing to let you know of NCCBI’s strong interest in working with you in conducting a comprehensive efficiency study of state government.

As our state’s needs grow along with our population, we see the need for a comprehensive review of all aspects of government, including our education systems.

We have aggressively supported additional revenues for the state through the closing of loopholes and an increase in the sales tax because of the budgetary crisis we are in at the present time.

However, this support for increased revenues will be received much better by our 2,300 members and the taxpayers in general if they are convinced that unnecessary spending has been eliminated and that government is functioning in an efficient, cost-effective way.

That’s why NCCBI is lending its support to an efficiency study commission to look at every aspect of spending. There should be no “sacred cows.”

Shortly after Jim Holshouser was elected Governor in 1972, he hired Warren King and Associates to perform an efficiency study of state government as the firm had done in a number of other states. It is important to note that business and industry loaned 80 executives who spent 10 weeks studying every program and every department. Many of the cost-cutting measures were adopted through legislative and executive action.

Eight years ago the General Assembly commissioned the G-PAC study, some of which was implemented. Other recommendations were apparently not politically acceptable and perhaps also because revenues were growing at a healthy rate, there was not a financial emergency to motivate reductions.

Jim Hyler of First Citizens, NCCBI’s First Vice Chair; Jim Goodmon of Capitol Broadcasting; the Charlotte Chamber and Bill Coley of Duke Energy have all discussed the need for a formal study of government by talented business people with us. We have also talked with Governor Holshouser who has a long standing interest and commitment to efficiency in government.

Our leadership and staff are committed to helping make this proposal a reality. For this effort to succeed, it must be a true partnership, and there must be a positive attitude and productive relationship for it to succeed.

If it is necessary, we would be willing to help raise private funds to help pay for a study on a shared basis with the state. We also have a number of business executives who would be willing to give their time to participate in this effort.

After a state budget is passed during these very difficult economic times, it is imperative that the citizens of this state have confidence in the fiscal outlook for North Carolina as we head toward the next biennium. It is absolutely essential that the state’s many programs and organizational structure be studied to determine the best ways to make our government more efficient. Stopgap measures are ineffective ways to run the business of government, and they cause division along party lines and divisive battles among special interest groups.