In this week’s newsletter I want to discuss with you three topics: the influence of Special Interests on the legislative process, the New Tax System the General Assembly is debating, and the problems facing Falls Lake.
Standing Up to Special Interests
North Carolina is experiencing the biggest economic downturn since the Great Depression. To balance the State’s budget, programs must be cut — the question is how to make the cuts as responsibly and fairly as possible. In these economic times, when good programs with proven positive results have to be cut, common sense dictates that no room exists for programs that waste taxpayer’s money. Some special interest groups and their paid lobbyists, however, are asking that we defy common sense.
North Carolina funds “personal care” services for Medicaid recipients, which are non-medical services designed to help people continue living in their home who might otherwise need to live in nursing homes or rest homes. Some of these available services include Laundry, Meal Preparation, Light Housekeeping, Grooming, Bathing, Health Monitoring, Medicine Reminders, Walking & Exercising, and Menu Planning. I support this program as a less expensive alternative to nursing homes or rest homes.
But, despite the merits of the program, personal care service delivery is riddled with waste and fraud. In 2006, independent auditors evaluated personal care service delivery. The audit findings were shocking: up to 45% of all personal care service recipients were ineligible for the services they were receiving. Administration officials in Gov. Easley’s administration did not release the report publicly or to the General Assembly. To the credit of Gov. Perdue’s administration, audit reports have been released.
As a Co-Chair of the Appropriations on Health and Human Services Committee in the State Senate, I was involved in the effort to cut slightly over $40 million state dollars from the existing program. Considering the audit report and the budget crisis North Carolina is facing, the proposed cut is an appropriate ordering of our priorities. For example, the $40 million dollar cut would fund expansion of health coverage for children in our State, a program that has an excellent track record. Or, the $40 million state dollars would save thousands of teacher assistants in the public school system who may lose their jobs.
North Carolina Home Health and Hospice (NCHHH), the largest trade association for personal care services, has responded to these events by publicly and personally targeting me for advocating the cut in personal services. You can read about their efforts here. My budget colleagues have invited NCHHH to provide an independent audit showing that there is no waste or fraud in this program, but to date we have not received any such information.
Special interest groups and paid lobbyists have a vested interest in protecting their profits, and they have the sums of money necessary to defend their programs and attack anyone who threatens their bottom line. But despite their attacks on me, I stand by my efforts to protect our state’s most critical priorities in the face of unprecedented budget shortfalls — and to demand more accountable and efficient use of your hard-earned tax dollars.
Creating a Fairer Tax System
The House and Senate Conference Committee on Finances have reached a tentative agreement to a tax package that would increase revenues by almost $1 billion in 2009-2010 and $1.3 billion in 2010-2011. The House and Senate negotiators remain far apart on how these revenues should be raised.
The House budget passed a tax package that included a one quarter increase in the sales tax, the creation of two new income brackets for incomes over $200,000 and taxing some services with the sales tax remaining at 6.75 percent.
The Senate is seeking a revenue package that lowers the sales tax by increasing the number of services taxed as well as lowering the corporate tax rate to the lowest rate in the Southeast.
North Carolina adopted a sales tax on goods during the Great Depression. The sales tax correctly reflected that North Carolina’s economy was based on manufacturing. Today, North Carolina has transitioned toward an economy based upon the sale of services. The transition from a manufacturing economy to a service based economy is so predominant that utilizing a revenue system that draws most of its sales tax from the sale of goods is now problematical.
The sales tax rate in North Carolina is 6.75 cents. There are over 166 different services taxed by other states. In North Carolina, we have a sales tax on 30 different services. This is a list of services we currently tax in North Carolina by category:
Utility Services
Personal Services
Business Services
Computer Services
Admissions and Amusements
Cable TV services
Circuses and Fairs
Leases and Rentals
Hotels, Motels, Lodging
Fabrication, Installation and Repair Services
If North Carolina taxed more services, the sales tax rate of 6.75 cents could be lowered. Generally speaking, lower middle class income earners spend their disposable income on the purchase of goods as compared to services, so the lowering of the sales tax can give that income group meaningful tax relief.
The House budget included adding 25 additional services without lowering the sales tax. Some of the services proposed to be taxed in the House budget included television repair services, automobile repair services, automobile washing and waxing services, sign construction and installation services, carpet and upholstery cleaning services, and garment altering and repairing services and shoe repair services. The Senate budget would tax more services with a corresponding decrease in the overall rate.
The debate centers on part whether altering the tax structure in a time of economic crisis is a wise course of action. Of course, in good economic times there is less incentive to make changes. A tax structure that better recognizes the North Carolina economy is warranted.
The “devil” is always in the details.
FALLS LAKE WATER PROTECTION
For the last four years the State Division of Water Quality has been developing new regulations to protect the water of Falls Lake, a man-made reservoir located in the upper portion of the Neuse River Basin. The City of Raleigh is the sole entity that is permitted to use Falls Lake water for drinking water, although several municipalities in Wake County buy their drinking water from Raleigh. Falls Lake has been classified as “impaired” under Federal clean water standards. This classification necessitates new regulations to lower the high levels of nitrogen and phosphorus in the lake’s water.
Contamination of Falls Lake is a problem for the residents of Granville, Wake, Durham, Orange and Person Counties. Currently, Granville County residents do not get drinking water from Falls Lake. However, Lake Holt and Lake Rogers are watersheds that are located in Falls Lake system and these lakes serve as drinking water sources for Granville County. Falls Lake’s water quality also impacts residents who use the lake for recreational activities including swimming, finishing and boating. On July 1, 2009, the Beaverdam Beach at Falls Lake was closed to swimmers as a result of unsafe water quality. You can view a news report here.
According to John Huisman, Environmental Senior Specialist at NC Division of Water Quality, “the original time frame [to finalize new regulations for Falls Lake] was unrealistic in assessing the amount of time necessary to collect water quality samples, run a field calibrated water quality model, draft rule language, hold public stakeholder meetings and gain adoption by the Environmental Management Commission.” In addition, he stated that “several months of chlorophyll-a data were lost when it was discovered that samples were incorrectly processed at the lab resulting in more time needed to collect the amount of data needed to run the model.” As a result, the State Division of Water Quality has requested a two year extension in issuing a final set of regulations to address the water quality issues. In response to the delay, many people feel that interim rules and regulations need to be adopted soon to protect the lake.
To address this problem, I have joined Senator Stein and others in supporting Senate Bill 1020, which encourages local governments, developers and landowners to take immediate steps to protect Falls Lake’s water quality. Under this bill, entities that show initiative to protect the lake will be exempted from future penalties that might arise because of their swift actions. In addition, Senate Bill 1020 directs the Environmental Management Commission to provide credit to local governments, landowners and developers for actions taken prior to the adoption of the final regulations. Senate Bill 1020 has been referred to the House Environment and Natural Resources Committee. You can view a copy of the bill here.
In addition, public stakeholder meetings are being held to fashion interim rules until the Division of Water Quality develops new regulations to protect the water of Falls Lake.
On Wednesday, June 24, 2009, once such public stakeholder meeting was held in Raleigh. This meeting included mayors, county commissioners and concerned citizens that use water from Falls Lake. Mayor Darryl Moss of Creedmoor was in attendance at this meeting at my request along with Mayor Tom Lane and other Granville County representatives. Mayor Moss believes that “the most immediate need is to get the work that the Falls Lake stakeholders and the Upper Neuse River Basin Association (UNRBA) have been doing on the table.” He believes “that the interim measures could be put in place immediately and in a cost-effective way.” Mayor Moss felt that it was important to highlight 4 points about the stakeholder process:
I think that we need to continue the dialogue about this issue and welcome any proposed recommendations concerning temporary interim rules for Falls Lake. Until stakeholders finalize interim rules and regulations, the NC Division of Water Quality has three key types of regulations that are in place: Water Supply Watershed Regulation, Soil Erosion and Sedimentation Control Regulation, and the Neuse Nutrient Management Strategy. The Water Supply Watershed Regulations place rules on wastewater discharges and new development. The Soil Erosion and Sedimentation Control Regulations are delegated by local governments. The Neuse Nutrient Management Strategy is designed to reduce nutrient loading to the estuary, and indirectly protects Falls Lake with the Neuse buffer and agriculture rules applying throughout the watershed and the new development stormwater rule applying to certain municipalities in the watershed.
The ultimate solutions will require that everyone affected by this critical North Carolina watershed work together to maintain a vital source of clean drinking water.
As always, I look forward to your thoughts and comments on the issues discussed in the newsletter. Please feel free to respond to any issue whether it was covered in the newsletter or not. It is an honor to serve as your State Senator, and I will do everything in my power to live up to that honor.
Sincerely,
Doug Berger