Golden LEAF spending decisions touch off controversy (Fayetteville Observer)
By Paul Woolverton
Staff writer
An $800,000 grant to provide iPod Touches for every child and teacher in grades five through eight in the Bladen County school system.
A total of $400,000 in grants for a horse park in Hoke County, where few people can afford horses.
A $100 million grant to build a jetliner factory in Lenoir County that promises to create 1,000 high-paying jobs by the end of 2016. The factory, which opened last year, had 163 workers by December.
Those are just some of the controversial spending decisions made by the Golden LEAF Foundation since it began awarding grants in 2000.
Golden LEAF gets its money from a settlement that North Carolina and other states made with the nation’s cigarette makers to end a lawsuit over the costs of caring for people suffering from smoking-related diseases.
Under terms of the settlement, North Carolina stands to receive $4.6 billion during the first 25 years of the 21st century. The legislature created Golden LEAF in 1999 to dole out half of the money to communities suffering economically from the decline in tobacco production. The foundation also underwrites statewide programs designed to help North Carolina move away from the tobacco economy.
While Golden LEAF President Dan Gerlach touts the program’s many successes – including 36,708 jobs created and retained through 2010 and $188.7 million in additional payroll – some Republican lawmakers and conservative activists say Golden LEAF has been little more than a slush fund for the Democrats.
Some critics also say it’s wrong to use government money to provide economic incentives for industry, something that Golden LEAF has done over the years.
“The Golden LEAF doesn’t have a perfectly clear history,” said Rep. John Blust, a Republican from Guilford County. “I’m sure you find very good things in many of their grants, but there have been mistakes. There has been money wasted.”
Blust thinks that the Golden LEAF’s board, appointed by the governor and House and Senate leaders, is subject to political pressure from them when it awards grants and that it would be best to put the money under the direct control of the General Assembly.
Gerlach, who worked for Gov. Mike Easley before taking the Golden LEAF job in 2008, said he didn’t see such pressures while he was in the governor’s office and hasn’t seen any since moving to Golden LEAF.
Golden LEAF has a professional staff that studies all requests and makes recommendations to the board, he said. Some decisions, such as the $100 million for the jetliner plant, are subject to a long, detailed evaluation. If the jetliner factory fails to create the jobs as promised, Gerlach said, the manufacturer is required to give back the money.
Blust’s criticisms of Golden LEAF were made this month in the General Assembly, during a debate over whether the state should take $67.6 million – Golden LEAF’s share of this year’s tobacco settlement payment – and use it to to help close a gap in the state budget.
The House and Senate voted to take the money, although they have not attempted to take Golden LEAF’s assets, which total more than $600 million. In past years, some lawmakers have tried.
On Thursday, Gov. Bev Perdue criticized the decision to take this year’s Golden LEAF payment. She said she has not decided whether to veto the measure, which is part of a larger set of cuts to balance the budget.
Incentive programs such as Golden LEAF are vital to help North Carolina compete for jobs, Perdue said.
“We have a 9.6 percent unemployment rate, and that is my primary task, to help those workers in this state find work, and I need the tools to do it,” Perdue said. “I believe that as we set it up, we did so thinking that somebody might want to invade that corpus. That’s a fight worth having, to me. We’ve got to have that tool.”
Cumberland County could be affected if the state uses the Golden LEAF money to help balance the budget. The program is scheduled to award $2 million in grants to Cumberland County in the next year. A committee is forming to select the grant requests.
Critics from two influential conservative organizations want to dissolve the program.
“It just needs to go away,” said Francis De Luca, president of the J.W. Pope Civitas Institute, an organization in Raleigh that promotes conservative issues and candidates. “Because that’s public money, and it’s being doled out by a private board appointed by politicians.”
John Hood, president of the fiscally conservative John Locke Foundation, expressed a similar view.
“Golden LEAF should never have been created,” Hood said. “The Master Settlement money should have flowed to the state’s general fund, based on the original theory of the case that smoking had a negative effect on state expenses, through the state employee health plan and Medicaid.”
The John Locke Foundation has been at odds with Golden LEAF since its inception. A 2008 review of Golden LEAF by the State Auditor’s Office didn’t help matters.
The audit found that in 2002 and 2006, the board invested Golden LEAF money in companies having potential conflicts of interest with a political campaign contributor, a board member and a public official. The three investments totaled $46 million. None of the investments was illegal at the time.
The audit also chastised the foundation for keeping poor records of its meetings and poor track of whether its grants succeeded.
Although Hood thinks the Golden LEAF foundation was manipulated early on by former Gov. Easley and other Democratic leaders, he acknowledged that political influence over it has since waned.
“I will hasten to say that I think Golden LEAF is much better managed today than it was years ago,” Hood said.
Republican Party leaders in the House and Senate say they aren’t prepared to dismantle the program.
“Golden LEAF does help create jobs,” said state House Speaker Thom Tillis.
State Sen. Phil Berger, the newly elected Republican Senate president pro tem, said that beyond taking this year’s payment to balance the budget, no decision has been made on Golden LEAF’s future.
Using some of the settlement money to help the tobacco-dependent communities was a good idea, Berger said, but he thinks the program is due for review.
“Were the decisions that were made 10 years ago, when it was created, does that still fit what we need to do?” he asked.
Recipient support
Those who have received Golden LEAF money staunchly support it.
Gerlach said grants that have been criticized would hold up if the critics took more than a superficial look at them.
Jane Murray, executive director of the Carolina Horse Park, said the grants that underwrote the park in its early years are paying off for Hoke County.
“There is no doubt that the economic impact we have had is growing and increasing,” she said.
The park holds events, such as Olympic equestrian trials, more than 100 days a year. The events draw visitors who stay in local hotels, eat at local restaurants and otherwise spend in the area, Murray said. The horse park estimates its events put at least $1.5 million annually into the area’s economy.
Marilyn Lee, curriculum and instructional director for Bladen County schools, acknowledged that some people might question the purchase of iPod Touch devices, which essentially are hand-held computers, for 1,600 students and 75 teachers. Although the grant award specifies iPod Touches, Lee said the school system hasn’t decided what kind of computers to buy.
“I don’t want it to be just a toy,” Lee said.
The computers, which ultimately could be small laptops or iPad tablets instead of iPod Touches, would connect to a wireless network in the school buildings, operate educational software and provide the teachers and school district a way to track the students’ learning progress, Lee said.
Gerlach said it’s important to note that the $800,000 grant won’t be paid until Bladen County submits a detailed, acceptable plan for what it will do with the money. The Golden LEAF payment is subject to whether the schools get other grants to upgrade their computer networks.
Educators believe that the computers will help the students later in life, Lee said.
The idea was based on a program in Mooresville, a city in the North Carolina Piedmont, Lee said.
The Mooresville school district provides a laptop computer to every child in grades four through 12, said spokewoman Tanae Sump-McLean.
“They use them at home, they use them every day in class,” she said. Golden LEAF did not fund that program.
Each computer is loaded with educational software and allows the students to learn at their best pace and through a means that often is better than a lecture in a classroom, Sump-McLean said.
The Mooresville district has seen standardized test scores rise by 13 points, the graduation rate rise by 22 points – to 86 percent – and the dropout rate decline, she said. The district attributes those successes, in part, to the computers.
Staff writer Paul Woolverton can be reached at woolvertonp@fayobserver.com or (910) 486-3512.
