North Carolina lawmakers need to question the wisdom of imposing job-killing tax hikes in order to spare the organization that funded the Randy Parton Theatre and Drag Racing Hall of Fame.
In light of the highly unpopular tax increases currently under consideration in the North Carolina General Assembly, now appears to be a good opportunity to revisit a proposal that would make more than $550 million in funds available immediately to budget writers: dissolve Golden LEAF.
As this article will detail, the funds managed by Golden LEAF are already subject to political whim and under the influence of powerful state lawmakers. A more responsible measure would be to transfer the current Golden LEAF funds to the General Fund where the spending will be subject to greater oversight by the General Assembly.
Dissolving the Golden LEAF Foundation would produce more than $550 million in assets to help fill the current budget gap, and also provide additional future annual revenue of about $70 million toward General Fund operations.
Moreover, it makes little sense to spend $2.2 million in annual administrative costs (not to mention the $3.6 million recently spent on its new headquarters) for the Foundation to continue to dole out money that could just as easily be appropriated in the annual budget.
WHY DISSOLVE GOLDEN LEAF?
Background
The Golden Longterm Economic Advancement Foundation, or Golden LEAF, was established in 1999 to receive one half of North Carolina’s national Master Settlement Agreement (MSA) funds. The MSA was an agreement resulting from a lawsuit filed by several states against the major tobacco manufacturers. Manufacturers were accused of misleading the public about the dangers of smoking, and a number of states sought compensation for the excess financial burden smokers placed on their Medicaid systems.
Created largely at the behest of then Attorney General Mike Easley, the Foundation was expected to receive roughly $2.3 billion in payments over a 25 year period.
Currently, Golden LEAF has assets totaling $720 million, with the annual MSA payments in the $70 million range. 3
The terms of the Master Settlement Agreement were rather vague, with no clearly defined uses for the funds being dispersed to states. The spirit of the agreement’s intent, however, can be found in passing references stating that the agreed upon funds should be directed to “further the setting of states policies designed to reduce youth smoking, to promote the public health,” and to “address the states public health concerns.” 4
In contrast to these health-related concerns, Golden LEAF’s website describes itself as “a nonprofit devoted to advancing the economic well being of North Carolinians and to transforming its economy.” In short, the Foundation grants money to various “economic development” projects throughout the state. Golden LEAF does claim to focus on areas that have traditionally been dependent upon the tobacco industry, but curiously there is no declared intent by the Foundation to address North Carolina’s “public health concerns” as mentioned in the Master Settlement Agreement.
In reality, Golden LEAF has become a highly politicized organization subject to the whims of Governor Easley and other power players in the General Assembly. The brief history of Golden LEAF has been riddled with grants to local pet projects, cases of favoritism and blatant cronyism.
In short, it is a slush fund that needs to be dissolved.
A Political Tool
When Golden LEAF was created, Easley declared that the Foundation will be “one that operates outside the grasp of political pressure.” 5 Likewise, Senate Majority Leader Tony Rand (D – Cumberland) stated that “A charitable trust shouldn’t have anything to do with politics.” 6
These proclamations quickly proved to be a sham.
For starters, the Foundation’s 15 member board is comprised entirely of political appointees, with the Governor, President Pro Tem of the Senate and Speaker of the House each responsible for 5 selections.
Todd Cohen, editor and publisher of the Raleigh-based Philanthropy Journal, observed, “the political make-up of the board has saddled the foundation with the perception that it is a political tool.” 7 Cohen further concluded, “Golden LEAF is by definition and nature a political creature subject to the whims and agendas of politicians.” 8
“Multi-Million Dollar Slush Fund”
The political nature of Golden LEAF’s Board of Directors has corrupted the Foundation’s grant-making process. Rather than an objective analysis of which projects will best advance the “economic well being of North Carolinians,” grants have all too often been decided by political turf wars and power plays. A review of pet projects and questionable items funded by the Foundation, in fact, prompted the Capital Monitor to state, “many are concluding that Golden LEAF has been nothing more than a multi-million dollar slush fund.” 9
Similarly, former Representative Stephen LaRoque proclaimed, “In Raleigh, Golden LEAF is known as the governor’s slush fund.” LaRoque seemingly came to this conclusion after one of his favored projects was denied funding after being promised support, while the Black Heritage Society received $50,000 for a museum in Kinston. Not coincidentally, the BHS included a number of Easley campaign contributors. 10
Further, several items that could easily be described as pork projects have been financed by Golden LEAF, including: 11
- A horse park in Hoke County
- A museum honoring bluegrass musician Earl Scruggs in Cleveland County
- The failed Parton Entertainment Center in Halifax County
- Local biking & hiking trails
- A Drag Racing Hall of Fame
- An art museum in the mountains
-
A training program for commercial truck drivers
The Foundation undoubtedly funds several projects that many would consider worthy. Such worthy causes would still receive funding if the Foundation’s money were redirected to the state’s General Fund budget and determined to be a top priority by legislators. The key point is that currently Golden LEAF finances projects ranging from more legitimate to downright wasteful, all without any oversight or debate among lawmakers.
Playing Favorites
It should come as no surprise to learn Golden LEAF is a breeding ground of political cronyism.
According to the Capital Monitor, “Golden LEAF’s board is filled with generous campaign contributors and political cronies. Members serving in 2008 include Jessie Bunn, who contributed $2,500 to Democrats like Jim Hunt and the NC Democratic Party; William Clarke, who gave $3,000 to various Democrats including former Speaker Jim Black; John Harmon, who contributed $5,000 to Democrats like Beverly Purdue; and former Democratic Party Chair Lisbeth Evans. Senate President Pro-Tempore Marc Basnight’s nephew has also been a member of the Board.”12
Not only is the Board stacked with cronies, there has been ample evidence of political favoritism surrounding some of Golden LEAF’s grants.
• John Crumpler, who donated the legal maximum of $8,000 to Easley’s 2000 campaign, was promptly rewarded in 2002 when a fund he organized received $30 million from Golden LEAF.13
• Capitol Monitor reported: “a group including Charles Davenport, brother of former Golden LEAF Board Chairman Lawrence Davenport, received $10 million from the Foundation for biofuels production.”14
• When Dell Computer landed a $3.5 million grant from Golden LEAF, Dell’s lobbying efforts were led by a business associate of one of the Foundation’s board members.15
The growth of corruption, in fact, has prompted the introduction of two bills to dissolve the Foundation and divert its funds elsewhere.16
Golden LEAF or Golden Parachute?
A recent Philanthropy Journal article recounts how Easley, along with Senate President Pro Tem Marc Basnight, delayed for several months the hiring of a new Foundation president to replace outgoing Valeria Lee. The reason? Easley wanted to find a position for his departing top economic advisor, Dan Gerlach.
According to the article, “Eleventh hour requests from Governor Mike Easley and state Senate President Pro Tem Marc Basnight have extended by three months the search for a new leader for the Golden LEAF Foundation, laying the funder open to charges of political meddling.” 17
Golden LEAF received hundreds of applications for the position, hired a consulting firm to aide in the process, narrowed the search down to four finalists who were all interviewed by the full board, but yet Easley still managed to convince the Foundation to delay their decision until Gerlach was freed up from his duties negotiating the state budget this summer.18
Gerlach, it should be noted, did not submit an application prior to the initial application deadline.19
Naturally, Gerlach was awarded the position, along with its hefty $189,000 annual salary. 20
“Easley’s intervention seems like the clumsy move of a lame-duck governor to find an exit strategy for a top aide,” noted Cohen.21
Conclusion
The case for dissolving Golden LEAF is compelling. As the state faces a daunting budget hole, now is the time to break up the Foundation and utilize the current assets and future revenue for General Fund operations. The taxpayers will be better served as hundreds of millions of dollars will no longer be directed to a politically corrupt foundation with little oversight. Transferring these monies to the General Fund will provide greater scrutiny over their disbursal and hold lawmakers accountable for how the funds are spent.
1Golden LEAF Audited Financial Statement; available from:
http://www.goldenleaf.org/auditedfinancial.pdf
2“Turning over a new leaf,” Under the Dome blog hosted by Raleigh News & Observer website; available from: http://projects.newsobserver.com/blogs/turning_over_a_new_leaf
3Supra, endnote 1
4Master Settlement Agreement; available from:
http://ag.ca.gov/tobacco/pdf/1msa.pdf
5Paul Chesser, “Easley, Basnight Manipulate Golden LEAF, Papers Show,” Carolina Journal Online (October 30, 2002); available from:
http://www.carolinajournal.com/exclusives/display_exclusive.html?id=102
6“Golden LEAF Foundation: A Sterile Golden Goose?” Capitol Monitor; available from:
http://www.capitol-monitor.org/its-your-money/golden-leaf-foundation-a-steri.php
7Todd Cohen, “Politicking Soils Golden Leaf Search” Stanford Social Innovation Review. (blog entry, 2008); available from:
http://www.ssireview.org/opinion/entry/politicking_soils_golden_leaf_search
8Ibid
9Supra, endnote 6
10Ibid
11“Golden LEAF Foundation: A Sterile Golden Goose?” Capitol Monitor; available from:
http://www.capitol-monitor.org/its-your-money/golden-leaf-foundation-a-steri.php
“Easley: Direct More Golden LEAF Money to Rural Areas” WRAL.com; available from:
http://www.wral.com/news/local/politics/story/1258741
12Supra, endnote 6
13Supra, endnote 5
14Supra, endnote 6
15Ibid.
16Ibid.
17Ret Boney, “Politics stall Golden LEAF hiring process,” Philanthropy Journal. (June 11, 2008); available from:
http://www.philanthropyjournal.org/nc/ncnews/politics-stall-golden-leaf-hiring-process
18Supra, endnote 7
19Ibid
20“Gerlach accepts offer to lead Golden LEAF” wbtv.com. (September 24, 2008); available from:
http://www.wbtv.com/Global/story.asp?S=9068970
21Ibid
[…] In their audacity to demand some semblance of fiscal sanity, Republicans are even going after the Golden LEAF Foundation sacred cow, vowing to cut upwards of $67 million from the mother of all slush funds. […]