Bleak State General Fund Fiscal Outlook

Overspending, Inflated Revenue Projections, Borrowing to Blame

Phil Berger

Senate Republican Leader

North Carolina Senate

Democrat Governor Mike Easley last week directed state agencies to reduce spending by 2 percent to prepare for a probable state revenue shortfall.

The 2 percent reduction is not applicable to public education, student financial aid or Medicaid funds; as those areas make up the majority of state spending; the amount saved will only total approximately $200 million from the $21.4 billion state budget.

The North Carolina General Assembly’s Fiscal Research Division recently released information disclosing that revenues collected during the first two months of the current fiscal year are running $112.8 million short of projections made barely eight weeks earlier by the Democrat-controlled General Assembly.

Revenue for the current year is even behind the amount collected during the same period in the 2007-2008 fiscal year, setting up the prospect that rather than a budgeted 3 percent plus increase in revenues, actual collections may be less than the amount collected in the just completed fiscal year.

With budgeted spending almost $1 billion more that last year, the state’s fiscal picture is far from healthy. Add major financial troubles on the national level to the substantial increases in prices for food, fuel, and housing and many economists conclude that North Carolina’s financial situation will likely get worse before it improves.

Senate Republican Leader Phil Berger (R-Rockingham) made the following statement: "With concentration on the national financial picture, it is possible for North Carolina’s real and growing fiscal difficulties to get lost in the shuffle. There is no question that the Governor’s 2 percent reduction is too little and, unless further steps are taken soon, we will find that it is too late to avoid either substantial tax increases or curtailment of government functions.

"We are impacted by the Nation’s financial situation and have already seen significant increases in unemployment and painful hikes in necessities such as food and gasoline. Monday’s buyout of our state’s second largest bank will likely bring more financial hardships for our people and will be felt across the state. While I applaud the Governor for addressing the issue, I believe we must be more aggressive in reducing spending; a savings of $200 million will not be nearly enough in light of a probable shortfall of $1 billion or more. “Unfortunately, at the same time they adopted a budget that was severely unbalanced, the Governor and his fellow Democrats limited the options available to the next General Assembly to deal with this situation.

"Their 2008-2009 budget ignored core state obligations and infrastructure needs while borrowing almost to the limit of the state’s debt ceiling. Meanwhile, North Carolina’s roads and bridges continue to deteriorate and congestion in our urban centers chokes off commercial and job growth. The state’s failing mental health system was provided a temporary ‘band-aid’ fix leaving our most vulnerable citizens at risk, and the state’s teachers and employees were left with the knowledge that their medical insurance plan was substantially under funded and likely to finish the year in a $250 million hole.

"This on top of ongoing, growing, and well-documented deficiencies in the state’s education system which was shortchanged by those very politicians who every election year claim to have education as their top legislative priority.

"Should the current economic situation continue, or worsen, and substantial savings this year are not realized, we will return in January facing a deficit for this fiscal year of more than a billion dollars. If past actions are any indication, Democrats will respond with even more spending and by increasing the already high state tax burden on families and small business. Such a rise in taxes could not come at a worse time considering how many families are already stretching their budgets to the maximum. Governor Easley should take further and effective action now to curtail spending is this fiscal year, before it is too late.”

2 Percent State Budget Cut "Late, but Needed"

Representative Paul Stam
Republican Leader
North Carolina House of Representatives
613 Legislative Office Building
Raleigh, NC 27603 - (919) 733-2962
pauls@ncleg.net

Gov. Easley has ordered state agencies to reduce budgets by 2 percent, affecting the spending plans through June 2009.

House Democrats rejected a similar proposal in July.

House Republican Leader Paul Stam called the decision, “late, but needed.”

“We offered Democrats an opportunity to plan for problems last July, but they rejected it while a hole in the State Health Plan became worse. If Governor Easley wants to conceal news about his mismanagement of the State Health Plan in concerns about the economy that is better than taking no action at all. But, he has known the State Health Plan was in trouble for months,” Stam said.

“Last summer, after the budget was passed, it was disclosed that a projected $50 million surplus in the State Health Plan had instead become a $250 million shortfall. Democrat House Members proposed paying for the problem out of the Rainy Day Fund. Unfortunately, they under-funded that reserve as well,” Stam said.

Appropriations Chairman Mickey Michaux (D-Durham) refused to allow consideration of a Republican amendment requiring the Governor to begin planning for a one percent savings so a State Health Plan crisis could be averted.

Stam later offered a motion to allow consideration of the Republican alternative, on the House Floor. The vote on his motion was clearly on the merits of the Republican proposal. It was rejected, 48 to 62. All Republicans present voted for the motion and all but one of those voting against it were Democrats.

“Over four years, spending has grown 31 percent, about twice the rate of inflation added to population growth,” Stam said. “We warned the House Democrats to start planning, and we said to begin then would not be as painful as it would be if they waited until fall. To refuse to adjust the Budget after a known $250 million problem was identified was irresponsible. Since July, we have learned that this problem is much larger.”

Below are the texts of Rep. Stam's Statement from July 22, 2008, Edition 2 of House Bill2440, the Stam/Daughtry Amendment, the Roll Call on the Stam Motion to Suspend the Rules to consider the amendment on the House Floor, and a copy of the Republican amendment .

STATE HEALTH PLAN
(House Bill 2440)
Thursday, July 24, 2008
Rep. Paul Stam

After the General Assembly passed its 2008 Budget, Democratic leaders announced they had discovered a quarter billion dollar deficiency in the State Health Plan for teachers, state employees and retirees.

This involved reserves and operating expenses, turning a projected $50 million surplus into a possible $200 million deficit during the fiscal year that began July 1, 2008.

At first these leaders planned to do little about it now. They then proposed to take any shortfall from the Rainy Day Fund. The goal for the Rainy Day Fund is 8 percent of last year’s operating budget, or $1.704 Billion. Instead, it is now only funded at $787 million.

In the Appropriations Committee, Chairman Mickey Michaux violated the Rules by refusing a Republican Alternative, offered by Rep. Leo Daughtry, to be discussed. On the floor Rep. Paul Stam made a motion to suspend the Rules so the Republican Alternative could be debated. Everyone understood that this vote was on the merits of the Republican alterative. Nevertheless, it failed 48 to 62, with 61 Democrats voting against the Stam Motion.

The Republican Alternative would have required the Governor to begin now to find a 1 percent savings in the State’s Budget so the coming State Health Plan crisis, which is surely coming this fall or winter, could be averted.

For Background: For these two years the Budget has increased by 13 percent, or approximately twice the rate of inflation plus population growth. In previous years Governor Easley has imposed unilateral cuts on his departments of almost 5 percent. Of course he can effect a 1 percent savings, and if he starts now it won’t be as painful as it will be if he waits until fall or winter. Senate Democrats refused to do anything about the problem.

State Auditor Les Merritt announced July 24 he had opened an investigation into the State Health Plan’s oversight and financial forecasts.

HOUSE BILL 2440
Committee Substitute Favorable 7/17/08

State Health Plan/Shortfall Funds

May 26, 2008

A BILL TO BE ENTITLED

AN ACT TO CREATE THE STATE HEALTH PLAN CONTINGENCY account in the office of state budget and management AND TO PROVIDE FOR CONTINGENT APPROPRIATIONS AND ALLOCATIONS FROM THE SAVINGS reserve account TO THE CONTINGENCY account TO MEET CLAIMS PAYMENT OBLIGATIONS OF THE NORTH CAROLINA STATE HEALTH PLAN FOR TEACHERS AND STATE EMPLOYEES FOR THE 2008 2009 FISCAL YEAR.

The General Assembly of North Carolina enacts:

SECTION 1. Purpose. – The purpose of this act is to provide funds from the Savings Reserve Account in an amount sufficient to meet the claims payment obligations of the North Carolina State Health Plan for Teachers and State Employees ("Plan") in the 2008 2009 fiscal year. It is the intent of the General Assembly that measures taken in this act to address the shortfall in funds to pay State Health Plan claims are temporary and that the Savings Reserve Account shall be reimbursed, as soon as practicable, in the amount of funds appropriated from the Savings Reserve Account as authorized in this act.

SECTION 2.(a) State Health Plan Contingency Account. – There is established in the Office of State Budget and Management the State Health Plan Contingency Account. Funds in the State Health Plan Contingency Account shall be from the Savings Reserve Account, shall not exceed one hundred million dollars ($100,000,000) for the 2008 2009 fiscal year, and shall be allocated only in the amounts and for the purposes authorized in this act. At no time shall funds in the Contingency Account exceed the amount necessary to meet claims payment obligations for the period for which the request for payment is made by the Executive Administrator.

SECTION 2.(b) Contingent Appropriations and Allocations From Savings Reserve Account. – Upon receipt of a request from the Executive Administrator for funds to meet the Plan's claims payment obligations for the current period, the amount needed for this purpose is appropriated from the Savings Reserve Account to the State Health Plan Contingency Account. The Office of State Budget and Management shall transfer these funds from the Contingency Account to the State Health Plan after the Executive Administrator has reported the facts to the Executive Committee of the Committee on Hospital and Medical Benefits supporting the amount of the funds requested for claims payment due at the time of the request. If, at the end of the 2008 2009 fiscal year, there is an unobligated balance remaining in the State Health Plan Contingency Account, those funds shall revert to the Savings Reserve Account.

SECTION 2.(c) Legislative Oversight. – Upon determining that additional funds are needed to meet the Plan's immediately pending claims payment obligations, the Plan's Executive Administrator shall present to the Executive Committee of the Committee on Employee Hospital and Medical Benefits the facts supporting the Executive Administrator's request for funds. Only after providing this information to the Executive Committee may the Office of State Budget and Management transfer the funds from the State Health Plan Contingency Account to the Plan and in the amount necessary to pay immediately pending claims. The Executive Committee shall inform the Office of State Budget upon the Committee's receipt of the information required from the Executive Administrator under this act.

SECTION 2.(d) Reporting. – Beginning September 1, 2008, and quarterly thereafter, the Executive Administrator shall report to the House of Representatives and the Senate Appropriations Committees, the Joint Legislative Commission on Governmental Operations, and to the Committee on Hospital and Medical Benefits on the financial status of the Plan. The Executive Administrator shall develop a plan for ensuring the fiscal viability of the Plan and limiting to the extent possible, the impact on Plan benefits.

SECTION 2.(e) Information. – The Committee on Hospital and Medical Benefits shall meet regularly with Plan member organizations to keep them apprised of the financial status of the Plan and actions being considered or recommended to ensure future financial stability of the Plan as well as minimizing any adverse impact on Plan benefits. The Committee on Hospital and Medical Benefits shall keep the House of Representatives and the Senate appropriations committees apprised of its activities to keep Plan member organizations informed.

SECTION 2.(f) Funds for Authorized Purposes Only. – At no time shall the funds made available under this section be used for purposes other than those authorized by this section.

SECTION 3. Effective Date. – This act is effective when it becomes law.

Congressional off-Shore drilling bill is election year shell game

Rep. Paul Stam
Republican Leader
North Carolina House of Representatives
613 Legislative Office Building
Raleigh, NC 27803 - (919) 733-2962
Pauls@ncleg.net

Raleigh – N.C. House GOP leader Paul Stam (R-Wake) denounced the off-shore drilling bill passed by the U.S. House, Tuesday, as “just an election year game,” Stam said. “The congressional moratorium was about to expire anyway, and the bill passed by Democrats in Washington simply puts a new moratorium in place.”

The U.S. House bill prohibits drilling within 50 miles from shore, and allows drilling between 50 and 100 miles only by coastal states that approve their plan, “which is interesting,” Stam said. “North Carolina’s most promising spot is the Manteo Prospect, 39 miles due east of Rodanthe. The choice of a 50 mile buffer might seem to preserve the view. But platforms drilling the Manteo Prospect would not be seen from the tallest lighthouse tower, at Cape Hatteras.”

“I think this bill was a wink and a nod to radical supporters,” Stam said. “Their determined opposition to offshore exploration was hurting their poll numbers. This bill was designed to make Congress look responsive to pain at the pump. But it actually clamps down tighter. The 50 mile restriction, which also denies North Carolina royalty payments, is unacceptable.”

Republicans have repeatedly urged Congress to lift their moratorium. Most recently, Stam, his counterpart in the Senate Phil Berger (R-Dist. 26), along with Joint Caucus chairman Rep. Dale Folwell (R-Forsyth) wrote the Department of Interior, asking North Carolina be treated no differently than other coastal states in offshore lease planning.

The Republican leaders urged “current and future administrations” to allow states to participate in decisions about appropriate ways to explore offshore energy potential. “States opting in for a 37.5 percent share of leasing revenue, together with regional sharing of production royalties, is in line with policy along the Gulf Coast,” Stam said.

In “Common Misconceptions,” published last July, Stam answered many “frequently asked questions” about offshore exploration on North Carolina’s outer continental shelf. “Studies suggest there are large potential reserves,” he wrote, “perhaps 5 trillion cubic feet of natural gas in the Manteo Prospect alone.”

Mrs. Easley's 88 percent raise raises questions

The University of North Carolina’s Board of Governors Friday approved an 88 percent pay raise for First Lady Mary Easley. The decision will increase her salary from $90,300 to $170,000, the bulk of her salary coming from state funds with approximately one-third to be raised through grants and donations. It is expected that some of those grant funds may actually be additional tax dollars. Reports indicate that the salary increase was not initially authorized through normal and accepted procedures. UNC system rules call for any raise in excess of 15 percent or $10,000 to first be approved by the university system; in fact, initial approval by North Carolina State University authorities violated a UNC system requirement.

“At a time when funds are tight and the General Assembly is having to explore new ways to pay public school, community college, and university teachers, now is not the time to give one person such an unprecedented raise,” said House Republican Leader Paul Stam (R-Wake). “How do you explain the lack of funds for adequate pay raises to an entire group of educators when Mrs. Easley receives such a large increase? This raise depreciates the morale of our state’s academic professors.”

“It appears to me that the job ‘responsibilities’ in this position could easily be handled by any other faculty member at a salary more in keeping with standard salaries,” said Senate Republican Leader Phil Berger (R-Rockingham). “To the average citizen in North Carolina, this appears to be a golden parachute for the Easley family at the taxpayers’ expense. This action, against the backdrop of well-publicized examples of wasted tax dollars, further fuels cynicism and distrust, and confirms the current low standing of public officials in the eyes of many North Carolinians.”

Republicans urge Interior to move deep water exploration as alternative from 2012 to 2010

Senator Phil Berger
Republican LeaderNorth Carolina Senate
1026 Legislative Building
Raleigh, NC 27601 - (919) 733-5708
Philbe@ncleg.net

Rep. Paul Stam
Republican Leader
North Carolina House of Representatives
613 Legislative Office Building
Raleigh, NC 27803 - (919) 733-2962
Pauls@ncleg.net

Rep. Dale Folwell
Joint Republican Caucus Leader
North Carolina House of Representatives
508 Legislative Office Building
Raleigh, NC 27803 - (919) 733-5787 - Dalef@ncleg.net

Republicans ask Interior to speed allowingdeep ocean exploration as alternative by two years
Friday, September 12, 2008

Raleigh – Republican leaders in the General Assembly have requested the Department of the Interior to include exploration of the Outer Continental Shelf in acceptable alternative strategic energy planning.

Since July, the Republican minority in Raleigh has been united in urging Congress to lift its moratorium on offshore exploration. House Republican leader Paul "Skip" Stam (R-Wake), Senate Republican leader Phil Berger (R-Dist. 26) together with Joint GOP caucus leader Rep. Dale Folwell (R-Forsyth) wrote Interior, saying a "thorough scientific and socioeconomic review will aid in assessment of the costs and benefits of oil and natural gas exploration…" saying such a strategy "must be done before North Carolina makes any decisions about utilizing these coastal reserves."

The three GOP legislative leaders expressed support for the "forward-thinking efforts" of (Interior) Secretary Kempthorne to develop a five-year leasing strategy to include all" the Outer Continental Shelf, "and begin in 2010 rather than 2012."

Stam, Folwell and Berger urged "current and future administrations to allow coast state participation in decisions about the most appropriate way to develop (or not develop) OCS energy reserves. And for states that do opt in, a 37.5 percent share of leasing revenue, together with regional sharing of production royalties similar to that defined in The Gulf of Mexico Energy Security Act of 2006."

In "Common Misconceptions," last July, Stam addressed "frequently asked questions" about exploration off North Carolina’s coast. "Studies show large reserves," Stam wrote. "There may be five trillion cubic feet of natural gas… accessible by rigs invisible…even from the top of Hatteras Lighthouse," the highest lighthouse tower in the United States.

(Copy of Letter to Interior follows)

September 10, 2008

Ms. Renee Orr
Five-Year Program
Manager Minerals Management Service (MS-4010)
U. S. Department of the Interior
381 Elden Street Herndon, VA 20170

Dear Ms. Orr:

On behalf of the Republican leadership in the North Carolina General Assembly, thank you for the opportunity to comment on the Department of the Interior’s plan to prepare a 5-year Outer Continental Shelf (OCS) Oil and Gas Leasing Program to begin in 2010. We believe inclusion of all OCS acreage affected by the current Congressional moratorium is an appropriate step to further offshore exploration and production as an alternative in the dialog concerning energy production for all coastal states.

On the day following President Bush’s July 14, 2008 Executive Order rescinding the executive moratorium on oil and gas leasing operations on the OCS, a resolution was introduced in the North Carolina General Assembly (NC House Res. 2806) urging Congress to allow North Carolina to determine whether offshore exploration should be allowed on the OCS in our State’s territorial waters.

North Carolina’s coast is one of our State’s most treasured resources and is integral to our economy, culture, and natural heritage. A thorough scientific and socioeconomic review will aid in assessment of the costs and benefits of oil and natural gas exploration and extraction. This must be done before North Carolina makes any decisions about utilizing these coastal reserves. The Republican leadership in North Carolina’s General Assembly has previously encouraged lifting the current OCS drilling moratorium.

North Carolina’s Republican legislators support the forward-thinking efforts of Secretary Kempthorne to develop a five-year leasing strategy to include all OCS and begin in 2010 rather than 2012. Once this plan is in place, all coastal states will be in a position to control the role energy will play in their futures. Without the Minerals Management Service (MMS) proposed lease plan, those decisions will be made for them.

As you know, numerous active leases have existed on North Carolina’s OCS, the most recent and most promising being 21 blocks of the Manteo Prospect leased in 1981 and 1983. Exploration proposals discussed over the following two decades were fraught with legal and political tension. The North Carolina Coastal Resources Commission has policies in place to ensure adequate study and consideration of environmental and economic factors related to our coast. Those policies are part of North Carolina’s federally approved Coastal Zone Management Program and mandate additional scrutiny by our Division of Coastal Management to ensure OCS activities are consistent with relevant federal and state rules.

Mobil Corporation has estimated potential reserves of 5 trillion cubic feet of natural gas, within the Manteo Prospect. Although that hydrocarbon volume may be present, given the size and reservoir characteristics of the prospect, we believe it should be up to the citizens of North Carolina to determine if, and how, such reserves might be developed. Before such public debate can occur there must be a commercial interest in developing an exploration plan, prior to which a lease plan must be in place.

During consideration of leasing strategies for OCS areas adjacent to states without any historic petroleum production, we urge the Secretary of the Interior, the MMS, as well as current and future administrations, to allow coastal state participation in decisions about the most appropriate way to develop (or to not develop) OCS energy reserves. And for states that do opt in, a 37.5 percent share of leasing revenue together with regional sharing of production royalties similar to that defined in The Gulf of Mexico Energy Security Act of 2006 seems to be appropriate.

Thank you for this opportunity to share our thoughts regarding development of an expedited 5-year OCS Lease Plan and for your consideration of our comments.

Sincerely,

Rep. Paul Stam
Minority Leader
North Carolina
House of Representatives

Senator Phil Berger
Minority Leader
North Carolina Senate

Rep. Dale Folwell
Joint Republican Caucus Leader
North Carolina General Assembly

WRONG PRIORITIES, LACK OF OVERSIGHT LEAD TO HIRING FREEZE

PRESS RELEASES
Senator Bob Rucho
North Carolina Senate
39th Senatorial District
515 Legislative Office
BuildingRaleigh, NC 27601
(919) 733-5655

North Carolina’s Department of Transportation (DOT) recently announced a hiring freeze for DOT personnel. The DOT attributes their decision to a shortfall in the federal government’s budget that would affect their funding; however, the DOT fails to mention that North Carolina’s transportation system and its funds have been struggling for a number of years. Just last year, a private consulting firm was paid $3.6 million in taxpayer money for a report that highlighted serious waste and mismanagement in the DOT. Many point to the taking of money from the Highway Trust Fund by Democrat budget writers as another reason for the DOT’s deficit; others fault Democrat leaders, who admittedly left many transportation issues unaddressed in the last legislative session.

Senator Bob Rucho (R-Mecklenburg) made the following statement:

“The Department of Transportation and the Easley administration are shifting blame for North Carolina’s woeful record in road construction and maintenance from their mismanagement, to the federal government. Time and time again, North Carolinians have seen road construction mistakes made with their tax dollars, such as the paving problems on Interstate 40, that indicate a lack of oversight at the DOT. North Carolina is no longer known as ‘the good roads state’ and is quickly becoming the state of crumbling roads, risky bridges, and abandoned road construction projects. The status quo in transportation in North Carolina is unacceptable. North Carolina’s transportation problems are rooted in our own Democrat-led state government’s lack of oversight and poor prioritizing. I find it ironic that, during the same news cycle in which the state’s First Lady’s 88 percent pay raise is discussed, we are also learning that there is not enough money to hire needed workers at the DOT.”

Common Misconceptions - FAQ

OIL EXPLORATION ALONG THE OUTER CONTINENTAL SHELF
COMMON MISCONCEPTIONS & FREQUENTLY ASKED QUESTIONS

The State of North Carolina has full control over offshore exploration.

False. North Carolina controls the first three miles oceanward of Mean Lower Low Water (MLLW) from which point the US territorial sea extends to 12 miles. Federal submerged lands also extend beyond the territorial limit out to 200 nautical miles in what is considered the Exclusive Economic Zone (EEZ).

The State of North Carolina has limited control over offshore exploration.

True. Although the geologic targets that have been identified to date occur on the Outer Continental Shelf in federal waters, the US Coastal Zone Management Act of 1972, as amended, requires all federally permitted coastal energy activity on the Offshore Continental Shelf to be consistent with the adjacent State’s federally approved coastal management program to the maximum extent practicable. For North Carolina activities, the North Carolina Division of Coastal Management, as authorized under the State’s Coastal Area Management Act of 1974 (CAMA), is responsible for determining whether federal, or federally permitted, activities are consistent with this coastal program.

The State of North Carolina coastal program would not allow offshore energy production.

False. The North Carolina Coastal Resources commission (CRC), established under the State’s Coastal Area Management Act (CAMA), currently has policies in place for coastal energy production in the North Carolina Administrative Code (specifically, T15A NCAC 07M.0400). Based on recommendations from an Ocean Task Force that had been appointed by the Division of Coastal Management (DCM) and the CRC (which is staffed by DCM) to examine ocean resource issues, these policies were adopted by the CRC in 1996 and approved under Executive Order from Governor Hunt.

There have never been any active leases from the US Minerals Management Service in North Carolina’s Federal waters (offshore continental shelf).

False. A total of 55 tracts were leased in federal waters offshore North Carolina between 1981 and 1983. Exploratory drilling had been proposed within the 21 units of the Manteo Prospect by both Mobil and Chevron. On November 17, 2000, the interests in the last remaining 8 natural gas and oil leases in the Manteo Unit were relinquished by Conoco, Shell Offshore and OXY USA.

Drill rigs will clutter the horizon and spoil the vista from the Outer Banks.

False. The Manteo Prospect (the nearest to shore of all historic federal leases), the unit that held the last active leases on the North Carolina Outer Continental Shelf (OCS) through November 17, 2000, is 44.8 miles east-northeast of Cape Hatteras and 38.7 miles due east of Rodanthe. Even from atop the Cape Hatteras light, the tallest lighthouse tower in the United States (elevation = 210’ above sea level), the distance to the horizon based on the curvature of the earth is less than 20 miles.

Oil spills from offshore drilling will destroy marine life and end up on the pristine beaches of the Outer Banks.

False. Geochemical analyses of Atlantic (non-North Carolina) OCS exploratory wells indicate that hydrocarbon source rock for the Manteo Prospect would be more likely to generate natural gas rather than crude oil. Mobil estimated the Manteo Prospect could contain as much as 5 trillion cubic feet (tcf.) of natural gas; a volume the U.S. Minerals Management Service concluded could be present given the size and reservoir characteristics of the prospect.

There is not enough oil and gas offshore North Carolina to make a dent in global demand.

False. The hydrocarbon potential of just the Manteo Prospect alone has been estimated to be between 5 trillion cubic feet (tcf) of natural gas, equal to 833 million barrels of oil, making it one of the largest domestic hydrocarbon discoveries since Prudhoe Bay, Alaska. To put this into perspective, US natural gas consumption in 2007 of 23 billion cubic feet represents less than 2% of the lower reserve estimate of 5 tcf.

How long until hydrocarbons can be produced after the moratorium is lifted?

The rule of thumb is ten years from concept to production. For example, if ANWR had been opened to drilling a decade ago when it was being considered, those reserves would now be contributing to global supply and affecting pricing.

If the moratorium is lifted, are hydrocarbon reserves guaranteed?

No. The prospects in NC’s OCS are true wildcat prospects. (A wildcat well is the first well drilled on a new, clearly defined geological structure.) Chevron estimated that there was a 7% chance of finding hydrocarbons and only a 2% chance of their being commercial. That said, it should be noted that, relative to the Manteo Unit, the highest bid in the 1983 Atlantic OCS lease sale (the last year for which Atlantic OCS leases were offered) was $2,015,000 for one block (Block 115) and that Mobil had submitted plans for a seven-well exploration program in Block 467. Both of these activities illustrate a justifiable economic risk. Today, advances in geophysical imaging such as 3D seismic have increased the ability to better define geological structures while new drilling technologies (e.g., deepwater drilling, steer-able bits, directional drilling) lower the environmental and economic risk.

Is it dangerous or impossible to drill in water depths such as those found under the Manteo Prospect?

No. The blocks under the Manteo Unit that had been proposed for exploratory drilling are at depths of 2,700 feet (Block 467) and 2,100 feet (Block 510). A decade ago, it was common that 20-25 wells were being drilled during any given week in the Gulf of Mexico in water depths greater than 1,000 feet. Discoveries have been made in water depths greater than 9,000 feet (Chevron’s Tiger and Shell Offshore Tobago discoveries made in 2004).
***
North Carolina will benefit economically from offshore hydrocarbon production.

True. Revenue for the following states was generated from offshore hydrocarbon production during 2007 (federal fiscal year October to September): CA ($48 million), AL ($50 million), TX ($65 million), and LA ($158 million). Additional positive economic impact of energy and energy-related industries within the hydrocarbon-producing coastal States contributes is also realized through jobs, taxes, and investment

Voucher Confusion by Bev Perdue

Rep. Paul Stam, Republican Leader of the North Carolina House of Representatives

Yesterday I saw a Bev Perdue ad frightening me against Mayor Pat McCrory. The ad claimed his supposed voucher position would cost the State $900 million, requiring tax increases and slashed education spending.

Yet a voucher is the same as a check drawn from a bank, just a form authorizing disbursement of cash and used as credit against a purchase or expense. The Smart Start Initiative backs a wide variety of purchases for private services, and not just for children of low-income families but for early childhood health screening, for example. If profit-making services were not available for health screening, transportation, and many child care and pre-school education providers the much touted success of this program would not be possible.

National studies of pre-school programs in most states regularly cite the use of vouchers as standard policies, including an analysis done by the W.K. Kellogg Foundation (1), listed on the Partnership’s website as the chief private donor to Smart Start. This statewide non-profit has received $2.280.2 Billion (2.) in funding from the taxpayers.

Every year Bev Perdue served in the state Senate, and later as Lieutenant Governor, she supported private education vouchers at the preschool level and at the college level in the form of Legislative Tuition Grants (3.) . She has never claimed this was bad policy or that this drew money away from public education.

For 35 years North Carolina has authorized what is today a $1,950 credit to every North Carolina resident attending our private and religious colleges. This saves the taxpayers money. According to the General Assembly’s Fiscal Research Division we subsidize North Carolina students in the UNC system $11,833 per year. In 2003, Bev Perdue presided over extension of this program to Roanoke Bible College (4.), an accredited four-year institution. Good for her!

Tax credits do not cost the state any more money than Bev Perdue’s Legislative Tuition Grants.

In 2008, House Bill 388 and Senate Bill 2079 proposed tax credits for parents of children with special needs. Bev Perdue torpedoed that idea at the urging of her Union bosses. Fiscal Research staff estimated this proposal would have allowed $18 million in tax credits to 2,900 parents of special needs children and provided a net savings to the State of $7 million and $6 million for the counties each year.

After 8 years on the State Board of Education, her recent ads demonstrate Bev Perdue as unqualified to lead education policy.

1 Financing Public Pre-School Programs: Current Practices and Future Possibilities, Committee for Economic Development, Nov. 2006.
2 North Carolina Partnership for Children, Inc. History of Funding.
3 North Carolina G.S. 116-21.2 “Legislative tuition grants to aid students and licensure students attending private institutions of higher education.”
4 2003 Session NCGA, HB 150, “Establish State Education Grants.” Roll Call 931 (S.L. 2003-429)

Dole much more independent than Hagan

John M. Blust, North Carolina House of Representatives

Kay Hagan has been running against Senator Elizabeth Dole claiming she will be an independent voice and that Senator Dole votes too often with President Bush (who does not have a vote in the Senate). Since Hagan cast the first stone – or, more accurately, the first 10,000 stones, a close look at the objective facts as they relate to independence is only fair. The facts show that Kay Hagan votes far more often with her Democratic leader in the North Carolina Senate than she accuses Dole of voting with President Bush.

During the ten years Kay Hagan served in the North Carolina Senate, a total of 7705 votes were taken in the Senate. Out of those 7705 opportunities, Hagan voted differently from Senate President Pro Tem Marc Basnight (D-Dare) on just 31 votes! That means Kay Hagan voted with Democrat Senate Leader Marc Basnight 99.59766% of the time! Since both Senators missed a few votes here and there, the actual percentage is probably closer to 99.5% identical voting. Anyone with internet access can verify these votes on the legislature’s official web site at www.ncleg.net.

Kay Hagan and Senator Marc Basnight have voted differently a mere of 31 times out of 7705 votes over a ten year period during which Hagan represented an urban piedmont district while Basnight represented a mostly rural, coastal district. Isn’t it strange that there would be virtual lock-step voting between two state senators who represent widely divergent types of districts?
How often do any two people agree with each other 99.5% of the time? It is doubtful that a husband and wife, father and son, mother and daughter, brother and sister, coach and player, boss and worker, pastor and parishioner, or two people in any other type relationship agree with one-another 99.5% of the time on 7700 matters over ten years!

Kay Hagan has represented a district that was gerrymandered to elect a Democrat to the NC Senate. Nevertheless, in one of her earlier elections, Senator Basnight spent over $300,000 on behalf of Hagan’s campaign.

This year the national Democratic Senatorial Campaign Committee (DSCC) is paying for most of Hagan’s US Senate Campaign. The DSCC has dumped a whopping 8 million dollars into North Carolina to try to buy Hagan a seat in the United States Senate. A great deal of this outside special interest money was provided by big national labor unions and trial lawyers to Democrat Senate Majority Leader Harry Reid of Nevada and ultra-liberal Senator Chuck Schumer of New York, the head of the DSCC. Most of the 8 million dollars has gone to pay for misleading negative advertising against Senator Dole.

For example, you may have seen the Hagan campaign ad with two old codgers in rocking chairs claiming that Dole votes with Bush 92 per cent of the time. Actually, the organization that put out the data claims that the correct figure is 88 per cent. When confronted by reporters about this discrepancy, Hagan’s handlers refused to change the false information in the ads. The Hagan handlers probably think the average voter will not see much difference between 88 percent and 92 percent, and any attempt by Senator Dole to rebut the claim will only serve to drive the point home more with voters. They do not respect the need for accuracy nor do they respect the voters of North Carolina.

The difference between 88% and 92 % is significant to anyone. In any legislative body, the majority of votes are unanimous or nearly unanimous because so many votes are non-controversial - such as commemorating resolutions, procedural considerations, and other matters that evoke little, if any, disagreement. When one examines the range of votes in the US Senate, the most conservative Senator’s voting record will probably vary at most 20 to 25 per cent from that of the most liberal Senator. Jesse Helms would vote with Ted Kennedy about three-quarters of the time. One commentator pointed out that Barack Obama and John McCain probably vote the same 80 to 90 percent of the time.

The voting variation in the NC Senate is much like that in the US Senate. In the 2005-2006 session, the most conservative state senator, Hugh Webster (R-Alamance) voted differently than Democratic Senate leader Basnight about 23% of the time. All 50 of North Carolina’s Senators agreed approximately 75% of the time. This would explain some of Hagan’s identical voting record with Basnight, just as it explains much of Dole’s voting with her fellow Republicans. But what can explain Kay Hagan’s 99.5% lock-step voting with her leader, Senator Basnight?

As you can see from the numbers, Senator Dole has demonstrated far more independence than Hagan – whose independence from her leadership is close to zero. Senator Dole has demonstrated she does not vote with the President or with anyone else in the mindless, lock-step fashion. One stark example occurred when President Bush and a bi-partisan group of US Senators, including both John McCain and Barack Obama, were advocating an amnesty bill for illegal aliens. Elizabeth Dole stood up to the President and led the opposition which finally defeated that bill. Hagan has never demonstrated this kind of independence. Instead, Hagan has demonstrated an almost blind loyalty to Senator Basnight.

Kay Hagan’s voting history in the North Carolina Senate and the fact that Harry Reid, and Chuck Schumer are funding most of her current campaign against Dole, make it very unlikely that Hagan could be an independent voice for North Carolina in the United States Senate. If history is any guide, Harry Reid and Chuck Schumer will be able to rely on Kay Hagan’s vote to help them implement their liberal agenda in Washington. New York would, in effect, have a third seat in the US Senate.

Perhaps Senator Dole should run her own commercials with some old codgers holding rubber stamps claiming that the rubber stamp is the proper symbol for Kay Hagan.

State Health Plan

After the General Assembly passed its 2008 Budget, Democratic leaders announced they had discovered a quarter billion dollar deficiency in the State Health Plan for teachers, state employees and retirees.

This involved reserves and operating expenses, turning a projected $50 million surplus into a possible $200 million deficit during the fiscal year that began July 1, 2008.

At first these leaders planned to do little about it now. They then proposed to take any shortfall from the Rainy Day Fund. The goal for the Rainy Day Fund is 8 percent of last year’s operating budget, or $1.704 Billion. Instead, it is now only funded at $787 million.

In the Appropriations Committee, Chairman Mickey Michaux violated the Rules by refusing a Republican Alternative, offered by Rep. Leo Daughtry, to be discussed. On the floor Rep. Paul Stam made a motion to suspend the Rules so the Republican Alternative could be debated. Everyone understood that this vote was on the merits of the Republican alterative. Nevertheless, it failed 48 to 62.

The Republican Alternative would have required the Governor to begin now to find a 1 percent savings in the State’s Budget so the coming State Health Plan crisis, which is surely coming this fall or winter, could be averted.

For Background: For these two years the Budget has increased by 13 percent, or approximately twice the rate of inflation plus population growth. In previous years Governor Easley has imposed unilateral cuts on his departments of almost 5 percent. Of course he can effect a 1 percent savings, and if he starts now it won’t be as painful as it will be if he waits until fall or winter. Senate Democrats refused to do anything about the problem.

We will discover who knew what and when, and by how much. But to refuse to adjust the Budget after a known $200 - $250 million problem was identified was irresponsible.

Below are the texts of the House Bill with the Stam/Daughtry Amendment and the voting record on the motion to suspend the rules in order to consider the amendment.

North Carolina Budget FY 2009 (In Conference)

FY 2008-09 Budget (Edition 7) North Carolina Senate - Get more College Essays

N.C. Senate Democrats should try democracy

Charlotte Observer - Monday, June 23, 2008

There's much to like – and some things to dislike – in the state Senate's $21.4 billion supplemental spending plan approved on a 33-16 vote Wednesday and sent back to the House Thursday after a final vote.

It raises teacher salaries by 3 percent, not enough to reach the national average but still significant at a time when many workers are getting no raises. And it boosts appropriations for the university system to help meet enrollment needs. It has no direct tax increases and boosts spending by about 3.4 percent, considerably less than the hikes in previous years.

On the down side, the Senate doesn't give schools enough money to offset a big increase in fuel costs, and it fails to match the $50 million the House provided to help four state trust funds leverage their money to buy land and otherwise protect green space for recreation, water quality, habitat and farmland preservation. And the Senate calls for $672 million in borrowing for construction projects without voter approval – more than the $550 million the House proposes for such projects.

These differences will be worked out in a conference committee with House members. But the most disturbing thing about the Senate budget is how it was developed and passed. Unlike the House, which built its budget proposal in a deliberate fashion and gave its members time to read the budget and hours to debate it on the floor, the Senate moved quickly and, some would say, ruthlessly.

It's no secret that Democrats dominate the Senate and get their way. That's politics. But this was no debate at all. Democrats tabled Republicans' amendments for the most part – they approved one by Sen. Bob Rucho, R-Mecklenburg, to study a pre-K program. Then they shut off debate entirely after Senate Majority Leader Tony Rand, D-Cumberland, called for a vote. The only real question left to both Democrats and Republicans was whether to vote yes or no. Democrats all voted yes; all but three Republicans voted no.

No wonder assistant Senate Republican leader Tom Apodaca, R-Henderson, was fuming. “It looks to me like it's still the Cold War, and we've copied the Russian system,” he told the News & Observer's Dan Kane after the budget vote.

Cutting off debate and denying consideration of alternatives potentially deprives the state of good ideas on how to do things. Many legislators, including some Democrats, have no other opportunity to study the bill and offer alternatives if they cannot do so on the Senate floor.
Democrats have ruled the legislature for a long time. They have the numbers. But the House is managing to conduct its operations while still giving the opposition party an opportunity to air some of its ideas. The Senate should do likewise.