NC GOP lawmakers target tobacco settlement money

RALEIGH, N.C. - The manufacture of and Lucky Strikes kept tax dollars flowing in North Carolina during Big Tobacco’s heyday. Now lawmakers are asking if they should take long-protected cigarette company settlement money - while possibly settling a humbling chapter in the state’s past.

Their target is money in the Golden LEAF Foundation, a private nonprofit organization chartered by the Legislature in 1999 to manage half the state’s expected $4.5 billion share of the national tobacco settlement between cigarette companies and 46 states through 2025.

The Rocky Mount-based foundation so far has awarded $450 million in grants, most of which have gone to try to improve the economic climate in small towns and areas affected by tobacco’s wane. It retains about $600 million in assets. Critics, mostly Republicans, argue money has been wasted and choices draped in political influence. The governor, Senate leader and House speaker who pick the board members have been Democratic for nearly the foundation’s entire existence.

“It’s a patronage organization,” said House Majority Leader Paul Stam, R-Wake.

With the GOP now in charge of the Legislature, a draft measure Stam is floating that would repeal the foundation’s charter is getting a look. It would earmark current and future Golden LEAF funds for projects for the state employee retirement system, community college instructional equipment, and a statewide loan and grant fund to help provide infrastructure to recruit business.

The proposal, obtained by The Associated Press, also would set aside 10 percent of the state’s annual settlement funds in 2012 and 2013 to give $20,000 apiece to thousands of mental patients and prisoners sterilized against their will decades ago through a state program. That works out to $152 million if all 7,600 people sterilized between 1933 and 1973 or their descendants are paid.

Democratic Rep. Larry Womble of Winston-Salem, home to cigarette maker Reynolds American Inc., said remedying the sterilization is more important to him than protecting the tobacco funds.

“This is something that I would seriously consider,” said Womble, who has tried unsuccessfully for years to get compensation for the sterilization victims. “That overrides anything that I can think of.”

But the top leaders of the House and Senate have wondered aloud if taking money from Golden LEAF - its full name is the Golden Long-term Economic Advancement Foundation - makes sense.

Democratic Gov. Beverly Perdue made clear her defense of the foundation when she vetoed a Republican bill last month that would have intercepted a $67.6 million payment from Golden LEAF to hold over until this summer to help close a $2.4 billion budget gap next year. While $435 million have been taken from two other entities that receive the other 50 percent of the settlement money, Golden LEAF funds have never been diverted, according to General Assembly research staff.

Trying to divert or eliminate the fund this year could cause more fireworks among lawmakers working toward preliminary budget decisions, said House Speaker Thom Tillis, R-Mecklenburg.

“It could become a greater distraction that any real benefit, even if you accepted the thesis that those funds should be used a different way,” he said.

Senate leader Phil Berger, R-Rockingham, said changes to tobacco settlement money allocation isn’t a top priority right now, but he said it’s worth asking if there’s a broader way to use the funds.

Golden LEAF Foundation President Dan Gerlach said the organization has proven its value to the state through nearly 1,000 grants and by using its money wisely to build the endowment. Other states have used their settlement share to close budget shortfalls.

“That’s something that should not be penalized by eliminating the foundation or trying to divert the funds,” Gerlach said. The grants have gone to Republican and Democratic areas, he said.

The foundation agreed last April to give $24 million in matching funds to help secure $76 million in federal stimulus to install 1,300 miles of fiber lines to improve high-speed broadband services to 69 underserved counties.

Without the Golden LEAF money, “probably the most significant impact in broadband infrastructure in the state’s history would be in peril,” said Joe Freddoso, chief executive of MCNC, the nonprofit managing the project.

A 2009 state audit highlighted some situations where political or financial influence was possible. Gerlach, who became executive director in 2008 after serving as then-Gov. Mike Easley’s senior budget adviser, said problems identified in the audit have been fixed.

John Hood with the conservative-leaning John Locke Foundation said he’s not saying Golden LEAF has failed to help the state at times. But he points to its largest grant - $100 million announced in spring 2008 to help bring aircraft parts supplier Spirit AeroSystems to the Global TransPark - to suggest lawmakers would be better suited to allocate the settlement money.

“Does anybody seriously believe that the General Assembly would have seen that as the best use of $100 million?” Hood asked.

Associated Press

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