Notables & Quotables
IN THIS ISSUE
3
our Investment In Freedom Pays Off Y JLF’s influence on legislative policy helps redefine & reform North Carolina.
“ You people need to understand it ain’t your money.”
4 From Candidate To Defender of Freedom JLF crisscrosses the state to educate candidates about economics & policy.
6 Freedom Prevails In State Budget
Conservatives have much to cheer, with fiscal reforms promised & delivered.
Rep. David Lewis (R-Harnett) on Sept. 17, responding to legislative critics of tax cuts included in the new state budget.
Defining Digits
8 Progressives Push Doctors Out The Door Doctors are fleeing independent practice to escape demands from bureaucrats.
9 Carolina Journal Report Stirs Reaction
$2.2
BILLION
National attorneys group asks U.S. Attorney General Loretta Lynch to investigate.
10 A mazing People, Amazing Speeches
Can’t join us in person for a presentation? No problem. Just click and watch.
$411
MILLION
Amount North Carolina taxpayers will keep in their wallets over the next five years, thanks to historic tax reforms approved by the General Assembly and Gov. McCrory. Amount of the increase in state spending on K–12 education in the 2015–16 Fiscal Year General Fund operating budget.
11 Tweeting, Liking, & Sharing JLF
Freedom-loving Tar Heels are enjoying JLF’s growing social media presence.
12 You’re Invited
5.499%
The Weekly Standard ’s Fred Barnes talks about his new book, Jack Kemp: The BleedingHeart Conservative Who Changed America.
4%
ZERO
2 The Locke Letter Fall 2015
North Carolina’s new, lower personal income tax rate as of Jan. 1, 2016, making the rate lower than Virginia, South Carolina, and Georgia.
North Carolina’s new corporate income tax rate as of Jan. 1, 2016, making it the lowest rate of any state that imposes a corporate tax.
Amount of taxpayer subsidy to be given to the solar industry once the four-decades-old subsidy expires at the end of the year.
You Made It Happen!
I
f you watched much of the traditional media coverage of the recent legislative session, you came away convinced our elected representatives toiled for months on end with very little to show for it in the end.
Fact is, North Carolina’s Freedom Movement won the session. Thanks to your investment, our outreach and research teams had the necessary resources to roll up our sleeves day after day, to keep at it, to stay relevant and in the center of the debate. We deployed your gift exactly where it would deliver the return you expect: persuading legislators to step toward freedom and away from bureaucracy.
Kory Swanson President and CEO
Pat yourself on the back, because you made it happen.
In this issue, you’ll find the budget numbers that show our state is reining in the growth of government, setting money aside for the unexpected, and continuing to reform the tax code to ensure working North Carolinians keep more of their money. And that’s just the beginning of the legislative victories.
More importantly, we’re not done working to secure our shared principles.
Election season is here, and we’re embarking on a series of workshops to educate candidates of all political stripes about economics, free markets, and the power unleashed through sound, limited-government policies.
We deployed your gift exactly where it would deliver the return you expect: persuading legislators to step toward freedom and away from bureaucracy.
It’s a huge undertaking, led by Becki Gray, JLF’s Vice President for Outreach. But it’s an undertaking vital to the future of our state. Last election cycle, we worked with more than 300 candidates. Over the primary and general election seasons, we anticipate working with even more women and men who will be making the decisions that will guide our state further toward its rightly place as First in Freedom.
Turn to page 5 to find out how to make your investment in our candidate education series.
On behalf of every member of our team, thank you for including this new effort in your year-end philanthropy plan. As with any tax-deductible gift you make, we promise to put it to work immediately in support of our shared ideals. A great example of that commitment is on page 9. I hope you’ll read health care analysis from Paul Slobodian, a valued new John Locke Foundation board member. Paul’s background in health care grounds his compelling commentary about the challenges patients and doctors face today — a commentary published earlier this year in the Raleigh News & Observer. Enjoy this issue of Locke Letter, and pass it along to a friend. We’re always thankful to have supporters like you by our side.
Dedicated To Making North Carolina First in Freedom
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Voting Isn’t The Only Way To Ex Donate Today To Our Candi Reliably conservative lawmakers are retiring! We must educate and inspire a new generation of leaders! That’s why JLF is crisscrossing North Carolina to educate candidates about freedom, free markets, and limiting government to core functions. Past forums have nurtured some of today’s most committed defenders of freedom. Join our dedicated Freedom Club members in supporting our Candidate Education Forum Series.
“ For too many years, the political Left was well funded, in addition to having the news media on its side. Now we have an opportunity to get views supporting limited government and free enterprise to the voters. Please join me in supporting the John Locke Foundation.” Phil Kirk, Raleigh Carolina Freedom Club Member
“ We support the John Locke Foundation because it preserves Locke’s definition of liberty and because it promotes Locke’s belief that the legitimacy of any government depends upon the consent of the governed.” Phil and Nan Miller, Raleigh Carolina Freedom Club Members
“ I was introduced to the John Locke Foundation soon after becoming a Pamlico County Commissioner. The research and insight concerning the issues that impact the citizens of North Carolina and our small county, in particular, has proved invaluable.” Chris Mele, Oriental John Locke Foundation Board Member Carolina Freedom Club Member
4 The Locke Letter Fall 2015
pand Freedom In North Carolina! date Education Forum Series NOV. 30
Deadline For Your Gift:
Please mail your tax-deductible donation using the envelope included with this issue.
Thank you! Who You’ll Impact
The seasoned, freedomloving candidate
The candidate searching for solutions
They’re Freedom Movement members and come to us to shore up their knowledge.
They want to provide opportunity for their neighbors but aren’t sure about the best path forward.
The curious student They want to know why people are talking about reining in government.
Your Gift Will Pay For: • Research & Analysis
• Agenda 2016 Policy Book
• Information-Filled Notebooks & Zip drives
Our Plan:
• Logistics & Travel
• Personal Follow-Up To Candidate Inquiries
Round 1: We’re already traveling the state, talking with candidates for the March 15 primary election.
ound 2: After the primary winners are R decided, we’ll head out for another round of workshops for general election candidates.
We’ll Cover: • Principles of Limited Government
• Economic Growth Versus Economic Development
• Role of Freedom & Free Markets in Growth & Opportunity
• Medicaid Behemoth: The Good, The Bad, The Ugly
• Why North Carolina is a Beacon of Conservative Reforms
• How Education Is Funded & What the Numbers Really Say
• Where the Revenue Comes From & Where It’s Spent
• Myths About Teacher Compensation & Turnover
• Why North Carolina’s Tax Reform is a Game-Changer
• Barriers To More Parental Choice in Education
• Regulation & Licensing: Hidden Tax, Barrier to Competition
• Why Our Renewable Energy Law = Higher Electricity Bills
Dedicated To Making North Carolina First in Freedom
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Why Freedom Prevailed General Fund Budget Summary FY 2015-16 Restrains Growth of Spending, Lowers Tax Rates
TAXES
$ Income Rate drops from 5.75% to 5.499%. Standard deduction grows.
SPENDING EDUCATION $12.3 Billion Puts more money into classroom. $2,000 pay hike for early-career teachers. $750 bonus for all other teachers. Increases voucher funding for low-income families.
HEALTH CARE $5.1 Billion Funds Medicaid reform, providing budget predictability and quality care for 1.9 million.
Corporate Rate drops from 5% to 4%.
JUSTICE & PUBLIC SAFETY $2.5 Billion Raises for corrections officers & sworn members of Highway Patrol.
$21.7 Billion 2015–16
Debt Service $714 Million Capital $17 Million
Reserves $180 Million Gen. Gov’t. $391 Million
Natural & Economic Resources $466 Million
Highlights Restrains Spending
Increases Transparency
Curtails Energy Subsidy
Growth is 3.1%, less than the combined rate of inflation & population growth.
State agencies, local governments & local education agencies must post budget information to common website.
Allows the 35% solar tax credit to expire at end of the year, ending a fourdecades-old subsidy.
6 The Locke Letter Fall 2015
In the Budget Debate 1 JLF Relentlessly Pursues Freedom and Free Markets! We never give up. Every single lawmaker and state official represents an opportunity to advance freedom and opportunity, and to curtail the smothering forces of too much government. Over nine months, Becki Gray and the team were in the middle of legislative action, reacting with information, urging reforms, advancing sound ideas, correcting falsehoods, explaining pros and cons, and responding to inquiries. These victories can be traced to JLF ideas, recommendations, and hard work.
2 Growth of State Spending Restrained!
7 More Money In Every Paycheck!
The $21.7 billion General Fund budget for FY 2015-16 increases spending by just 3.1 percent — less than the rate of inflation and population growth, the standard under a formal Taxpayer Protection Act. Despite a $450 million surplus in revenue, legislators and the governor resisted powerful groups urging them to spend more. Instead they exercised fiscal discipline that respects taxpayers.
Building on transformational tax reforms that began in 2011 and continued in 2013, the third round of tax fairness reduces the personal income tax rate from 5.75% to 5.499%, and reduces the corporate income tax rate to 4%. In addition, the standard deduction increases by $500, and deductions for medical expenses and charitable contributions are unlimited. Overall, taxpayers will keep more than $2 billion of their own money over the next five years because of these reforms.
3 Unfair Solar Industry Subsidy Ends! Nearly four decades of taxpayer-subsidized special treatment for Big Solar ends December 31, 2015. From 2010 to 2014, these credits amounted to $224 million. Dozens of lobbyists and advocates applied tremendous pressure in order to save big business’ sweet deal. But fairness won the day, and the 35% state tax credit will not be extended.
4 Saving For a Rainy Day Now a Priority! Every household knows it’s vital to put money aside for a rainy day. And that sound principle is part of the new budget. More than $600 million is being deposited into savings accounts, building toward reserves of $1.6 billion to deal with natural disasters, a downturn in the economy, or other expenses that couldn’t be foreseen.
5 Who’s Spending What Is Easier To Find! No longer will citizens be forced into a maze of websites and documents to find out what state agencies, local governments, and local education agencies are spending. A new Internet portal will function as one-stop shopping, featuring monthly updates on budgets and expenditures.
8 Trapped In a Failing School No More! Low-income families now have more educational freedom and opportunity, thanks to expansion of the Opportunity Scholarship Program. Through a voucher of up to $4,200 per year, income-qualified parents of kids whose education needs aren’t being met by a traditional classroom can attend the private school of their choice. Funding is available for 4,400 low-income students next year.
9 Strategic Spending On The Classroom! No, state legislators and the governor did not cut K-12 education spending. Spending is up by $410 million in the new budget, with funding to be used for digital instructional materials, reading camps, access to broadband, and more. In a key move to attract bright new teachers, those entering the profession will make at least $35,000 per year, a $2,000 increase in first-year pay. All other teachers received a “step” increase in salary and a $750 bonus.
6 Shell Game With Highway Fund Ends!
10 Medicaid Program Oriented Toward Better Care, Lower Costs!
Highway money will now go to build highways. No more will the state divert $216 million each year from the Highway Fund to the General Fund. Coupled with a long overdue update to Division of Motor Vehicles fees, the state will now have a reliable, steady stream of funding to pave roads, shore up bridges, and relieve congestion based on data and need, not political favors.
Medicaid, the health insurance and health care provider for 1.9 million North Carolinians, has long been plagued by massive cost overruns and concerns about how to achieve better health outcomes. Moving to a hybrid of provider-led and managed care systems encourages better-quality care through a closer relationship between doctors and patients, more predictable costs, and less risk to taxpayers.
Dedicated To Making North Carolina First in Freedom
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JLF Board Member: Keep Bureaucrats Out Of The Doctor’s Office
Paul Slobodian
John Locke Foundation board member Paul Slobodian holds a doctorate in counseling psychology from Boston University and a Master of Science in Business from MIT’s Sloan School of Management. He offered his views on health care reform in this recent op-ed published in the Raleigh News & Observer.
In the midst of sluggish economic growth, finding a sector of the economy growing from 15 percent of the economy up to 19 percent would normally be a cause of celebration, except that this is health care. The lack of good cheer about this growth is an indirect acknowledgment of a stark reality: We are not realizing much increased value as we spend more on health care because too much of our health dollars are going to ineffective (and often harmful) procedures. Estimates of the waste from this overconsumption of health care range from 30 percent to 50 percent. While all of the experts talk about reducing this waste (the phrase of the day is “bending the cost curve”), the reality is that hospital administrators, pharmaceutical companies, device manufacturers, insurers, consultants, think tanks and government bureaucrats all are seeing their power, control, and financial remuneration increase due to this medical-care consumption growth. All of the reformers’ trendy ideas have failed and will likely continue to fail in spite of the experts telling us they will soon figure it out. Electronic health records are a hugely expensive disaster. So far, they decrease doctor efficiency, reduce quality, and increasingly make patients fearful of sharing sensitive information with their doctors for fear
8 The Locke Letter Fall 2015
hackers or others will access their private data. Accountable Care Organizations turn doctors into rationers, introducing a conflict of interest between doctor and patient. Price controls by Congress or bureaucrats or oligarchic insurers only reduce access to care, demoralize doctors, and introduce the risk of game playing by health systems by “upcoding” (labeling a doctor visit as more complex than it is). Too often doctors are portrayed as the source of the problem, exploiting patients with unnecessary tests and procedures. But our doctors are buffeted by demands from patients who see more “free” treatments as evidence their doctor “cares,” by administrators who like seeing health system revenues increase, and by fear of malpractice lawsuits if an MRI is skipped and a 1 in 1,000 malady appears later. Most prescriptions of health-system experts call for replacing private-practice physicians with doctors as employees in huge health care institutions where they can be monitored (using data mining) and controlled (using rewards and punishments based on metrics extracted from electronic health records). Too many doctors are fleeing independent practice to escape the onslaught of demands from the legions of bureaucrats from above. The only way to reduce the waste of overtreatment is to free patients and doctors from the onslaughts of the “reformers” and allow patients and doctors to work together in a trusting relationship to improve the patient’s health. This will happen only when we patients can directly reap financial benefit by reducing the billions being wasted via overconsumption of health care services. All of the experts, however, seem to postulate that patients are too dumb or too unsophisticated to wisely consume health care. The reality is that these are fat times in the health care sector, and the giddy insiders don’t really want patients to bring about an end to the party. The next time you hear an “expert” talk about “bending the cost curve,” your first instinct should be to check your purse or your hip pocket to make sure your wallet is still there.
Carolina Journal Reporting Spurs Request To U.S. Attorney General Because of your investment in our rigorous journalism, Carolina Journal’s reporting has once again garnered national attention. We are proud to tell you that Carolina Journal’s work may lead to a federal investigation of the local U.S. Attorney’s office.
Every donation you make to the John Locke Foundation is put to work immediately, focused on making an impact, whether through our journalism arm or our public policy division. Because of you, Carolina Journal is making things happen. Dedicated To Making North Carolina First in Freedom
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Donald van der Vaart Secretary, N.C. Department of Environmental Quality
“ EPA Intrusion: The Federal Power Grab Over North Carolina’s Environment”
Dr. Rebecca Tippett Director, Carolina Demography, Carolina Population Center, UNC-Chapel Hill
“Who Are North Carolina’s Millennials?”
Mary Katharine Ham and Guy Benson Authors
“ End of Discussion: How the Left’s Outrage Industry Shuts Down Debate, Manipulates Voters, and Makes America Less Free (And Fun)”
Brenda Berg President & CEO, BEST NC
“ The Business Case for Education: Why North Carolina Can (and must) Have The Best Education System In The Nation”
One Click & You’re There! 10 The Locke Letter Fall 2015
Watch the JLF presentations you weren’t able to see in person. This treasure trove includes more than 100 amazing people and topics. JohnLocke.org/events/videos.html
Get Engaged With Freedom‌ Join the Chat On Social Media! facebook.com/johnlockefoundation
Freedom is growing in North Carolina. Which victory has you pumped? Tax cuts? Transparency website? End of taxpayer subsidy for solar?
Celebrate conservative budget victories by helping us top 10,000 followers on Twitter! twitter.com/JohnLockeNC
Dedicated To Making North Carolina First in Freedom
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You’re Invited Join the John Locke Foundation for a look at the late Jack Kemp’s life and legacy as we host Fred Barnes of The Weekly Standard and Fox News Channel, co-author of the new book, Jack Kemp: The Bleeding-Heart Conservative Who Changed America. At our Headliner Luncheon, Barnes will reflect on why and how the economic theory that helped restore America under Ronald Reagan was pioneered by a professional quarterback turned congressman and cabinet secretary.
Fred Barnes Tuesday, December 1 Doubletree By Hilton Brownstone 1707 Hillsborough Street, Raleigh 11:30 Doors Open 12 Noon Luncheon & Program Tickets: $35 per person Books will be available for purchase. To reserve your seat, visit JohnLocke.org/events or call 1-866-JLF-INFO. 12 The Locke Letter Fall 2015