NC JUSTICE NEWS: LaRoque Investigation + Medicaid Cuts + The Tax Migration Myth

August 9, 2011

INVESTIGATION: NC lawmaker gets big pay, loans government money to associates

Last week, NC Policy Watch blew the lid off a story that could have huge consequences for a North Carolina lawmaker.

The Policy Watch investigation uncovered questionable management and financial dealings at Rep. Stephen LaRoque’s federally funded public charities throughout the last decade, showing that LaRoque received six-figure paychecks for charities funded with federal dollars. Reporter Sarah Ovaska spent two months investigating the dealings of LaRoque, a conservative Republican from Kinston, and discovered LaRoque used two small economic development organizations to loan public funds to his close associates and political allies. In addition, the boards of LaRoque’s non-profits were stacked with his immediate family members, a potential violation of IRS laws that govern tax-exempt non-profits.

Board members at the two non-profits – the East Carolina Development Company and Piedmont Development Company – had no idea LaRoque was making as much as $195,000 a year while working at the companies. The investigation also found that the U.S. Department of Agriculture failed to conduct annual visits to LaRoque’s field offices for four years in a row, despite audits submitted to USDA that raised concerns over LaRoque’s control over the organizations’ finances and records.

Now, LaRoque’s colleagues and constituents want answers. He refused to talk to NC Policy Watch, and he denied the investigation's results in the press but didn't offer specifics. The North Carolina State Democratic Party has already called for LaRoque to offer “direct and honest answers about these serious and substantial allegations.” There will undoubtedly be more developments to this story, and will be the place with all of the information.

MEDICAID CUTS: Vital services will feel brunt of budget cuts

Even with program changes and reductions, the NC Department of Health & Human Services is still looking at a “gap” of up to $168 million in legislative budget cuts to Medicaid. Services like adult dental care, physical therapy, and community-based mental health programs could all be in jeopardy if North Carolina makes further cuts to the already suffering Medicaid program.

North Carolina’s Medical Care Advisory Committee (MCAC) met at NC State University last Friday to discuss the enormity of the legislative budget cuts made to Medicaid in June and how those cuts will be implemented. Of the $354 million in Medicaid cuts, the DHHS’s Division of Medical Assistance has identified approximately $236 million that can be saved with certain changes.

But $168 million cuts is no laughing matter, and the suggestions for certain changes and reductions only point toward fewer services for North Carolina's most vulnerable citizens. At the forum, some of the options presented included further rate reductions, elimination of optional services such as in-home care and hospice, and lowering payments to providers.

MCAC will meet again in September. It’s imperative that individuals come out for the meeting and voice their questions and concerns. DHHS made it clear that it’s up to the citizens to speak now while they still have the chance to invoke real change.

STATE TAXES: The migration myth

Those opposed to tax increases often argue that raising tax rates would drive rich people out of North Carolina. But a new report shows that's not true—state tax rates don't affect residents' decisions to stay in or leave North Carolina. But tax cuts will cost the state resources it needs to create the well-educated workforce, quality infrastructure and safe communities that attract individuals and businesses to the Tar Heel state.

The study, co-released by the Center on Budget and Policy Priorities and the NC Budget & Tax Center, found that Americans move in between states for a variety of reasons but rarely because of tax levels. The effects of taxes on migrations is so small, the report says, that states that raise income taxes on the wealthy would in fact see a substantial gain in revenue.

The facts speak for themselves in North Carolina. In 2003, more wealthy individuals moved to the state, despite the fact that the state had just added a high-earners tax bracket. The "tax migration myth" is bogus, but unfortunately this misinformation has had great influence over state policymakers, leading to many of the dangerous and damaging cuts to institutions and programs we saw during this year's legislative session.


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