In a report released late yesterday, State Auditor Les Merritt explained the handling of special discretionary monies controlled by the leaders of the General Assembly, and suggested that Attorney General Roy Cooper examine legal and constitutional issues related to the special funds.

Merritt also raised questions about separation of powers between the legislative and executive branches, as it pertains to control of the reserve funds.

State Senate President Pro Tem Marc Basnight (D-Dare), House Speaker Jim Black (D-Mecklenburg), and former Co-Speaker Richard Morgan (R-Moore) divided up to $24 million in various state agencies overseen by Gov. Mike Easley, to be spent according to the three legislative leaders’ wishes. The funds were allocated for fiscal years 2004 and 2005.

Merritt examined $6.5 million that was to be directed by Basnight through the Department of Cultural Resources, and $7.5 million split between Black and Morgan and disbursed through the Department of Health and Human Services, the Office of State Budget and Management, and Cultural Resources.

In the report, the auditor did not address $10 million in funds at the Department of Transportation that had been split between Basnight, Black and Morgan. Also, Merritt did not mention $1 million in funds controlled by Morgan, which he directed through DHHS to senior centers in Moore and Gaston counties.

Merritt also directed Cooper’s attention to a North Carolina law which prohibits the General Assembly from funding new expenditures which it has previously considered and rejected. Merritt identified 11 projects which had been voted down in previous budget bills, excluded by name in the final version of the budget, yet funded through the special reserve funds.

The monies were used to fund various nonprofit organizations in the state favored by the three legislative leaders and those who supported them in their posts.

“The General Assembly leadership approved these requests before forwarding them to the departments for processing,” Merritt said in the audit report.

He also noted that executive branch agencies must devote significant resources to administer grants.

“The awarding and monitoring of grants to non-state entities requires considerable time and effort for state agencies to ensure compliance with the provisions of (state law),” he wrote. “…the General Assembly did not appropriate any additional funds to OSBM, DCR, or DHHS for the administration of the grants from the Reserve Funds.”

Merritt also provided a chronological account of one allocation directed by Black, in which he requested that Cultural Resources hire former State Rep. Michael Decker. The Forsyth County Republican, who briefly joined the Democratic Party in 2003 and supported Black’s co-speakership with Morgan, sought a state government job after losing a Republican primary race last year.

Merritt said an assistant to Black notified Cultural Resources that the Speaker had a “desired employee” (Decker), and that the agency should create a position which “should be edited to include any specific qualifications of the desired employee.” Language describing the position was later reworded “to tailor the position to Mr. Decker.” The position paid $45,000 per year, but is not funded in the budget that is currently being negotiated by the General Assembly.

Basnight, Black and Morgan each were given opportunity to respond to Merritt’s report. Basnight expressed regret that “the budget process did not work the way it should have,” but said every project that was funded and recommended by the Senate was “truly deserving.”

Black expressed no regret, and said he did not “agree or disagree with” Merritt’s findings. But he also defended the worthiness of the projects that were funded.

Morgan merely thanked Merritt for the opportunity to review the report.

Paul Chesser is associate editor for Carolina Journal. Contact him at [email protected].