RALEIGH – Here’s such a bad idea that the right response, as Deputy Barney Fife might put it, is to “nip it in the bud.”
According to Lee Weisbecker of Triangle Business Journal [subscription required], a group of Raleigh-based nonprofits and lobbies recently formed a coalition to encourage State Treasurer Richard Moore to use a portion of the $540 million in escheats under his jurisdiction to invest in start-up companies in North Carolina. Moore – who other than hailing from rural North Carolina is about as far from Don Knotts’ immortal character as is imaginable – should in classic Barney fashion draw in a big breath, twist his jaw firmly to the right (of course), and tell these folks that he is not interested in creating a new source of political corruption in our state.
The coalition, the Capital Access Workgroup, includes Gov. Mike Easley’s N.C. Department of Commerce (?!), the Roanoke Electric Cooperative, the Neuse River Development Authority, the N.C. Entrepreneurial Association, and state-funded nonprofits such as the N.C. Community Development Initiative and the N.C. Rural Economic Development Center. Some of these operations are already engaged in the dubious business of securing taxpayer money and doling out it to favored business enterprises, particularly but not exclusively in the eastern part of North Carolina. A similar model exists, one step removed, in the Golden LEAF Foundation. It is a nominally private charity whose board is politically appointed and who steers public funds (dollars North Carolina state government received from the national tobacco settlement, purportedly to reimburse taxpayers for the public cost of treating smoking-related illness) to for-profit businesses, often those with the most lobbying heft or connections to major politicians.
To this sordid and inefficacious mess should not be added one penny of escheats money – meaning funds that have been left in cancelled bank accounts, uncollected insurance refunds, and the like. Escheats money is not legally available for use subsidizing the business ventures of the politically savvy. By law, the state treasurer is required to make repeated efforts to return the money to their owners, and in the meantime to use earnings from the escheats fund to finance educational scholarships. Whether it is the owners or the intended scholarship beneficiaries who benefit, the responsibility of the state and its elected state treasurer is clear: to maximize return on investment. Using escheats for “economic development” is inherently in conflict with that responsibility, just as using the retirement funds of teachers and state employees to finance venture-capital initiatives in North Carolina would violate the state’s contract with them (though some of these same political slicksters have advocated that dangerous idea in the past, too).
There may well be attempts to rationalize the proposal, to suggest that escheats owners or beneficiaries can still benefit as long as the venture-capital funds are well-managed. That’s nonsense. Basic financial principles tell us that placing an artificial restriction on where funds can be invested – in “deserving” businesses in rural North Carolina, for example, but not in “deserving” businesses in South Carolina or Iowa or anywhere else – must reduce the investment return in the long run. There is no investment rationale for limiting the use of the funds to our state, no credible argument that only North Carolina entrepreneurs have promising ideas. The rationale is obviously political, and is just as obviously inconsistent with the state’s responsibilities.
The governor should say no. The state treasurer, who wants to be the next governor, should say no. The General Assembly, if asked, should say no. Nip it in the bud.
Hood is president of the John Locke Foundation.