RALEIGH — The story of former state senator, now Congressman, Frank Ballance and at least one taxpayer-funded nonprofit he headed has been told in significant detail by my Carolina Journal colleagues. Unfortunately, both policymakers and political activists have chosen to focus mainly on Ballance’s alleged transgressions, ethical and legal, rather than on the broader issue of why lawmakers get involved with nonprofit organizations seeking tax money — and whether they should so do.
The John Hyman Foundation Ballance created, and from which he and his family members appears to have derived some personal financial benefit, is only the most blatant recent example of this practice. Over the years, I have come to understand that dozens of nonprofit groups have secured funding from the state legislature not in spite of the fact that sitting lawmakers served on their boards but very much and very explicitly because of it. Because these groups aren’t out to make a profit, it is asserted, there is no conflict of interest when a board member who happens to be a legislator encourages colleagues to appropriate tax money for a “public purpose,” which in practice means pretty much anything that members of the public could claim to benefit from.
The “public purpose” definition here is too broad. More problematically, the “conflict of interest” definition here is too narrow. Surely such conflicts aren’t limited to cases where tax money flows directly into an elected official’s pocket. What if the nonprofit is run by close friends, business associates, political contributors, or family members? What if the nonprofit would spend its appropriation in ways likely to enhance the legislator’s electoral campaigns? What if the nonprofit is delivering a service that a legislator is eager to consume himself?
In a new and developing case, Rep. Thomas Wright of Wilmington appears to be involved in a nonprofit foundation in that city that meets several tests of a potential conflict of interest, including the more direct one. As reported in the Star-News of Wilmington, Wright got together in 2001 with three other individuals to create The Community’s Health Foundation with downtown offices across the street from the county’s public-health department. Wright said that the intention was to secure a state grant to provide community-based health programs, but the state budget crisis intervened to such a degree that Wright, who as chairman of House Appropriations could have pushed for a state grant, decided that “the needs of the state are much greater” (which would seem to be an implicit admission that funding the nonprofit wouldn’t meet a true public-purpose test).
The foundation now owes approximately $150,000 on its mortage, not including interest and fees. The newspaper reported that foreclosure was an immediate possibility, and furthermore that a foreclosure notice on Wright’s personal residence in Wilmington had recently been published. A health and safety consultant when not acting as a state legislator, Wright said he had recently suffered financial setbacks that had contributed to the problem with his home, but that it had been resolved to head off foreclosure.
To make the story even more complicated, the foundation has another financial problem: nearly $4,600 in delinquent property taxes. As a nonprofit, it could have filed for a property-tax exemption, but apparently Wright failed to do so for several years and cannot do it retroactively. Meanwhile, another nonprofit — the African-American Heritage Foundation — may be interested in purchasing the health foundation’s property for a museum. According to the newspaper account, this transaction would also appear to be contingent on securing a state appropriation.
Several aspects of the Wright story are deeply troubling:
* Wright, chairman of the House panel on appropriations, still seems intent on routing state tax dollars to this foundation one way or the other. “I’m still moving very aggressively,” he said of his efforts.
* Wright told the newspaper that the General Assembly “frequently” directs state appropriations to nonprofits formed by legislators. Even I wouldn’t have concluded that the practice was “frequent.”
* He further said that he had run the situation by legislative leaders and a staff attorney for the General Assembly. No one thought it was a conflict of interest. That’s appalling.
* Wright’s personal finances are not separate from those of the foundation in question, since he admits that board members will be liable for the nonprofit’s debt if it remains unpaid.
I have no desire to pick on Rep. Wright, just as Carolina Journal previously investigated Ballance not because of who he was — I always thought him to be a knowledgeable, effective, and above-board state senator, which just goes to show you how flawed my judgment can be — but because the apparent waste of tax dollars and abuse of the legislative process were so egregious. Taking Wright at his word, I’m prepared to believe that his actions aren’t at all distinctive, that these relationships exist across the state among lawmakers of both parties.
That’s much worse. It would be better if the Ballance and Wright cases were aberrations. They could be addressed with individual remedies. Instead, we have a serious and systemic problem with the process of appropriating taxpayer dollars, a problem that should command the immediate attention of Gov. Mike Easley and the General Assembly in the coming legislative session — preferably before Wright inserts a self-serving grant into the appropriations bill.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.