From its beginning, the controversial NCInnovation has been plagued with questions and concerns. The questions centered around its lack of transparency and the rationale for taking half a billion taxpayer dollars to gamble on commercializing university research that otherwise might go unfunded by willing investors. Concerns included NCInnovation awarding sizable bonuses to its leaders and spending significant funds on lobbyists.

The latest controversy, as reported by The Carolina Journal, is its audit committee’s decision to delay approval of its IRS tax forms. Committee members cited disclosure omissions and a lack of thorough bookkeeping among the concerns holding up their approval of the tax forms.

This should be the last indicator needed to confirm that state government should sever all ties with NCInnovation and claw back the entire $500 million in taxpayer dollars it already received.

Interestingly, both the state House and Senate budget proposals take aim at NCInnovation, but only the House proposes a full clawback and breaking ties with the group; while the Senate would continue government funding, but at a much smaller level.

The Senate’s inability to cut off NCInnovation completely should not be surprising, given their 2023 proposal to provide $1.4 billion in taxpayer funds to the then-new, unproven organization.

The reasons for fully defunding NCInnovation are several. For starters, North Carolina taxpayers should not be forced to fund an organization of political appointees picking winners and losers in the marketplace.

Business investments should be voluntary choices made by market participants who willingly risk their own capital. It should be these willing investors — not politicians or taxpayer-funded committees — who determine which innovations are brought to market and how much each receives in investment.

Ironically, NCInnovation’s own promotional brochure exposed the folly of politicizing business investments when it touted VinFast as a “success story” that it hopes to emulate. VinFast has become the poster child for misguided and failed crony capitalism, yet NCInnovation looked to it as inspiration.

Perhaps even more concerning are the outcomes of similar programs in other states that NCInnovation has cited as shining examples of how it could benefit North Carolina:

  • The “scandal-plagued” Texas program that benefited donors to former Texas Gov. Rick Perry and was defunded by Texas legislators in 2015 at the request of Gov. Greg Abbot
  • The Georgia program with such a poor track record that only about half of its participants were still active in the state less than a decade later
  • The Ohio program with such transparency woes that Ohio legislators acted to prevent it from being audited

Other red flags abound.

When NCInnovation awarded half a billion dollars in state appropriations, it was totally unproven. The group had not yet awarded a single grant — not even to a small pilot program — to prove the worthiness of its concept. But they were able to find hundreds of thousands of dollars to spend on lobbyists to help secure hundreds of millions worth of taxpayer dollars.

There’s also the concern that the public-private partnership with NCInnovation violates the state’s Umstead Act, which prohibits public entities from rendering services — such as private equity investment — that are ordinarily and customarily provided by private enterprises.

A March performance audit by the North Carolina auditor’s office gave NCInnovation a clean bill of health on the surface, but it was limited in scope and still managed to voice concerns. For example, there could be a potential conflict of interest in selecting a private investment manager to oversee its endowment, and also NCInnovation’s high level of lobbying expenses suggests the group is interested in capturing more taxpayer funding in the future.

Finally, it’s clear that there are higher-priority uses for the $500 million that NCInnovation is now sitting on. Hurricane Helene recovery leaps immediately to mind.

It’s not too late for state legislators to erase their mistake and completely cut ties with NCInnovation. Instead, they could redirect half a billion in taxpayer dollars to help victims of one of the most devastating natural disasters in state history.