A school voucher lobbying group flew N.C. House Speaker Thom Tillis and 10 other lawmakers to Miami in March despite a state law banning lobbyist gifts to lawmakers.

Within a month of what was billed as an educational trip by Parents for Educational Freedom in North Carolina, the group’s political action committee also sent thousands of dollars to help several of the lawmakers’ re-election campaigns.

The March 14 to 15 trip to the Miami area was for lawmakers to learn about Florida’s Tax Credit Scholarships Program, a controversial initiative that gives dollar-for-dollar state tax credits to encourage companies to donate scholarship money for low-income children attending private schools, according to Darrell Allison, the director and chief lobbyist for Parents for Educational Freedom (PEFNC).

But Bob Phillips, director of the government watchdog group North Carolina Common Cause, suspects the trip was part of a lobbying strategy to convince lawmakers the Florida voucher program could work in North Carolina.

“Ultimately, it’s about trying to influence,” Phillips said. “That (the March trip) is something that fits the definition of lobbying and to me is a violation of what our statutes say.”

Allison seemed to concede the same point in a March podcast interview he gave shortly after the trip with redefinED, an education reform blog. He was asked if tax credit scholarship legislation would be filed soon in North Carolina.

“I will say to you that we wouldn’t have 12 delegates, legislative delegates, coming to the state of Florida if they weren’t serious about … what the next strategic step is,” Allison said. He added, “We think the visit here to Florida has helped lay the groundwork.”

The bipartisan group of lawmakers on the $8,300 March trip only heard from proponents of the controversial Florida program, according to an agenda provided by PEFNC to N.C. Policy Watch. Absent from the trip were teacher’s groups and others in Florida who criticize the tax credit scholarship program for diverting needed funding from the public schools to send children to private, often religious, schools that don’t have to meet state standards.

A highlight of the North Carolina lawmakers’ Florida trip was a $500 luncheon with former Florida Gov. Jeb Bush at the Biltmore Hotel, a 150-acre tropical resort in Coral Gables, Fla.

Bush is a major figure in the conservative education reform movement, and now heads the Foundation for Excellence in Education, a think-tank seeking to overhaul the country’s educational systems through policies like ending teacher tenure, expanding the use of charter schools and school vouchers, and the increased use of virtual education.

The N.C. lawmakers also heard from Florida legislators who supported the tax credit program and businesses that benefited from it. They also went to a private school in Miami that enrolls students through the scholarship program.

North Carolina ethics laws ban lobbyist gifts to lawmakers, making anything from a cup of coffee on up off-limits if a lobbyist or related person is using the gift to push an agenda.

There are exceptions, and the N.C. Ethics Commission has allowed lobbyist groups to pay for trips when the purpose is to educate, and not influence, lawmakers and public servants.  But those exceptions are granted on a case-by-case basis, and the ethics commission has repeatedly advised lobbyists and elected officials to seek guidance.

Parents for Educational Freedom did not seek a formal opinion from the State Ethics Commission in advance of the March trip, but did draw up a 4-page memorandum of its own (available here) that told lawmakers the trip didn’t violate lobbying laws.

“The educational meeting includes visiting participating schools in Florida’s Opportunity Tax Credit Scholarship Program,” states the PEFNC memorandum. “Their program has shown significant achievement gains for thousands of low-income students. Therefore, the primary purpose of the meeting and trip is educational.”

The memorandum also referred to another Florida trip the group arranged in 2008 for lawmakers to learn about school vouchers for special needs children. That trip paid off for PEFNC last year, when the N.C. General Assembly passed a law establishing the special needs voucher program in North Carolina.

That three-sentence analysis determining the trip’s educational focus isn’t enough to absolve the group or lawmakers from their responsibility to follow ethics laws, Phillips said.

“If there’s something of value provided, then it’s prohibited,” Phillips said.

Several of the lawmakers on the trip said it was informative, but clearly planned to cast the Florida program in a favorable way.

“It was intended by those who arranged the trip as a promotional thing,” said state Rep. Hugh Blackwell, the Republican chair of the House Select Committee on Education Reform. “They were certainly presenting it in a positive light.”

Lawmakers, Tillis staffer and mystery business people on trip

Parents for Educational Freedom has spent years trying to push the state to compensate families that educate their children outside of the public school system.

For its March trip to Miami, the lobbying group spent $8,300.87 on plane tickets, meals and hotel rooms for Tillis, the other lawmakers, a Tillis staffer and two lobbyists, according to a May 15 filing of lobbying expenses at the N.C. Secretary of State’s Office. (Click here to see the lobbying expense forms.)

On the trip were six Republicans and five Democrats: N.C. Reps. Blackwell, R-Valdese; Marilyn Avila, R-Raleigh; Marcus Brandon, D-High Point; Elmer Floyd, D-Fayetteville; Mike Hager, R-Rutherfordton, and Marvin Lucas, D-Spring Lake; and state Sens. Malcolm Graham, D-Charlotte; Kathy Harrington, R-Gastonia; Edward Jones, D-Enfield, and Dan Soucek, R-Boone.  State Rep. Bryan Holloway, a Rockingham County Republican, was scheduled to be on the trip but canceled at the last minute, according to lobbying disclosure forms.

The legislative staffer on the trip was Jason Kay, Tillis’ legal counsel. PEFNC didn’t initially disclose that it picked up the tab for Kay and two lobbyists when it filed a required expense report in April at the N.C. Secretary of State’s Office. Those expenses were publicly disclosed in a May 15 addendum filed after N.C. Policy Watch began asking questions about the trip.

The Secretary of State filings did not list any expenses for Allison, a registered lobbyist for the group who went on the trip and required to report lobbying expenses to the state.

Two unidentified North Carolina businesspeople also went to Florida, Allison said.  He would not identify the two people nor the corporations but said they were included to show how the tax credit program could benefit the state’s business community.

Publicly available lobbying expense forms at the N.C. Secretary of State’s office don’t make any mention of the corporate officials who accompanied the lawmakers on the trip.

Jordan Shaw, Tillis’ spokesman, said PEFNC assured Tillis’ office that the trip did not break any ethics rules.

“It was bipartisan, it was for educational purposes,” Shaw said.

N.C. Policy Watch filed a May 3 public records request to Tillis’ office for all records, including any ethics opinions that may have been requested, related to the trip. As of Thursday, none of the records have been released. [Note: Shaw, Tillis' spokesman, said the public records request is being processed and records should be released soon.]

PEFNC was also asked to produce any ethics opinions it sought in reference to the March and 2008 trips, but have not provided anything to N.C. Policy Watch other than its in-house memorandum.

The North Carolina Ethics Commission enforces the state’s ethics laws, but does not comment on specific situations. Much of the work the commission does is kept confidential, including ethics advisory letters lawmakers request from the commission.

The public disclosure of the trip comes several weeks after two members of Tillis’ staff resigned after revelations they had intimate relationships with lobbyists, according to reporting by the News & Observer.

Charles Thomas, Tillis’ former chief of staff, was engaged in a romantic liaison with a top lobbyist for the powerful N.C. Home Builders Association. Both he and the lobbyist left their jobs, and top Democrat lawmakers have since asked the Legislative Ethics Commission and the State Ethics Commission to conduct investigations.

On Thursday, the News & Observer reported that Tillis approved a month’s severance pay, nearly $20,000 of taxpayer money, for Thomas and Amy Hobbs, the other Tillis staffer who resigned because of her relationship with a lobbyist.

Campaign contributions followed trip

A few weeks after the lawmaker returned from Florida, several received campaign contributions from the school voucher proponents.

Partners for Educational Freedom, a political-action committee associated with Parents for Educational Freedom, gave $11,250 to nine lawmakers in the months running up to the May 8 primary, according to the group’s first-quarter campaign finance filings.

Of those nine lawmakers, six had gone on the trip (or were scheduled to be on the trip, in Holloway’s case).

Together, they took in more than $9,000 from the lobbying group’s PAC with the bulk of the money coming in after the March trip.

Among the contributions were $3,000 that went to Holloway’s campaign, $2,500 to Brandon, $2,000 to Soucek and $500 to Tillis.

John Kirtley, a Tampa Bay venture capitalist who spoke to the group on the Florida trip and runs one of the scholarship foundations, also sent money to North Carolina after speaking with the delegation of lawmakers.

Campaign records show he gave a total of $6,000 to the Partners for Educational Freedom PAC on April 11 and 13. He also sent $1,350 to Brandon on April 12.

Brandon said he had contacted Kirtley after the trip for a campaign contribution, a routine he follows when meeting people that support his causes.

“I’m a school-choice (candidate) and there are school choice people that like that,” he said. “There’s nothing wrong with that.”

Education versus influence

The education exception to the lobbying gift ban is one the State Ethics Commission has clarified repeatedly in recent years approaching the issue by looking at meetings on a case-by-case basis.

Comprehensive ethics reforms adopted in 2006 came to North Carolina after its political structure had been rattled by a sweeping corruption scandal that ended with one of the most powerful political leaders in the state, former Democratic House Speaker Jim Black, wearing a jumpsuit in a federal prison cell.

The reforms were supposed to weaken the “pay to play” culture and end dinners where well-connected lobbyists paid the way of state lawmakers, and private gatherings that lobbyists used to push their agendas.

The commission explained the difference between educating and influencing in a 2007 newsletter, writing that paying for lawmakers’ meals or to attend meetings meant to influence lawmakers on a current or future issue aren’t allowed.

“If the meetings primary purpose is to influence a public servant, legislator, or legislative employee with respect to executive or legislative action (rather than educate them on a legitimate subject), the meeting is not ‘educational,’” the newsletter states.

All in all, Brandon, the High Point lawmaker, said he thought the trip was beneficial, and allowed lawmakers to bridge some of the partisan divides that dominated last year’s legislative session.

He also found it to be fairly run-of-the mill, with the overnight stay at a Hyatt hotel and no extravagant meals or events.

“It wasn’t lavish at all, not even close,” Brandon said. “I’ve had other groups send me places and it’s been nicer.”

Questions? Comments? Email reporter Sarah Ovaska at sarah@ncpolicywatch.com, or call her at (919) 861-1463. Comments can also be sent to this blog post about the story.

A proposed virtual charter school with ties to a Wall Street-traded education company wants to open this fall, and filed a legal grievance to try and force the N.C. State Board of Education to review the school’s application.

N.C. Learns, a newly-formed non-profit organization that’s partnered with the online education company K12, Inc. , filed a March 21 request for a permanent injunction and contested case hearing against the state education board. (Click here to see the petition.)

The state board had gotten a request in February from the proposed school for approval, but did not take any action on it.

The motion for an injunction and request for a hearing was made at the N.C. Office of Administrative Hearings, an administrative law court that reviews decisions made by state agencies.

The operators of the would-be virtual school argue in their motion that because the Cabarrus County school board gave it preliminary approval in January, state law requires the state board consider the application on a different, and faster, time table than usual.

Representing the non-profit is state Sen. Fletcher Hartsell, a prominent GOP lawmaker and Cabarrus County attorney hired by the non-profit to represent their interests.

“By failing to consider, much less grant final approval to the Application, the SBE has substantially deprived NCVA of its rights to form and operate that charter school approved by the [Cabarrus County school board], costing NCVA a substantial sum of money,” Hartsell wrote in the N.C. Learns’ petition.

Hartsell did not return several phone calls seeking comment about the case.

The state education board wants more information about the funding formulas and quality of virtual charter schools before make any decisions about any specific virtual charter schools, said Bill Harrison, the chairman of the N.C. State Board of Education.

“We’re big fans of virtual education but we all think this isn’t something we need to jump into without doing some serious work,” Harrison said. “There are some concerns around accountability and quality assurance.”

The N.C. General Assembly lifting of a 100-school cap on charter schools has resulted in a huge spike in interest in the brick-and-mortar schools that operate outside the traditional parameters of public education. Nine schools got the go-ahead to open this fall as part of the state board’s “fast-track” approval process this year. More than 60 more charter schools (the virtual charter school not among them) submitted applications last week to open up for the 2013-14 school year, according to a list of the schools on the N.C. Department of Public Instruction website.

K12, Inc., (NYSE: LRN), the largest online education company in the country, has made an aggressive push to open a statewide virtual charter school, a move that would give its Wall Street investors a share of North Carolina’s education dollars.

The company already runs virtual public schools in more than two dozen states, and estimates 86 percent of its revenue to taxpayer-funded online schools, according to K12, Inc. investor information.

But recent news articles from national newspapers like the New York Times and Washington Post have questioned the fiscal management and quality of education the company offers, pointing out overbilling for ineligible students in Colorado and a Pennsylvania school where virtual students performed significantly worse than their public school peers. A class-action investor lawsuit is also pending against the company, accusing company leaders of making misleading statements about the performance of schools run by the company.

The mounting national attention doesn’t appear to have dampened K12, Inc.’s interest in North Carolina, where the company hopes to recruit 2,750 students in its first year and take in $18 million in federal, state and local education dollars.

The company has hired lobbyists from McGuireWoods, one of the state’s top lobbying firms, including former state Rep. Jeff Barnhart of Cabarrus County. N.C. Learns, the non-profit set up to host the school, hired Hartsell, the Cabarrus County lawmaker, to represent it

In exchange for giving preliminary approval to the virtual charter school, the Cabarrus school district was promised free use of K12, Inc. online products, as well as a 4 percent cut of the public education funding the virtual charter school anticipates receiving.

The administrative grievance filed by the virtual charter school is pending, and no hearing has been set.

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.org.

Lottery tickets and scratch-off instant games continue to be the most popular in North Carolina counties saddled with some of the state’s highest poverty rates.

Statewide, North Carolinian adults spent $212 per capita on the lottery in 2011, according to an N.C. Policy Watch analysis of lottery sales information as well as adult population and poverty estimates from the U.S. Census.

But those per capita sales figures more than double in places like Halifax County, a struggling Eastern North Carolina county where per capita lottery sales were $516, the second-highest in the state. The county is also one of the state’s poorest, with more than a quarter of its population living under the federal poverty line, roughly defined as a household income of $23,000 for a family of four.

More than $21.7 million was spent on lottery tickets in Halifax County in 2011, and $1.5 billion statewide.

Those sales numbers don’t sound unusual to Alvin Jones, a 35-year-old newspaper press operator in Halifax County who plunks down $100 a day on the N.C. Education Lottery and the state lottery in nearby Virginia.

Alvin Jones, a Halifax County lottery player

Jones buys tickets multiple times a day and sees nothing wrong with his $100-a-day habit, which adds up to $36,500 a year. He says he gets a steady income working, and uses the money left over after paying his bills to play the lottery.

“I play because I don’t drink, I don’t smoke, and I don’t go to clubs,” he said. “If everyone has to have a habit, that’s my habit.”

The most he’s won on a single game is $2,500, and he uses his winnings to offset what he spends on lottery tickets.

North Carolinians pinning their hopes of prosperity on the lottery is not all that unusual,  and many rushing out today and tomorrow to buy tickets before Friday night’s $500 million MegaMillions jackpot drawing will join thousands more across the country hoping to win it all.

One in every five Americans believe that winning the lottery is the most practical way to amass personal wealth, according to a 2006 study by the Consumer Federation of America and the Financial Planning Association.

That percentage was much higher for low-income people — nearly 40 percent of those with incomes under $25,000 thought the lottery was the best ticket to wealth.

Financial experts say those beliefs aren’t based in reality, but state lotteries across the country capitalize on those false hopes, said Les Bernal, the director of Stop Predatory Gambling, a national non-profit organization critical of state-run lotteries.

“For government to win, citizens have to lose,” he said.

The N.C. Education Lottery has never conducted any detailed studies on its client base, but lottery officials maintain that their goal is to have a lot of people play a little bit in order to raise needed money for the state’s education system.

“We do not target any group in our sales nor do we promise riches or the end of a person’s financial problems in our advertising,” lottery spokesman Van Denton wrote in a statement. “We are committed to the best responsible play practices.”

Sales highest in high poverty counties

In 2011, per capita sales spiked in the eastern part of the state, where $561 to $367 was spent on lottery tickets for every adult in the 10 counties with the highest per capita sales – Nash, Halifax, Vance, Wilson, Hyde, Edgecombe, Lenoir, Washington, Martin and Bertie counties.

All but Nash County had highly impoverished populations, with more than 20 percent of the total population living under the federal poverty line.

(Use our interactive graphic below to see how individual counties fared.)

The lottery analysis was conducted by N.C. Policy Watch for the second year in a row, and used county sales data provided by the N.C. Education Lottery and compared it with adult populations poverty estimates from the U.S. Census. This year looked at sales data for the 2011 calendar year.

In this year as well as last, per capita sales were highest in counties with high poverty rates, where 20 percent or more of the population lives under the federal poverty line.

Last year’s report, “Hope and Hard Luck,” looked at lottery data from the 2009-10 fiscal year and found that out of the 22 high-poverty counties, all but two had lottery sales more than the state average of $211.

Since then, the U.S. Census has released updated data on poverty data which found more entrenched poverty in the state as a result of the lingering effects of the recession and economic downturn.

Now, 37 of the state’s 100 counties have poverty rates topping 20 percent. Of those, 26 counties, mostly in the eastern part of the state, had per capita lottery sales that topped the state average.

But not all counties followed the high-poverty, high-lottery sales formula, notably in Nash County, where per capita sales were $561 and the poverty rate only 15.6 percent. The lowest per capita lottery sales were in Graham County on the mountainous western edge of the state, where $51.32 was spent on lottery tickets and 22.5 percent of the population lived in poverty.

Proponents of the N.C. Education Lottery have held up the games as largely harmless ways to offer entertainment to residents while sending needed revenue to the state’s education system, pointing to more than $2 billion that’s gone to education since the lottery’s 2005 inception. When it first began, the N.C. Education Lottery was required to send 35 percent of its proceeds to fund education. That percentage has since fallen to 30 percent, after lottery officials said they needed to put more money into prizes in order to attract more players.

Those more critical of the state lottery, like Bernal of Stop Predatory Gambling, say the state-run lottery only offers a small portion of money for education while taking money away from those who need it the most.  Savvy marketing is used by state government to to dupe people, with games like the $20 scratch-off ticket “$200,000 for Life” or a $5 ticket “EZ Grand” enticing players to part with their money, Bernal said.

By law, lottery proceeds can’t be used for general education funding, but is slated for supplemental programs that increase school construction, teacher’s salaries, pre-K programs and college scholarships.

The lottery added an estimated 3.6 percent of funding to the $7.9 billion needed to run the state’s public schools over the last year, according to the N.C. Department of Public Instruction.

Robert Farris Jr. , a Wilson lawyer who serves as the N.C. Education Lottery Commission’s chair, said North Carolinians make their own decisions about whether to play, and when they do, a portion of the money goes to help education in the state, he said.

“It’s a voluntary contribution by all that play whether they’re poor or rich,” Farris said. “That’s the beauty of it.”

Farris’ home county of Wilson had the fourth-highest per capita sales in 2011, with $442.22 spent on the lottery for every adult resident.

The state lottery isn’t as harmful as other types of gambling, Farris says, and he’s found it to be a way to offer entertainment for players and earn some money for education.

“Nobody is forced to play, the casinos and horse races and stuff tend to be a lot more addictive,” Farris said. “Those players lose their house. Lottery buyers lose a dollar or two.”

The lottery commission recently sat through a presentation about Keno, a numbers-style game typically played in restaurants, bars and taverns where winning numbers are selected every few minutes. In Ohio, the game has new drawings every four minutes, from 6 a.m. to 2:30 a.m., seven days a week.

Farris said he expects the commission will hear more about the game, and it could offer another way for the lottery to reach new players.

“The nature of the lottery seems to be that you have to keep changing to stay the same,” he said.

Halifax schools hurting for money, while lottery sales climb

Back in Halifax County, the high per capita lottery sales also come as the county school system is trying to convince residents that they need to contribute to the local school system.

A May 8 referendum would allow the county to assess a property tax on homes in the Halifax County School District, one of the most troubled school systems in the state that pays its teachers  the lowest salaries in the state.

(To learn more about the challenges facing the county, read this report from January that looked at  entrenched poverty in one Halifax County community of Scotland Neck.)

Currently, no local property tax is assessed, and that’s made it difficult for the school district to retain teachers and pay the rising gas and electricity bills for the schools, said Donna Hunter, the chair of the Halifax school’s education board.

Hunter has been spending her evenings talking to citizen groups about how needed the education funding is, but repeatedly faces crowds reluctant to see their tax bills go up in order to better fund the county’s schools.

The Halifax school district used $909,000 in the 2011-12 fiscal year to pay for repairs to school buildings, but more money is needed to bring the Halifax county schools up to acceptable levels, she said.

She wishes her fellow Halifax citizens had as much enthusiasm about funding schools as they did about playing the lottery.

“We’re trying to do more for the generation that’s here and the generation that’s to come,” Hunter said. “To me, it sounds like instead people are spending their money on themselves with the lottery.”

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

In the midst of last year’s contentious state budget negotiations, a prominent state lawmaker quietly secured $62,000 in state-approved economic development grants to expand his private law practice.

N.C. Rep. Tim Moore, a five-term Cleveland County Republican, received a $30,000 grant of federal community development money last spring from the N.C. Department of Commerce as well as a $32,000 grant of state money from the N.C. Rural Center, a non-profit economic development group funded through the state legislature and private sources.

The public monies will partially fund an estimated $225,000 renovation of a vacant historic bank building Moore owns in downtown Kings  Mountain, Moore’s hometown 30 miles west of Charlotte. To be eligible for the two grants, Moore promised to expand his small private practice from himself and two staffers to seven employees by the summer of 2013.

Moore, the co-chair of the powerful N.C. House Rules Committee, turned down an in-person interview request with N.C. Policy Watch, but provided written answers to questions about the $62,000 in grants. In his comments, he referred to a Jan. 6, 2011 informal advisory letter he received from the N.C. Ethics Commission, which found the state’s ethics laws didn’t prevent him from applying for the funds. The burden, under state ethics law, falls to Moore to ensure his legislative votes aren’t improperly influenced by the money, and that he didn’t use any privileged information he had as a legislator to help him in the grant application process.

“There is clearly no conflict of interest,” Moore wrote to N.C. Policy Watch. “In fact I requested and received an advisory opinion from the State Ethics Commission before applying, that confirmed there was no conflict of interest.  I am always sensitive to conflict or the appearance of conflict in anything I do.”

(Click here to read the ethics commission letter to Moore.)

As with many state-level economic development projects, the city of Kings Mountain (pop. 10,000) applied for the grant money to the agencies on behalf of Moore, who has served as a Cleveland County legislator since 2002. Rick Moore, Tim Moore’s father, also serves on the Kings Mountain city council, but the elder Moore did not participate in any of the discussion or votes to back his son’s business proposal, according to city council minutes and the younger Moore.

Both the N.C.Rural Center and Commerce Department said Tim Moore made initial contact with the agencies through legislative liaisons, and say that Moore didn’t make any attempts to personally influence the decision to grant him the money, an assertion shared by Moore.

Renovation on the downtown bank building has yet to start, and Moore has not drawn down any of the $62,000 in grants he received last year, according to the N.C.Rural Center and Kings Mountain planning director Steve Killian. Moore also hasn’t hired a general contractor for the project yet, a requirement for the N.C.Rural Center grant, but he hopes to begin the renovation work in March.

He expects to hire the four new staffers (two lawyers and two paralegals) by August, and must have at least three of the new hires be people who had low-to moderate incomes in the previous year, in order to comply with the regulations of the $30,000 Commerce Department grant Moore received through a federal Community Development Block Grant (CDBG) Small Business Entrepreneurial Development Program.

Though there is no direct ban on lawmakers receiving state funds for their personal business ventures, watchdog groups say it can still pose headaches or problems for legislators.

Elected officials in decision-making positions need to tread carefully when their personal business pursuits become mixed with taxpayer money, said Bob Hall, the executive director of Democracy NC, a state government watchdog group.

“It is a delicate situation because he is in one way their boss, he has influence concerning their budgets,” Halls said. “It’s a tricky situation for them (the state agencies) to be independent.”

Bob Phillips, the director of Common Cause North Carolina, said the appearance of a conflict of interest can exist, and he advises elected officials to take steps to avoid situations where even the appearances of conflicts of interest arise.

“It’s always incumbent on officials in public office, in my mind, to bend over backwards to avoid direct conflict of interest or the perception of a conflict of interest,” Phillips said. “It might not seem fair, but the perception is damaging too and it’s always best to avoid it at all costs.”

Law firm money push came with looming cuts to state

Moore pursued the economic development money in the midst of one of the most heated budget fights at the state legislature.

In the first-half of 2011, the state legislature was embroiled in fierce, partisan debates about the state’s budget before a $19.7 billion budget passed the GOP-led legislature over Democratic Gov. Bev Perdue’s veto. The budget included across-the-board cuts in state agencies, including elimination of 6,300 public education positions and the lay-offs of more than 500 teachers and 1,200 teacher assistants. Republicans, in power of the N.C. General Assembly for the first time in a century, hailed the trimmed budget as a victory and much-needed return to scaled-back spending on the state level.

Moore voted for the budget, in line with the rest of his party members and five House Democrats that sided with Republicans to override Perdue’s veto.

“We inherited a multi-billion deficit from the previous leadership and had to restore fiscal responsibility to the state government,”Moore wrote.

That view of last year’s budget shortfall was far from universal in the legislature, with Democrats arguing that many of the deep cuts were harmful, needless and caused by Republican leadership’s refusal to consider extending a temporary one-cent sales tax.

But while Moore and his fellow lawmakers were knee-deep in debates about cuts to state services in the following fiscal year, he and Kings Mountain city staff corresponded and talked with program officials at the Rural Center and Commerce Department to secure the two grants for his private law firm.

Talks with the state agencies about the grants began in early January 2011 and continued through May and June, when the grants were approved, according to email correspondence from Moore, Commerce and Rural Center staff obtained by N.C. Policy Watch through a public records request.

Included in the public records request was an email  Moore penned Feb. 6 to Adam Hines, a consultant working with Kings Mountain, urging the city to get the Rural Center application in soon.

“We should get the application files asap because the grant funds may be drying up very soon at the state level,”Moore wrote in the email.

Moore, in the written comments to N.C. Policy Watch, said he was referring to the popularity of the grant program, and not because of any insider information he had as a legislator.

“There are many communities encouraging business to apply for the funding and I wanted to make sure my application was submitted in time,”Moore wrote.

When asked if he thought the $62,000 in grants was a wise use of taxpayer money, Moore responded that, “the grant funding makes restoring an old, abandoned bank building economically feasible and it will significantly improve the downtown area of Kings Mountain…..These programs are predicated on the basis that the only way these kinds of buildings can be economically restored.”

How the grants came through

The Rural Center said it disclosed Moore’s role as a state lawmaker at every step of its review process for the Building Reuse and Restoration Program grant. A Commerce Department spokesperson said that while one program official talked early on in the process with Moore about grant possibilities,  staff in the office that approved Moore’s grant didn’t know he was a lawmaker until contacted by an N.C. Policy Watch reporter.

The Commerce department money had initially been given to the city of Kings Mountain for a medical wellness center project that fell through. Instead of turning the money back over to the state, Kings Mountain officials were able to distribute it amongst several other businesses. Moore wasn’t on a list recommended by city staff in March for city council approval, but was added the next month after inquiries from Hines, according to email correspondence from city staffers.

Billy Ray Hall, the longtime director of the N.C. Rural Center, said he had no personal contact with Moore about the grant and said Moore had to be treated like any other North Carolina business owner applying for the grants that go to restore vacant, unused buildings in the state’s rural areas and small towns. The Rural Center has done about 350 similar projects since 2004, when the program began, and it’s since become one of the Rural Center’s most popular programs, he said.

No other state lawmaker has been a direct recipient of funds in the program, though Hall said several years ago, a grant given to a tenant of a building owned by state Sen. Clark Jenkins, a Tarboro Democrat.

“We have to treat everybody the same,” Hall said.

Though the N.C. Rural Center disclosed Moore’s dual role as a legislator and grant application internally, it neglected to include that disclosure in an annual report it files with the N.C. General Assembly reporting back on how it uses the public funds. (The program Moore received money from is fully funded by the state legislature.)

The brief mention of the $32,000 grant (page 30 of the Rural Center’s annual report) is listed as “First National Bank Rehabilitation and Reuse” with no reference to Moore nor his being the owner of the building.

Moore, in his written answers to N.C. Policy Watch, maintained that his position as a legislator did not give him an unfair advantage in the grant process, and said he wanted to be treated as any other business owner would be.

“The bottom line is that I wanted to make sure that I would be treated no differently than any other applicant and wanted to make sure that my position as a legislator would have no bearing and preferably not even be known by the individuals making the review decisions at the state level,” Moore wrote. “In fact, to this day I have no idea who reviewed my application at the state agencies which were involved.”

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

When Kenneth Moore moved back to this Halifax County town a year ago, he hoped to trade in the street violence of Philadelphia for the peace and safety he remembered from growing up in this Eastern North Carolina.

But Moore hasn’t been able to find that since arriving back in the rural town in southeastern Halifax County in November 2010.

Scotland Neck – remembered by Moore as a proud, working-class community– is a skeleton of what it once was, with staggering rates of poverty ravaging the town of 2,000.

A downtown that used to be flush from tobacco, farming and manufacturing money is now desolate, some buildings collapsed from neglect. Video sweepstakes parlors break up the monotony of empty storefronts.

Enormous collapsed trees from an August hurricane are still in front of Moore’s neighbor’s yards, untouched by city clean-up crews, and there are few basketball courts and no after-school programs for youth to attend, he says.

Moore talked about his frustrations he has in the community immersed in poverty at a meeting held last week in Scotland Neck as part of the NAACP’s “Truth and Hope Tour of Poverty in NC: Putting a Face on Poverty.”

Spearheaded by the Rev. William Barber II, the head of North Carolina’s NAACP, the poverty tour filled a bus with media, community organizers and anti-poverty advocates made stops in Washington, Roper, Elizabeth City, Winton, Scotland Neck, and Rocky Mount – all areas that have impoverished populations topping 20 percent. The UNC Center on Poverty, Work and Opportunity and the N.C. Justice Center, the parent organization for N.C Policy Watch, partnered with the NAACP for the poverty tour.

The goal of the tour was to highlight the harsh conditions that the poor face in North Carolina, and how the neediest communities often end up dismissed by the powers that be, Barber said.

“It’s not a sin to be poor,” Barber said. “But it is a sin to see our brothers and sisters in poverty and ignore them.”

A second leg of the tour will start up in February.

The November killing of an unarmed, disabled man on a bicycle by a police officer’s Tazer rattled the town’s African-American community, which makes up nearly 70 percent of the town’s population, according to the U.S. Census.

The death of Roger Anthony, 61, was ruled a homicide, the first homicide in the town in the last four years. The State Bureau of Investigation is looking into the police-involved death, and the officer (who had been on the job a month) has since tendered his resignation.

Meanwhile, jobs are hard, if not impossible, to come by in the rural town.

“I’ve been finding it very hard to find a job anywhere,” said Moore, 43, a cook with years of experience working in busy chain restaurants. “There’s nothing you can do here.”

He doesn’t have a car, and with no public transportation in the Eastern North Carolina county, he has no way to get to a restaurant job in the larger, and more prosperous, cities of Roanoke Rapids, Tarboro or Rocky Mount.

So he idles his time in this small town, where he and his wife live off the $9.40 she makes an hour deboning chickens at a nearby poultry processing plant.

But that’s often not enough, and their church recently stepped in to help pay their mounting heating bills.

One in four in Halifax in poverty

In Halifax County, more than one in every four people is living under the federal poverty line, defined as a household income of $23,000 for a family of four. That statistic goes up in Scotland Neck, where former mayor James Mill estimates that 40 percent of his town’s population is impoverished.

The county is one of 10 in the state that have “persistent poverty,” with poverty rates of over 20 percent for more than three decades, according to a study released earlier this week by the N.C. Budget and Tax Center, a project under the N.C. Justice Center.

Poverty and progress are tied to race here, possibly even more than in other Eastern North Carolina rural communities where blacks and Latinos typically experience higher rates of poverty than their white counterparts.

Overall, black and Latino residents of North Carolina are much more likely to live in poverty than white North Carolinians. In the state, 27.7 percent of African-Americans live in poverty, while 34 percent of Latinos do, according to an analysis by the N.C. Budget and Tax Center. Less than 12 percent of the state’s white population lives in poverty. Those rates go up even higher for children

The economic racial disparity emerges in other ways as well.

Moore, the unemployed cook, told Barber during the town’s leg of the “Truth and Hope” poverty tour that he was frustrated that a community meeting held after the stun-gun death of Anthony, the disabled bicyclist, was only attended by African-American city councilors. Antony was black and the officer involved in his killing is white.

Six of the police department’s seven full-time officers were white, and one was Latino, at the time of Anthony’s death. Police Chief Joe Williams has since hired an African-American officer to replace the officer who resigned as a result of Anthony’s killing.

“It was an unfortunate incident,” Williams said about Anthony’s death. “We all hated what happened.”

Williams said that he’s often unable to attract qualified black officers, because they often opt to go to towns or cities that can pay better than Scotland Neck. Three of his part-time officers are black, he said, and he’s had black officers working for him in past years who got picked up by better paying departments.

Scotland Neck Town Administrator Nancy Jackson later said she was unaware that there was community outrage about Anthony’s death.

“I haven’t heard of any relations that are bad,” she said. “No one has come forward and said we have a complaint. We’re like any other small town and we have issues.”

County’s economic engine far from Scotland Neck

A lack of jobs is one of the major issues. As Barber, the state NAACP head, walked several blocks of the city’s east side — a poor, predominantly African-American neighborhood – last week, residents came out to tell him their frustration about the town’s stagnant economy.

Most of Halifax County’s economy is centered in Roanoke Rapids, 30 miles northwest of the town.

A large part of that reason is because of the city’s presence near Interstate 95, said Cathy Scott, the director of Halifax Development Commission , the county-run economic development organization. The city, though better off than the rural parts of the county, has economic woes of its own. A former textile town, it saw mills close up in the 1990s and no industry has been able to replace those jobs in large numbers, Scott said.

The county’s wood industry, a big part of the economic engine in the rural areas that are thick with loblolly pine forests, has suffered hits as a result of the county’s economic downturn, leaving lumberyards with reduced demand, Scott said. Scott hopes to build on emerging markets for the wood industry, including expanding existing factories that turn wood pulp into diaper fill and wood pellets that have become popular fuel sources in Europe in recent years.

Segregated schools link to poverty

But one of the biggest reasons for the disparity between rural Halifax County and the city of Roanoke Rapids is the presence of a three racially-segregated school districts, said Mark Dorosin, a senior managing attorney with the UNC School of Law’s Center for Civil Rights.

The center published a lengthy report in 2011, “Unless our Children Begin to Learn Together….The State of Education in Halifax County, North Carolina” that examined the racial disparity in the county’s schools. The number of students that the three school districts serve is small, with approximately 8,000 students attending the three public school districts in the county. In comparison, Wake County, the state’s largest school district, has more than 140,000 students enrolled in the schools.

The county has had three separate school district since the 1910s, two of the school districts (Halifax County School District and the tiny Weldon City School District) are nearly 100 percent non-white, while the remaining school district, the Roanoke Rapids Graded School District, has a student population that’s 70 percent white, according to the UNC report.  The Halifax County school system performs at such low levels that it’s under a court order to improve, though both of the other school districts are also struggling to provide quality educations.

“You’ve got this clear racial and socio-economic isolation in these three school districts,” Dorosin said. “Roanoke Rapids is this white island or enclave in the middle of this predominantly non-white county.”

The report declared that the segregation was unconstitutional, and called for the school districts to merge.

“The county’s three districts – Halifax County Public Schools (HCPS), Weldon City Schools (WCS) and Roanoke Rapids Graded School District (RRGSD) – remain among the most segregated in the state and are tainted by the ongoing impacts of the legacy of Jim Crow segregation,” the report concluded. “By maintaining this tripartite system, Halifax County and the state more deeply entrench racial segregation in the community, limit the educational resources available to students based on their race, cause irreparable harm to the academic opportunities for all children in the county, and stunt the economic viability of the region.”

Gary Grant, a community organizer in the black farming community of Tillory in southeastern Halifax County, agrees that continuing racial division in the county’s school has been a direct link to the high levels of poverty.

“The civil rights movement must have jumped over us and went to right to Virginia because it never did come here,” Grant said. “We’ve had complete white flight from the county school system.”

Montre Freeman, a Halifax County resident active with the county’s NAACP chapter, said the school segregation doesn’t make sense on the financial level, with the rural county paying for three separate school administrations, and also hurts the county’s chances of being a desirable place for businesses to set up shop.

“Because we have somehow have crafted a separate but equal school system, the (black) children are born into a defeatist mentality that they (the Roanoke Rapids school children) are better than us,” Freeman said. “For business, at the end of the day, you want to make money, but you don’t want to have to worry about the way your children are educated.”

Scott, the head of the county’s economic development group, agreed that the quality of the schools and the uncertainty over the future of the schools make it hard to lure businesses to the area.

“It may be a factor of eliminating us early on that we don’t even know about,” Scott said. “We can’t be blind to the fact that the better we educate our children, the more comfortable the companies are that there’s going to a workforce in the future.”

The Center is pushing ahead with residents to try and merge the three school districts, though both the Weldon and Roanoke Rapids school districts are opposed to any merger. The Halifax County Board of Commissioners, which holds the purse strings for all three school districts, would have the authority to make any changes. Litigation or official complaints to the federal education department are also possibilities Dorosin is considering.

Dennis Sawyer, the superintendent of the Roanoke Rapids school district, said his school district is unfairly painted as being an exclusive, white enclave and says that the system is seeing its student population diversify.

“There a very strong misunderstanding and misrepresentation about Roanoke Rapids being rich and heavily Caucasian,” he said. “We’re continuing to diversify, and have less money to operate with but our performance has increased.”

High electricity bills hurt poor, stall job growth

Making it more difficult for the poor to get by in Scotland Neck are the high electivity bills, a recurring problem in many Eastern North Carolina communities that are part of the Electricities utility system.

Scotland Neck is one of the many Eastern North Carolina municipalities that are part of Electricities, and beholden to millions of dollars of debt from a deal made in the 1970s that’s resulted in unexpected costs passed on to consumers.

Moore, the unemployed Scotland Neck man, had a bill of $279 last month in a home with only a handful of electronic appliances.

He’s suspect of how the town determines his bill, and says that he never sees anyone come to read his meter.

“I don’t see anybody come out here,” he said.

When he called the town to complain, he said he was told to “use common sense” and that the clock on his stove must be leading to the high bills, he said.

Jackson, the town administrator, said many people don’t understand that their bills include sewer, water , trash and electricity. When the town joined Electricities in the 1970s, it thought it would end up be a savings for townspeople.

“It turned out into not such a good deal,” Jackson said.

The town of 2,000 ends up cutting off electricity for 20 to 25 people a month for unpaid bills, she said. They wait to disconnect until after the first of month for disconnections, so those surviving off of Social Security or veteran’s benefits checks can have a chance to pay their bills.

That same high cost of electricity is also a factor in bringing jobs to Scotland Neck, said Scott, the economic developer.

“Being an Electricities community, the electricity rates are traditionally higher than in other areas of the county,” she said. “We can work with industry to try to overcome some of that, but it is a factor.”

Moore said he felt encouraged by the stop the poverty tour made in his town last week. He hopes that something will come of it, and that a restaurant job will come his way soon.

“I’m used to working and not working gets me down sometime,” Moore said. “Cooking is all I’ve ever really done, and that’s my passion.”

Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

The federal agriculture department has opened an ongoing investigation into state Rep. Stephen LaRoque’s two economic development non-profits, a spokeswoman for the agency confirmed.

The Kinston-based non-profits – the East Carolina Development Company and Piedmont Development Company – have taken in $8 million in federal funding since 1997, as part of the U.S. Department of Agriculture’s Intermediary Relending Program. The program aims to combat poverty by allowing non-profit organizations to borrow money from the federal government and then lend the funds out to struggling businesses in rural areas.

Delane Johnson, a spokeswoman for the USDA’s Rural Development division in North Carolina, confirmed Wednesday that the agency is conducting an investigation into LaRoque’s non-profits.

“There is a federal investigation going on related to Stephen LaRoque and his intermediaries,” Johnson said. “I’m not at liberty to discuss him nor his non-profits at this time.”

Joe Cheshire, a high-profile Raleigh defense attorney retained by LaRoque, did not respond to recent requests for comment. LaRoque has declined requests to speak with N.C. Policy Watch about his management of his non-profits on several occasions, but said in an August press conference that he has nothing wrong and ran the non-profits according to federal agriculture department rules.

An N.C. Policy Watch investigation from last summer found LaRoque, a Kinston Republican serving as a co-chair of the powerful House Rules Committee, received a plump salary (up to $195,000 a year) from the federally-funded charities and had members of his immediate family in key roles on the non-profit’s board of directors. Loans were given out to close associates, including two fellow GOP legislators, and LaRoque loaned his own for-profit business $200,000 from the non-profit, a potential violation of IRS tax laws that prohibit non-profit leaders from receiving personal or excessive benefits from tax-exempt charities.

Johnson, the USDA spokeswoman, referred further comment to the USDA’s Office of Inspector General. The OIG office did not confirm nor deny the existence of an investigation.

“We simply don’t comment on investigative matters or acknowledge whether we have something ongoing,” said Paul Feeney, a Washington-based spokesman.

The OIG office has two branches for conducting investigations, an audit division as well as an investigation division where law enforcement agents look to see if matters run afoul of criminal laws. No information was available from USDA about the nature of the probe into LaRoque.

In addition to the USDA investigation, LaRoque is also facing the possibility of an inquiry into his actions by his fellow legislators, after N.C House Minority Leader Joe Hackney asked N.C House Speaker Thom Tillis in November to refer the matter to the Legislative Ethics Commission for review. Tillis has asked the bipartisan Legislative Ethics Committee to decide if looking into LaRoque’s federally-funded non-profits falls under the committee’s jurisdiction.

Those legislative committees work largely in secret, and the status, scope and nature of any probe is not publicly known.

LaRoque’s wife signed his contract

Documents recently made available to N.C. Policy Watch also reinforce the existence of a cozy relationship he enjoyed with his board directors, with both his wife and brother in key roles on the board of directors.

When LaRoque needed his lucrative management contract with an economic development non-profit organization renewed, it was his wife Susan LaRoque – the chairwoman of the non-profit – that signed the contract on behalf of the federally-funded charity.

A copy of the 2009 contract was obtained by N.C. Policy Watch through attorneys representing a past Democratic opponent sued by LaRoque, a Kinston Republican, for defamation. (To view a copy of LaRoque/s contract with the non-profit, click here.)The lawsuit LaRoque filed against former state Rep. Van Braxton was dismissed by LaRoque in mid-November, with LaRoque agreeing to have the non-profit pay more than $17,000 in contempt of court fees to the opposing side’s lawyers.

At an August press conference, LaRoque indicated that East Carolina Development Company had a contract with his fon-profit company, not him personally, and said he was paid only out of interest and fees paid by the companies repaying the non-profit, and not overall assets.

“We’ve never received one dime of taxpayer money or grant or foundation money to pay our operating costs, something that not many other non-profits can claim,” LaRoque said at his press conference. “Our contract is derived from interest and fees.”

But the actual contract appears to show LaRoque is also entitled to a portion of the federally-funded non-profit’s assets, as well as a portion of the interest and fees collected by the non-profit. It gives him 3 percent of the non-profit’s total assets, half of all the loan fees collected by the non-profit and 10 percent of the annual profit of the company. (The 2010 tax return for the East Carolina Development Company can be viewed here.)

The contract signed by Susan LaRoque is a clear violation of the laws that govern non-profits, said Thomas Kelley, a professor at the University of North Carolina’s law school who specializes in non-profit law.

Tax law does not allow insiders of non-profits to benefit personally from the non-profit’s funds, and LaRoque’s wife, as a director, would be hard-pressed to set aside her and her husband’s personal financial interests, Kelley said.

In addition, tax returns for LaRoque Management Group obtained from Braxton’s lawyers also show that the company operated at losses of $40,000 to $100,000 from 2006 to 2009, which resulted in the state lawmaker’s for-profit company paying little or nothing state or federal income taxes in those years, according to copies of the tax returns.

Past probes by OIG

The USDA’s OIG has looked into the finances of LaRoque’s non-profits before.

A critical June 2010 audit from the USDA’s Office of the Inspector General office found significant problems overall with the national Intermediary Relending Program, taking particular issue with the USDA giving contradictory messages about whether those repaid funds are public. The report called for the Rural Development division to begin defining the money as federal dollars.

The report also found $7.9 million in funds, $4 million from LaRoque’s non-profit, were loaned out improperly and called for the money’s return to USDA. The final decision about whether the money will have to be returned hasn’t been made, more than 18 months after the audit was published.

The USDA inspectors found that the non-profit exceeded the program’s lending cap of $250,000 on several occasions, including more than $2 million in loans that went to a developer to built multi-family homes in Greenville. The developer has said he repaid the loans to LaRoque after the souring economy made the project not feasible.

A final decision has not been made by USDA about whether it’ll require the money that was improperly leant out to be paid back immediately, but a decision is expected soon, said Jay Fletcher, another USDA spokesman.

“The final recommendation is nearing its completion,” Fletcher said.

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

The nation’s largest for-profit virtual education company quietly took steps this week to open up an online charter school in North Carolina that would subsist off of public funds and siphon off profits to Wall Street investors.

The move comes as the company, K12, Inc., faces mounting questions in others states over the quality of education students receive from the company.

A representative of K12, Inc., a publicly traded company on the New York Stock Exchange (NYSE: LRN), attended a Cabarrus County school board meeting Monday to ask if the school system would partner with the company to open up a virtual public charter school that would draw from students statewide.

The company first began talks with the school district by having former state Rep. Jeffrey Barnhart, now a lobbyist at the prominent Raleigh law and lobbying firm McGuireWoods, to approach the school district in his home county, according to Cabarrus County Superintendent Barry Shepherd.

Neither Barnhart nor a spokesman for K12, Inc. returned calls for comment on this story.

The move by K12, Inc., isn’t entirely unexpected, after the newly-empowered GOP-led state legislature passed a bill this summer lifting the state’s 100-school cap on charter schools. Lifting the cap has not been without controversy, with proponents arguing that charters offer more innovative ways of teaching while critics warn it could defund existing public schools and be a dangerous first step to privatizing public education in the state.

K12, Inc. kept a big presence on Jones Street during the talks, and hired seven well-connected lobbyists in 2011, according to the N.C. Secretary of State’s lobbying division.

However, the push to tap into the North Carolina market comes as the company faces mounting criticism of putting profits before education. Teachers at some virtual schools have complained of being overloading with large classes while the company loosely monitored student’s progress, at times charging states money for educating children who withdrew soon after signing up or barely attended the online classes.

“Their curriculum is limited, it looks like a pretty hollow experience for the kids,” said Gene Glass, a research professor at University of Colorado-Boulder who has been critical of K12, Inc., as well as other for-profit educational companies. “It’s just all about business.”

Booming business

2011 has been a good year for the company, with North Carolina and several other states opening up laws to allow more charter schools, including charters that are based online. K12 CEO Ron Packard, made $5 million in combined salary and stock options last year, according to filings made with the U.S. Securities and Exchange Commission. (To see a breakdown of Packard’s earnings, go to page 33 of K12’s 2011 Proxy statement.)

As of 11 a.m. Friday, the company was trading at $20.23 a share, a big drop for the company following the New York Times publication of an extensive article Tuesday that found the company “tries to squeeze profits from public school dollars by raising enrollment, increasing teacher workload and lowering standards.”

The Times mentioned a state audit in Colorado that found taxpayers paid $800,000 to the company for students that were never enrolled in the virtual school, or who lived out-of-state. It also mentioned a Pennsylvania virtual public school run by a K12, Inc. subsidiary that saw 60 percent of its students behind grade level in math, and 50 percent trailing in reading.

The virtual charter school, if the N.C. State Board of Education allows it to open, could mean a steady stream of state, federal and local funding flow through to charter as the company makes a profit off of education, as it has in over half of the states in the country.

The company uses an online-based system where children use both physical workbooks while communicating with teachers over the Internet and anticipates serving 2,750 North Carolina students in its first year. It would provide computers for low-income students and suggests using public resources like library Internet access for those not able to afford connections at their home, according to documents provided by the company to the Cabarrus County schools.

A charter school gets an average of $4,712 funds per student as well as additional local and federal dollars. A virtual charter school would be entitled to getting the same funding amount as charter school with physical buildings, despite the obvious differences in operating costs.

“There are no policies right now that would state they would get something different,” said Alexis Schauss, director of school business with the N.C. Department of Public Instruction, which oversees charter schools.

North Carolina law requires that charter schools be operated and managed through non-profit organizations, an attempt to make sure school leaders keep their interests on education and not in financial incentives.

If the company recruits 2,750 students in its first year, the cost would be $18 million to taxpayers in state and local education funds, not including federal funds, according to a 299-page application the company sent to the Cabarrus school district.

K12 staff told Cabarrus County school officials it hopes to open up in the fall, but that appears unlikely. The N.C. Department of Public Instruction set a November deadline for “fast-track” applications for charter schools hoping to open by the 2012-2013 school year, and are already well into their selection process.

By 2016-2017, the company wants to have 5,109 students, and anticipates taking in $34.5 million in public education funds, according to the application.

The virtual public charter school would be open to all grade levels, and offer diplomas for high school graduates.

But it’s not as if the state of North Carolina doesn’t offer anything by way of online education.

The state runs the North Carolina Virtual Public School, an online school that allows students in public schools to take classes online that aren’t offered in their home districts. Offerings for middle school and high school students include 17 AP classes, foreign languages like Chinese or Arabic, and other advanced classes. The cost to taxpayers is about $349 for each course a student takes, said David Edwards, a spokesman for the state-run virtual school.

It may be more cost-effective and offer a better quality education to think about expanding the state’s offerings, instead of hiring a private company to run an online school, said Alex Molnar, another University of Colorado-Boulder professor critical of for-profit virtual schools.

In order to get around state rules that require charter schools to be managed and run by non-profit organization, the company would set up a non-profit organization called “North Carolina Learns” and then contract with K12, Inc. for all services, the company wrote in its application. No non-profit by that name has been registered yet with the N.C. Secretary of State’s Office, as is required.

Molnar said founding a non-profit to act as a shell for the for-profit company is typical of K12.

“It’s a way to run around the clear intent of the law,” Molnar said.

Powerful players

It’s also not uncommon for the company to tap former elected officials to make its cases, as it appeared to have done in Cabarrus County, Molnar said.

Shepherd, the school superintendent, said he got a call from Barnhart, the former five-term state representative for the area, in October about the possibility of K12 partnering up with the school district.

Barnhart resigned from his legislative seat in late September to take a job with the McGuire Woods lobbying firm in Raleigh. K12 has hired four lobbyists from the firm, according to filing at the N.C. Secretary of State’s office.

“Jeff (Barnhart) contacted me to see if I would be interested in our district pairing with a virtual charter school,” Shepherd said. “I was impressed with what I heard.”

Barnhart stepped down from the N.C. General Assembly on Sept. 30 after serving five terms and is prevent from lobbying until the close of next year’s legislative session, according to lobbying rules outlined in a recent N.C State Ethics Commission opinion. With Barnhart prevented from lobbying at the state level until a cooling off-period passes, he was not listed as one of the four McGuireWoods lobbyists hired by K12.

Because reforms to the state lobbying laws don’t cover local government, Barnhart can push his clients’ causes on the school district level, said Bob Hall, director of Democracy NC, a government watchdog group that’s been active in lobbying reform in North Carolina.

“Lobbying local government is not covered,” Hall said.

Shepherd, the Cabarrus County superintendent, said school staff have met with K12 representatives, and that the school board members will make a decision in January about whether to partner with the school after holding work sessions to discuss the proposal.

Having a school online could help reach homeschooled children, or those unable to succeed in a traditional school setting, Shepherd said. Part of the agreement, if Cabarrus County were to partner with the school, would be receiving three percent of state and local funds the charter school would receive.

Shepherd said he wasn’t aware of some of the national criticism of the company, but plans on doing more research and passing on the information to board members. He said his goal is to increase the offerings for students.

“We’re looking at innovations that will reach all children with education possibilities,” he said.

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

Attempts by the state legislature to pass local bills requiring voters in some, but not all, counties to produce photo identification at the polls would fail to meet the constitutional guarantee of equal protection, according to a recent analysis by the N.C. Attorney General’s Office.

The state Department of Justice, in a Nov. 23 advisory letter sent to Gov. Bev Perdue’s office, indicated that a strategy by GOP leaders to circumvent Perdue’s June veto of a voter ID bill would run into constitutional issues. Having individual counties ask for more stringent identification rules would create an unconstitutional scenario where voters in some counties face more hurdles to vote than in other areas.

“It is therefore our views that significant equal protection concerns would arise if voter identification requirements were established for some voters and not others based merely on their county of residence,” wrote Grayson Kelley, the chief deputy Attorney General, in the letter. He later added, “The enactment of local acts applying photo voter identification requirements in only certain counties would raise serious equal protection issues under both the United States Constitution and North Carolina Constitution.”

Click here to read Kelley’s seven-page advisory letter to Mark Davis, Perdue’s general counsel, obtained by N.C. Policy Watch through a public records request.

In recent weeks, a handful of conservative county commissions (in Craven, Davidson, Gaston, Lincoln and Rowan counties) have passed resolutions requesting that the legislature allow the counties to require photo identification to vote. The legislature would then, during a special session, have to pass what’s called a “local bill” in order to grant those powers to those counties. Local bills are generally exempt from governor vetoes, and usually deal with issues specific to counties.

But Kelley, in his letter, said that the courts would likely find that lawmakers don’t have the ability to push through piecemeal changes to voter identification requirements, and that state law calls for changes of that magnitude be made through an all-encompassing general bill, like the one that was vetoed by Perdue.

Kelley also says in the letter that Perdue would necessarily be stripped of her ability to veto those local bills, because the larger voter registration issue had already been taken up by state lawmakers.

Like much of what happened in this year’s legislative sessions, the push to require voters to show ID at the polls has broken down on partisan lines, with Republicans behind the additional requirements and Democrats voting against the proposal. The “Act to Restore Confidence in Government by Requiring that Voters Provide Photo Identification Before Voting” passed both the House and Senate in the spring, but failed to become law after Perdue vetoed it on June 23.

House Republicans are a few votes short of overriding Perdue’s veto, and N.C. House Speaker Thom Tillis told the News & Observer in June that a vote could come anytime he has enough votes lined up.

“If seven Democrats don’t show up for a publicly announced session, that would be the easy way to override it,” he said in an interview, referring to the required three-fifths needed.

According to Democracy NC, a good government watchdog group, the push at the local level also broke down on partisan, as well as racial, sides, with 27 white Republicans county commissioners voting to ask for the voter identification rules in the five counties. Opposing the bills in the five counties were three Democrats, one white and two African-Americans.

During legislative debates, supporters of the bill said that requiring that voters show picture IDs would prevent voter fraud. But critics said the bill would do little to prevent the already minimal issue of voter fraud in the state, and amounts to voter suppression. It would create barriers to voting especially among the poor, African-Americans and elderly who may not have valid driver’s licenses or other photo identification, critics say.

Nearly a half-million voters don’t have state-issued identification, according to an estimate by the N.C. State Board of Elections.

A Democracy NC analysis also found that in the 25 counties with the highest percentage of registered voters lacking a state photo ID in the state, 15 of those counties are also home to the largest impoverished populations in the state. That means many of the voters who would have to go out and get photo ID in order to vote are living in some of the poorest areas of the state.

Lawmakers should conduct a bipartisan ethics investigation  into the business dealings of state Rep. Stephen LaRoque, a top Democrat in the legislature said today.

House Minority Leader Joe Hackney, the Democratic leader in the Republican-controlled N.C. House of Representatives, wants a bipartisan committee to look into Stephen LaRoque, an embattled Kinston Republican lawmaker facing scrutiny over his management of two economic development non-profits.

Hackney sent a letter this morning to N.C. House Speaker Thom Tillis asking for an independent investigation into LaRoque. (See below for text of letter.)

“(W)e should hold the members of our chamber to a higher standard of behavior to help build public faith in government,” wrote Hackney. “An open, bipartisan review of the allegations against Rep. LaRoque best serves the people of North Carolina and our fellow House members.”

LaRoque, a Republican serving his third term after a four-year hiatus from the state legislature, could not immediately be reached for comment. He’s previously defended his pay at the non-profit, which was up to $195,000 a year, and having his immediate family on his board of directors as an acceptable way of doing business.

Tillis could not be reached for immediate comment Wednesday morning, but has previously said his staff was looking into the matter and taking it seriously.

LaRoque, a Kinston Republican serving as a member of Tillis’ leadership team, has faced tough questions in recent months about two economic development non-profits he runs, the East Carolina Development Company and Piedmont Development Company. The non-profits, both based out of Kinston, have taken in $8 million from the U.S. Department of Agriculture as part of the agency’s Intermediary Relending Program that aims to combat poverty by loaning money to struggling entrepreneurs in rural areas. Neither non-profit has received money from the state. A USDA inspector general’s report in 2010 also found that more than $4.5 million was improperly lent out by the non-profits.

An August investigation by N.C. Policy Watch, “Public money, personal gains,” found the federally-funded-charities paid the sole employee Laroque generously, as high as $195,000 a year, without the knowledge of several board members; his board of directors included his wife and brother; and the non-profit gave loans of federal money to close associates of LaRoque – including his wife (his girlfriend at the time); two fellow GOP legislators and his lawyer.

NC Policy Watch also found a for-profit company owned by the lawmaker, LaRoque Management Group, took a $200,000, no interest loan in July 2010 from the non-profit, a potential violation of IRS tax laws that prevent non-profit insiders from personally benefiting from their charities.

LaRoque failed to report the loan on the non-profit’s most recent tax return, despite questions that specifically asked about personal benefits from the charity’s coffers.

Hackney called for the investigation after LaRoque dismissed a defamation lawsuit last week filed against the N.C. Democratic Party and Van Braxton, the Democratic opponent LaRoque unseated in  the 2010 election.

LaRoque took issue last fall with campaign fliers that accused him of stealing the home and business of a well-known Kinston barbecue restaurateur by foreclosing on the properties after a loan between the two went bad.

The only monetary settlement in the dismissal was $17,250 the East Carolina Development Company paid in contempt of court fines to Braxton for not turning over key documents in the lawsuit.

Decision in Tillis’ hands

The decision about whether to appoint a separate commission or send it the N.C. legislative Ethics Committee is up to Tillis, who gave LaRoque a leadership role this session as the co-chair of the powerful House Rules Committee.

Bob Hall, director of the government watchdog group Democracy NC, said an investigation could be conducted behind the scenes or out in the open, depending on the decisions made by legislators.

“It would be to the benefit of everyone if (an investigation) was aired, and it would be best if it were aired in the light of day,” Hall said.

The last high-profile ethics inquiry looking at the behavior of a legislative member was in 2007, when Hackney, then the House Speaker, formed a commission to looking into Thomas Wright Jr., a Wilmington Democrat eventually ousted from the legislature because of improprieties in his campaign finances and with a non-profit. Wright is now serving a six to eight year sentence in state prison.

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.

Text of letter sent by Hackney to Tillis

Source: Joe Hackney’s office 

November 16, 2011

The Honorable Thom Tillis

Speaker of the House

North Carolina General Assembly

Raleigh, North Carolina 27601

Dear Speaker Tillis:

Several recent media reports have raised questions about the business practices of our colleague Rep. Stephen LaRoque. The reports appear to point to a pattern of violating several guidelines for nonprofits as well as the rules for the U.S. Department of Agriculture loan program that provides the capital for Rep. LaRoque’s business.

I understand that you and your staff are monitoring this matter and I appreciate your attention. However, I believe the House of Representatives and the public deserve a fuller examination of the allegations made against Rep. LaRoque. I am asking that you appoint a bipartisan commission to independently review the matter and make recommendations about the best course of action in this case. The leadership of this commission should also be bipartisan — as is the leadership of our Ethics Committee – to assure the public that political gamesmanship is not a factor in this review.

No member of the House of Representatives should be exempt from the laws and regulations of our government. In fact, we should hold the members of our chamber to a higher standard of behavior to help build public faith in government.  An open, bipartisan review of the allegations against Rep. LaRoque best serves the people of North Carolina and our fellow House members.

I would be pleased to consult with you about the membership, duties and procedures for this proposed committee and I hope we will discuss this matter soon.

Thank you for your serious consideration of my request and please let me know if I can be of any assistance to you as you move forward.

Very truly yours,

Joe Hackney

State Rep. Stephen LaRoque’s federally-funded non-profit will pay thousands in contempt of court fines as part of the state lawmaker’s agreement to dismiss a defamation lawsuit against a political opponent.

LaRoque, a Kinston Republican, dismissed a defamation lawsuit Tuesday that he filed a year ago against the state Democratic Party and Van Braxton, the Democratic opponent that LaRoque unseated in the November 2010 elections.

The East Carolina Development Company, the small economic development non-profit founded by LaRoque in 1997, will pay $17,250 to Braxton’s lawyers for failing to turn over key documents in court proceedings, according to court documents.

The lawsuit had been ongoing for a year, and Braxton’s lawyers fought it, contending that statements in a campaign mailer about LaRoque stealing were true.

The dismissal and contempt fine are the most recent blows for LaRoque, a polarizing lawmaker that’s come under scrutiny for the generous annual pay, as high as $195,000, he’s gotten from the non-profit and loans he approved to close associates. The East Carolina Development Company and Piedmont Development Company, both based out of Kinston, have taken in $8 million from the U.S. Department of Agriculture as part of the agency’s Intermediary Relending Program that combats poverty to making business loans available to struggling entrepreneurs in rural areas.

Braxton said he was glad to see the lawsuit dismissed, but that federal authorities should be brought in to determine if any laws were broken by LaRoque’s management.

“Just because the lawsuit is over, we’re not stopping what we’re doing,” Braxton said. “We’re hoping to have him held accountable for his actions.”

Braxton added that he doesn’t plan to run for office again.

LaRoque’s attorney Bert Diener did not return calls seeking comment.

LaRoque was the subject of an August investigation by N.C. Policy Watch, “Public money, personal gains” that found the two small economic development non-profits paid him salaries that early board members were unaware of; he later stacked his board of directors with immediate family members; and gave loans to close associates of LaRoque – including his wife (his girlfriend at the time); two fellow GOP legislators and his lawyer.

NC Policy Watch also found that LaRoque’s for-profit company LaRoque Management Group took a $200,000, no interest loan from the non-profit, a potential violation of IRS tax laws that prevent non-profit insiders from personally benefiting from their charities.

LaRoque also failed to report the loan on the non-profit’s most recent tax return, despite questions that specifically asked about personal benefits from the charity’s coffers.

A spokeswoman for the U.S. Attorney’s Office for the Eastern District of North Carolina declined to comment when asked if the federal prosecutors would be taking a closer look at LaRoque.

“I can’t confirm or deny any investigation that we may or may not have,” said Robin Zier, a spokeswoman for the federal prosecutor’s office.

Questions? Comments? Reporter Sarah Ovaska can be reached at (919) 861-1463 or sarah@ncpolicywatch.com.