Surry County has seen its share of this money. Early on in the Golden LEAF Inc.’s existence, the agency put nearly $1.8 million into Surry County, helping Surry Community College get its viticulture program running and spurring the start up of the local wine industry.
Of more recent vintage, the foundation earlier this month awarded roughly $2 million in grant money to help with a number of local projects identified by local leaders as components in economic development efforts.
Much of the Golden LEAF money would stop, though, if a couple of state legislators have their way in this session of the General Assembly.
Golden LEAF was created in 1999 by the General Assembly after years of legal wrangling and lawsuits brought against tobacco companies by state governments — including North Carolina — who were being saddled with some of the health care costs associated with treating these long-term smokers.
Four tobacco companies, Philip Morris, RJ Reynolds, Brown & Williamson and Lorillard, signed the agreement in late 1998. Those tobacco companies, as part of a consent decree aimed at stopping the lawsuits, committed themselves to paying billions of dollars to the states. North Carolina opted to create the Golden LEAF Inc., commissioning the foundation with utilizing that money to spur economic development in struggling rural communities which had been traditionally dependent on tobacco. Since then, roughly $70 million a year has been pumped into the foundation’s coffers.
State Sen. Daniel Clodfelter, a Mecklenburg County Democrat, has introduced a bill which would divert those annual payments from Golden LEAF to the state’s general fund for three years. Rep. Paul Stam, a Wake County Republican, has taken that a step further, introducing a bill that would permanently make the incoming tobacco settlement money part of the state’s general fund. The bill would leave the present foundation endowment in place, so Golden LEAF could continue its work with the proceeds of that endowment.
Dan Gerlach, president of the foundation, said that would come close to gutting Golden LEAF’s ability to carry out its mission.
“Some of the people (supporting the bills) claim we have $700 million in the bank,” he said, because that’s close to how much the endowment has received. However, he said, Golden LEAF has concentrated on taking the incoming money and putting it in the communities, rather than building a huge endowment fund.
“Because of the pressure these communities are under, like Surry County, we’re trying to get more of that money on the street, to help more communities,” he said. “We’re trying to help rural, economically distressed counties get ahead.”
Stam has called the Golden LEAF grant program “a luxury,” and said that the state’s budget crisis means luxuries should be cut.
Gerlach said that is not so.
Because of the foundation’s aggressiveness in putting a larger percentage of its income back out into communities, and because of losses in the value of the endowment fund with the drop in the stock markets, he said the fund’s value stands at about $400 million. He said between the foundation paying off earlier grant obligations, and funding new grants, it is putting about $60 million into rural economies this year.
“If we don’t get any more money coming from the tobacco settlement, we would have to become like a more traditional foundation, which means we would give away 5 percent of our assets, or $20 million,” Gerlach said. “This year, that would have cut our grant-making budget by two thirds.
“Some people would argue we should put more money in the endowment to get the money back up, but we’re trying to get more of that money out there in the communities. The more diverse we make our rural economies, the better chance we have of succeeding in the long term.”
Gerlach, who was budget advisor to former Gov. Mike Easley, said he understands the budget pressures on the General Assembly, but he believes cutting off the program that is helping to restore rural communities to economic health is not the way to balance a budget.
“We’re focusing on how we can help get these communities back on their feet ... you don’t cut that ... it doesn’t make any sense to cut the very things that help them (rural communities) compete economically.” He said had these measures been put in place years ago, the wine industry in Surry County may not have gotten off to a strong start, the viticulture program at SCC may not exist, and this year’s grant package to Surry County would likely not have happened.
Gerlach has a sympathetic ear in Sen. Don East, a Pilot Mountain Republican who represents Surry, Stokes, Yadkin and Alleghany counties.
“I don’t like that (bill),” he said. “That’s not the intent and the purpose of the Golden Leaf Foundation. That money is not to balance the budget. It’s not for the general fund. It’s for special projects that have done a lot of good in Surry and Yadkin and Alleghany counties.”
East said he sees an age-old battle in the proposal — that of the more metropolitan areas of the state taking away from rural communities, because the Golden LEAF money has primarily been spent on projects in rural communities.
“The simple fact is, those rural folks have been left out for years and years,” he said. “Raleigh, Winston-Salem, Charlotte, Greensboro have gotten a disproportionate share of state funds forever.”
Although he believes the attempt to divert the funds will get some notice this year because of the budget crisis, he said those backing the bills may find themselves in an uphill battle.
The foundation, he said, “...has done a lot of good, there’s several millions of dollars that have gone to Surry County. I would think that the Golden LEAF Foundation spreads their funds across this state in a good fashion and a good manner, and a whole lot of people would get up in arms if that were taken away. I’ll certainly do everything I can to see that it doesn’t happen.”
Rep. Darrell G. McCormick, whose district includes parts of Surry, Iredell and Yadkin counties, said he believes that it is probably too early to worry much about losing the funding.
“This is just one of those bills, it’s come out in its first format, it hasn’t gone to committees. It’s definitely going to be vetted and scrubbed ... before it goes anywhere. I think as the next week or so goes by, everyone will have time to look at the unintended consequences. There are always intentions with a piece of legislation, but as time goes by, you have time to look at unintended consequences.”
In the end, though, he believes simply comparing the results of the foundation’s work to the benefits of using the money for balancing the budget could be a major deciding factor if the bill ever makes it to the floor for a vote.
“The original intent of the Golden LEAF Foundation was to retrain farmers, was for rural economic development. I don’t think we have met all the criteria. Our budget is in a bad situation, but have we really met those (Golden LEAF) needs yet? I don’t think we have. Our communities have benefited from Golden LEAF a lot. Our budget’s in a bad situation, but I don’t think I’d like see that Golden LEAF money go away.”
Stam, however, said the philosophy of putting that money into Golden LEAF is flawed, and the very localities Golden LEAF is targeting have been hurt by the program’s existence.
“The whole premise of that settlement was that cigarettes was causing damage to the Medicaid budgets of the states,” he said. “If you’re doing restitution, that money should be going back to the general funds that pays for Medicaid. ... If it had gone into the general fund as it should have, Surry County would have gotten more money than it has now.”
During the past decade, when more than $700 million has been paid into the Golden LEAF fund, Surry County has received grants and commitments totaling $3.8 million. Stam said using budgeting formulas that determine how money flows from Raleigh to individual communities, Surry County would probably have received $10 million to $12 million of that money had the settlement payments gone directly into the state’s general fund.
“The difference is, you get two checks that have on the top of the check Golden LEAF Foundation. You can take a picture of those two checks,” he said, and that’s the way some legislators like it because they can use Golden LEAF awards to their political advantage. “They can get credited when you get some little grant, for half a million here, or half a million there, they can talk about how they brought the bacon home. They can’t claim that if the money is going into the general fund.”
Rep. Sarah Stevens, whose district includes parts of Surry and Alleghany counties, said she opposed the bill. For now.
“I don’t think I can support that measure,” she said. “But, I’m going to have to see all the arguments. It’s taking away money from a foundation that has done a good job, and I don’t think I can support that as it’s written, but I do want to see all the arguments.”
Clodfelter, the Mecklenburg senator who introduced the bill in the senate, did not return telephone calls seeking comment.
Contact John Peters at jpeters@mtairynews.com or 719-1931.
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