Commerce leaders chafe at proposal to impose ethics, salary rules on nonprofit
Posted April 3, 2014
Raleigh, N.C. — Draft legislation reworking the rules for a new private nonprofit designed to recruit businesses to North Carolina would make the corporation's employees subject to state ethics, personnel and travel polices – prompting objections from Commerce Department leaders.
"The objective here is nimbleness, speed of movement, the ability to take action and to market the state effectively," said Commerce Secretary Sharon Decker. "I'm looking at all of the legislation with that lens. So, I've got concerns about legislation that might be preventive."
When Gov. Pat McCrory took office, plans were already in the works to turn some of the Commerce Department's functions over to a private nonprofit that would be run by state appointees. According to the idea's proponents, private-sector employees would be able to both react more quickly to businesses showing interest in the state and develop long-term relationships. A private nonprofit would also be able to keep more of its activities secret, although the Commerce Department already has many sweeping exceptions to public records laws not enjoyed by other state agencies.
During the 2013 legislative session, lawmakers pushed forward with a bill that would have told the Commerce Department how to create the nonprofit and laid down rules for the corporation. But that bill never received final approval because it got bogged down in a fight over natural gas drilling.
But lawmakers did place a short provision in the state budget that gave the Commerce Department authority to move ahead with the transition. McCrory, Decker and others have taken those few paragraphs and run with them. A new nonprofit has been formed, and the state has begun the process of moving marketing functions over the to 501(c)(3) corporations.
Legislation that the Joint Legislative Economic Development and Global Engagement Committee formally recommended to the 2014 General Assembly session would place more rules around the new nonprofit.
Decker and Richard Lindenmuth, the chief executive of what is now called the Economic Development Partnership of North Carolina, both told members of the committee that they welcomed the legislation but had some objections.
For example, the legislation requires that the nonprofit raise $10 million from private sources before drawing down its state funding.
"That slows the process," Decker said after Thursday's meeting.
Asked by Sen. Brent Jackson, R-Sampson, whether the nonprofit would be subject to state ethics rules, Lindenmuth said Commerce officials were still negotiating with lawmakers on that point.
"That's an area for discussion. I don't think any of us intend to be less than truly ethical," Lindenmuth said.
However, he said, ethics and other disclosure rules could interfere with the ability of businesses recruiters to host business dinners and keep information from private industry secret.
He gave the example of a recent negotiation in which North Carolina was talking with a realtor who represented a business considering a move. Another state's recruitment team was allowed to talk directly to the company's officials, but North Carolina couldn't.
"The company was afraid that, if they announced their name here, it would be public information and, therefore, everybody would know that they were coming here, including their employees," Lindenmuth told the committee.
State personnel and expense rules could also pose a problem for the new nonprofit, he said. For example, he said that state workers are limited to a lower per diem than might be practical for some recruitment trips.
"I don't think we could find a $60 hotel in France at the Paris Air Show," Lindenmuth said.
Rep. Tom Murry, R-Wake, called the bill "a good faith effort" to address concerns from all parties, but said that it was still being negotiated.
The General Assembly session begins on May 6.