Ethics form exemption leaves out some agency leaders

Posted March 20, 2014

Cabinets filled with statement of economic interest forms line the wall inside the State Ethics Commission building, located on Blount Street in Raleigh.

— In a back room of a 115-year-old house on Blount Street, file cabinets brimming with thousands of paper records line the walls.

Before they're stored inside this ornate Queen Anne-style manor, home of the State Ethics Commission, staff members read, digitize and index each one for easy retrieval for the public.

The forms, called statements of economic interest, are an important component of the State Ethics Act, passed in 2006 to combat corruption following the conviction of former Democratic state House Speaker Jim Black. The law requires high-ranking public servants to note potential economic conflicts of interest such as investments, debt and other financial interests. Contained in these pages are the economic investments of every one of the important decision-makers in North Carolina government.

Or rather, almost everyone.

 Sunshine state

This is the fourth of a multi-part series on open government to coincide with Sunshine Week, March 16 to 22.

Read part one for a closer look at what constitutes a public record and how WRAL News uses these documents in its reporting. Check out part two for a closer look at the tensions between the availability of public records and the time and resources it takes government agencies to retrieve them. And see part three to find out how agencies across the state fare when it comes to wait times for public records

The state's ethics law contains a loophole of sorts that allows lower-salary state workers covered by the ethics act to opt out of filing. Make less than $60,000, the provision says, and you don't have to submit an SEI.

"I think it was originally to exclude from that filing requirement people in that position who would be less likely to be making decisions," Perry Newson, executive director of the State Ethics Commission, said.

But following legislative efforts in 2012 and 2013 to expand the number of at-will employees – those exempted from State Personnel Act protections by the governor – more than 100 additional workers now fall into this loophole. That includes workers designated as both managers and policymakers across half of the governor's cabinet agencies.

Although these individuals are still subject to the State Ethics Act, they're not required to provide the form that citizens could use to evaluate their potential conflicts of interest, causing some concern among government watchdogs.

"We clearly believe that $60,000 is way too high a threshold," said Jane Pinsky, director of the North Carolina Coalition for Lobbying and Government Reform. "When the average state employee earns a little over $40,000 and the average teacher earns $45,000, those numbers need to be much lower."

Exemptions called 'mark of leadership'

When hundreds of state employees were informed over the summer that their positions would soon become exempt, several cabinet secretaries told workers it was a positive step.

Inaugural Ceremony and Parade on Jan. 12, 2013 Q&A: Personnel Act changes

"I see this designation of your position as exempt as a badge of distinction of which you should be proud," John Skvarla, secretary of the Department of Environment and Natural Resources, told employees in an Aug. 9 memo. "I know not all of you will agree with that sentiment, but I see an exempt managerial or policy-making designation as a mark of leadership."

Department of Health and Human Services Secretary Aldona Wos told staffers that the change would strengthen leadership and increase accountability.

"This new designation also recognizes the significant impact that you can have on the state in your role," Wos wrote in an Aug. 20 memo. "As a part of this leadership team, we will be able to leverage your creativity, passion and expertise for the benefit of the Department and the people we serve every day."

Data from the Office of State Human Resources show 131 of these leaders, or about 10 percent of the governor's designations, fall below the $60,000 threshold. That number was about 15 prior to 2013, when the legislative cap on exempt positions hovered around 400.

Exempt employees – designated as either managerial or policy-making – make up the majority of the 200 total employees in the loophole, with the remainder primarily made up of assistants and secretaries on the governor's staff and other agencies.

One notable exception is state Budget Director Art Pope, who filed an SEI in 2013 even though his $1 annual salary meant he wasn't required to do so.

Among the newly exempt employees not required to file are environmental program supervisors at DENR, developmental service directors at DHHS and correctional superintendents at the Department of Public Safety.

That's a problem, Pinsky says.

"People who are in important positions only benefit from transparency," Pinsky said. "All of us benefit from transparency."

Lowering the bar

She said she'd like to see the limit lowered to $40,000, where it would capture all but about 20 assistants and receptionists sprinkled across state agencies.

"Clearly, there are some people who earn $40,000 a year who are not in a position where they should really have to file, but most of the appointees should," Pinsky said.

Newson points out that SEIs, which are self-reported by filers, are not meant to "catch the bad guys." Instead, he said, they serve a valuable education function to those who might not know where potential conflicts of interest might lie.

"You're supposed to have a little bit of self-reflection and think, 'Is there anything I'm doing that could have an impact?'" Newson said.

SEI or not, McCrory spokesman Josh Ellis said the rules don't change for someone because they don't have to file a form.

"The governor expects all state employees to uphold high ethical standards, regardless of whether they have to file the ethics form," Ellis said.

Although all workers covered by the ethics law – even those under the $60,000 limit – receive some sort of ethics training, Pinsky said filing statements of economic interest also serve as a protection for government decision makers. Ethics Commission staffers review each form and tell every filer whether they have any potential conflicts of interests of which to be aware. 

The exception to that standard is for members of the General Assembly. The Ethics Commission makes sure they file statements of economic interest but does not advise on possible conflicts. Given the variety of issues considered by the legislature, it would be impossible to predict and remove every possible conflict. 

"I just think, if I were in any of these positions, I would want that clarity, that transparency, that clear bright line where you can say, 'I made the right decisions as a state employee,'" Pinsky said.

She said SEIs also serve a valuable service to the public, which can use them to make sure public servants are making decisions for the right reasons.

"If we don't believe in our state government, it's going to wither away," Pinsky said. "One of the ways we encourage people to believe in state government is to make it as open and transparent as we can."


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  • Billy Smith Mar 21, 2014
    user avatar

    Democrats are about as transparence as the CIA.

  • glarg Mar 21, 2014

    ""People who are in important positions only benefit from transparency," Pinsky said. "All of us benefit from transparency.""

    A myopic viewpoint.

    People do not 'benefit' from being forced to fill out pages and pages of paperwork. So that busy bodies can then browse through their personal financial information.

    Does Pinsky plan on publishing all of her financial information?

    A guy making $40K a year has just a much right to privacy as anyone else. If people are the type to work a fiddle they will do so regardless of if they have to file incorrect paperwork.

  • Rebelyell55 Mar 21, 2014

    Well ain't they the smart ones, way to keep those underlinies under control.

  • Joseph Shepard Mar 21, 2014
    user avatar

    Have to wonder why this same level of scrutiny has not /was not applied to Gvnr Dumplin and Bobby Boy Etheridge? Could it be the left leaning political investigators were not motivated enough to try and present a balanced story?

  • jpinsky Mar 21, 2014

    Congratulations to state Budget Director Art Pope was being a leader in maintaining the open, transparent, accountable government North Carolina needs

  • SaveEnergyMan Mar 21, 2014

    The SEI form is an important part of operating a transparent state gov't. I serve on a board and have to fill one out. It reminds me of the obligations of ethics in everything I do. Everyone in such a position should have to fill it out.
    I love how the politicians spin the notion of being reclassified to an exempt (from the personnel act) position into a "mark of leadership". It means two things:
    1. Your salary is not tied to regular state employee pay grades, which means they can pay you high salaries, and
    2. You can fired/laid off immediately with little recourse and without severance.

    Convenient when you want underlings to do your bidding and throw them away as scapegoats.

  • Duane Putnam Mar 21, 2014
    user avatar

    Good tool for the appointees to use! Just make the right "non-partisan" decisions to benefit the supporters, but kick it down the pile. Make it appear that the decisions came from one of those exempt decision makers and funnel the bounty from here. I wonder how much Duke dough has flowed this way through the greedy little fingers over at DENR recently. A green stain to the coal ash on McCrorys' hands?