Grassroots Graft

When it comes to corruption, state governments are second to none.

John Hood from the August/September 1998 issue

(Page 2 of 2)

There seemed to be a climate of "pay to play" at the DMV, with workers not so subtly promised that the governor would be apprised of their financial support or lack thereof. On a single day in February 1995, Toomer and some 80 of his Department of Transportation colleagues made contributions to Gov. Jim Hunt's 1996 campaign kitty. More than one-third of the employee donors received pay raises or promotions within a couple of months. According to a report by the watchdog group Democracy South, the contributions were often collected and "bundled" by politically appointed DOT supervisors, who used the cash to strengthen their connections to the governor's office.

By the time we published Toomer's allegations in the August 1997 Carolina Journal, the rest of the news media had begun their own scandal investigations. In September, The (Wilmington) Star-News reported evidence that the governor, his secretary of transportation, Garland Garrett, and his campaign finance director, Jim Bennett, had promised a seat on the North Carolina Board of Transportation, a powerful appointed panel, to a campaign contributor for $25,000. The allegation came to light because the donor, James Allen Cartrette, didn't get the appointment and started complaining about it.

Is selling a government post and then reneging on the deal, among other things, a case of mail and telephone fraud? Columbus County District Attorney Rex Gore looked into the matter and decided not to indict anyone, but he made it clear that he believed the charge. "I personally believe that Mr. Cartrette fully expected to get a DOT position," he said. "I personally believe that Mr. Garrett and Mr. Bennett did little to lead him to believe otherwise. I might get a conviction at the corner store, but I could not in the courtroom."A federal investigation is ongoing.

Another spate of news stories, in The Charlotte Observer and The (Raleigh) News & Observer, reported that several Board of Transportation members--and even, in at least one case, the governor himself--had pushed for highway projects to benefit themselves or political patrons. In August 1997 the Locke Foundation joined with three left-of-center policy groups in a joint request for a state performance audit of DOT and prosecution of wrongdoers. The resulting audit called for significant changes in DOT structure and operations.

The problems in North Carolina's transportation department--from excessive politics to insider dealings and mismanagement--led to the resignation of the secretary of transportation, the state highway administrator, and two board members. In February 1998, the FBI, the U.S. Department of Transportation, and the Postmaster General's Office (which handles mail fraud) announced a wide-ranging investigation of North Carolina's DOT.

Last year, the governor announced reforms aimed at reducing the number of patronage employees in the department and tightening procedures for hiring and promotion. State lawmakers are debating DOT reforms that include downsizing the board, tightening ethics guidelines, reorganizing and privatizing transportation divisions, and handing over highway revenues and authority to local governments.

You might think this long ordeal has validated rather than tarnished the processes through which North Carolina fights corruption. After all, the news media, with a little prodding, did leap into the fray. The legal system, creaking and groaning all the way, did begin investigations and forced some crooks from office. Hunt was forced to cede some power and go through the toughest political scandal of his career. Yet the governor's approval numbers are through the roof. North Carolina voters have either tuned out the scandal stories or concluded that "everyone does it, so why pick on Hunt?"

State corruption is far harder to combat than corruption in high-profile Washington or in local government, where decisions receive more local media coverage and where citizens can attend meetings and corral officeholders. States are the middle, "missing" layer of government. Press contingents in state capitals have been shrinking for years. Many voters lack basic information about who governs their state and what they do.

It will take more than exposés and lawsuits to clean things up in state capitals. It will take basic changes in what state governments do and how they do it. Here are a few of the most important reforms:

Toughen civil service and contracting rules. I was a reluctant convert to this idea. I used to think that rigid rules for hiring state employees and awarding contracts were unnecessary impediments to running government more like a business. Now I recognize the truth: Government can't and shouldn't be run like a business. It doesn't face the discipline of the profit motive. It relies on attitudes and behaviors fundamentally different from those confronting entrepreneurs. The alternative to civil service protections for employees is not a merit system but selling jobs to campaign donors. Exempting state agencies from bidding procedures means buying office supplies from an agency head's cousin.

Cut back regulation. There are good economic and moral reasons for minimizing the encroachment of the state into private decisions. But one of the most persuasive arguments is that appointments to regulatory agencies and specific regulatory decisions are often bought by high-dollar donors. One glaring example is nursing home regulation, as the Kentucky case showed. In many states, operators who want to open new homes must obtain a "certificate of need" from state regulators. Coupled with state authority over nursing home reimbursements from Medicaid and other programs, this power makes the nursing home industry a reliable source of campaign cash. Other big campaign players in most states include the gaming industry, real estate developers, home builders, and health care lobbies such as optometrists and chiropractors--all of which worry about regulation.

Fight pork-barrel spending. While discretionary funds tapped by lawmakers for pet projects in their districts make up a relatively small percentage of most state budgets, they consume a tremendous amount of time and result in a disproportionate amount of corruption. Consider state funding of the arts. While the Locke Foundation has long opposed such spending on principle, over the short term we have settled for reforming the process by which the money is distributed. Grants to local arts groups now must go through an open process of application, priority setting, merit consideration, and approval, which will reduce the amount of logrolling and waste.

As long as human nature remains what it is, there will be potential for official corruption. Government will always be necessary to carry out essential functions such as law enforcement. For the foreseeable future, education and some kind of social safety net are likely to remain government responsibilities as well. Finding ways to carry out these functions without buying and selling influence is a critical challenge, one that advocates of limited government should make their own.

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