He introduced an executive overhaul of the federal loan system at the University of Michigan in January. Its $10 billion price tag for work study positions and supplemental grants accompanies two important power shifts.

The proposal lets Washington fix interest rates and offers more control over the loan process. Further, it adds federal oversight to state universities with restrictions on campus-based aid.

I criticized this model in January because it creates state spending on compliance and doesn’t encourage budget reform on campus. The controls reward states with their own money and are even a tough sell to universities.

The plan lowers forgiveness terms from 25 years to 20 years and reduces minimum payments from 15% of discretionary income to 10%. It eases repayment obligations and removes private industry, effectively making a tuition loan an entitlement.

Spending your student to college

More students will borrow when repayment is optional, though interest rate savings are insignificant at $10 a month. Students have incentive to attend a college or graduate program they can’t afford over one less preferred. Monthly payment caps and interest rates become the political equivalent of Medicaid or Social Security.

For example, the less a graduate earns the greater the loan forgiveness. Universities will raise tuition when enrollment numbers increase backed by taxpayer loans.

A group of chancellors, including UNC’s Holden Thorp, blame state legislatures for tuition hikes and expect loans to carry higher interest rates when Washington lends directly.

CNBC produced Price of Admission: America’s College Debt Crisis examining $1 trillion in student loan debt. It argued the bubble could burst if students can’t find jobs to make loan payments, noting underemployment for 50% of graduates in the last two years. For-profit universities drove a significant increase in spending and defaults.

College administrators control campus spending and tuition rates. The UNC Board of Governors appropriates state funding to universities from a sum budgeted by the General Assembly.

This system relies on responsible spending by university officials. I am studying the deliberations of faculty committees on budget cuts and tuition to gain a better understanding of priorities for the short session. That process will create a dialogue about costs among educators, lawmakers and families.

Thanks for reading.

By contrast, the Associated Press wired details of North Carolina’s exploding Medicaid deficit to Bloomberg Businessweek in early April. National coverage didn’t include a $320 million overdraw by our Medicaid Management Information System (MMIS) and a two year delay in its implementation.

Medicaid IT soars past budget and deadline
The joint government operations committee heard details in March of the failures in MMIS development. Ninety-percent of its costs are paid by the federal government.

The state auditor’s office reviewed MMIS in January and found the $320 million gap resulted from volatile regulation and compounding costs of the delay. Changes to state or federal eligibility are common and require expensive coding for implementation.

Federal support for the IT infrastructure doesn’t mitigate overspending because all 50 states must comply with the reform. Americans pay for and use the programs nationwide, while political reluctance to address overspending on benefits adds to the deficit and interest payments.

Expensive duplications arose from the delay and burdened the shortfall: both the existing Legacy system and the developing MMIS platform must comply with policy changes.

The state auditor is reviewing more IT projects in response to the abysmal results of the MMIS audit. The Department of Health and Human Services “did not fully document how it determined the amount of damages,” and did not timely identify $30 million in unauthorized changes according to the March 6 presentation. Contracts for MMIS “did not define how responsibility for delays would be determined” or “how damages would be calculated.”

North Carolina overspent more on one entitlement program this year than the $500 million IRS appropriation making headlines in the national debate.

The individual mandate adds millions of participants to Obamacare’s oversight in 2014. Tax credit and penalty provisions that structure the law are common targets for fraud. There’s little doubt the IRS will require billions more in diverted funds to enforce Obamacare.

Medicaid shortfall burdens other services
The fiscal year 2011-2012 Medicaid shortfall was $256 million – the $150 million figure reported in the AP story assumes unpaid receipts and tobacco settlement funds recoup $107 million for the program.

During the short session lawmakers must divert funds from other programs to fill this shortfall. Such actions allow entitlements to consume important services, as the $70 million interest payment on our unempoyment debt threatens state parks and cultural resources. In states like California and Illinois where Democrats hold majorities, the impending response is to increase taxes.

The Supreme Court can stop the bleeding in health care budgets if it overturns Obamcare. The shifting policies, community guarantees and IT development that drive overspending will be eliminated if the entire law is thrown out with the individual mandate. States will no longer develop costly exchanges and the IRS won’t need diverted funds to implement new tax credits and subsidies.

Lawmakers facing budget shortfalls could use that money to serve the struggling famlies who earned it. We lowered costs in North Carolina with malpractice reforms not contained in Obamacare or the federal agenda. Thanks for reading.

The mandate affects primarily young and healthy Americans and is crucial to the law’s financial structure. Increased revenues from that low-risk pool subsidize new benefits for higher-risk pools required of insurance companies. Those changes were referred to in the proceedings as ‘guaranteed-issue’ and ‘community rating’ policies.

The recent costs of Medicare reforms, Medicaid IT and state exchange structures in North Carolina preview disastrous outcomes for the Patient Protection and Affordable Care Act. I’ll detail those failures in a two part series, starting with the state exchange and Medicare.

The costs of turning a free market into a government exchange – before economic impact.

​Obamacare is implemented through state exchanges, but a KPMG study warned in March the emerging costs of those bureaucracies are soaring in every state. By 2015, the law will transform states into unfunded collection agencies for federal policy.

​In November 2011 the N.C. General Assembly’s Government Operations committee heard reports on development of its health insurance exchange. The Department of Insurance oversees the interim program under a $12 million grant from the federal government, but the exchange must be state funded by 2015. Annual costs of operation thereafter are estimated at $23 million in new spending for North Carolina.

From a joint meeting of the Health and Human Services and IT Oversight committees on Dec. 13 2011, this presentation by fiscal research staff detailed the complex mission and structure of the state exchange.

Current and future costs of the exchange are an unnescesary drain on state funds, resources and personnel. Rather than provide a public service shaped by policy tradeoffs, the exchange shifts a free market into protective custody of the government for ideological purposes.

Medicare reimbursement reforms and a new ‘competitive bidding’ program forecast failure for Obamacare.

​CNN Money predicted disaster for government spending on the program a year ago in an article titled ‘The ugly math of Medicare.’ That study joined CNN’s continuing series on America’s debt and the global financial meltdown, realities that preclude preposterous investments like Obamacare.

If you’ve lost perspective on our nation’s $15 trillion national debt, remember that each trillion is a million millions. North Carolina has a $2.5 billion deficit, forcing $70 million interest payments out of our budget annually.

The percentage of reimbursements paid by Medicare to providers is plummetting, proof that government can control the cost of insurance with your tax money but not the cost of health care.

“To wit, in 1975, the program’s income from revenue and premiums covered 69% of total Medicare disbursements. In 2010, they covered 40%. By 2040, they’ll only cover 30%.” -CNN 4/8/11

The effects of that trend are compounded as hospital costs accelerate. High-tech medical equipment, technology and personnel hired for implementation are growing expenses. Life-saving methods for the ill and premature newborns, life-support for the elderly, new disease treatments, increased prescription drug use and extensive testing also contribute to higher costs.

Medicare’s new ‘competitive bidding’ program is a regulation that limits individual choice, hurting the quality of care and access for seniors. The program is a misnomer because a free market is the most competitive approach to health services. Here are some detrimental policies of the reform detailed in the federal document:

– Medicare now approves suppliers through a ‘quality and financial’ standards process and every device must be ordered through a ‘contract supplier.’ The only exception is seniors can ‘sometimes get a walker from doctors, certain other treating health care practitioners, or hospitals even if they aren’t contract suppliers.’

–Diabetics who purchase supplies locally are encouraged to switch to approved mail order suppliers. Harm to local businesses is implicit in the program’s encouragement that ‘If you go to your local store to get your diabetic testing supplies, you will probably be paying more for the cost…’ than through a contract supplier.

– When participants require a specific brand of equipment, their doctor must prescribe the brand and document that exception. This visit to the doctor is required for every supply order, an enormous inconvenience to seniors who can treat themselves without such oversight. If contract suppliers cannot accommodate a request, they are only required to provide an alternative brand that is ‘safe and effective.’

These reforms stifle innovation and competition, shifting customers to government approved suppliers. The economies of scale for preferred providers accommodate price mandates, but hundreds of businesses already subject to government regulation are now excluded. New regulation and price controls won’t solve Medicare’s insolvency or low reimbursement rates given the expansion of benefits through ‘guaranteed issue’ and ‘community rating’ policies in Obamacare.

In a follow-up post I’ll provide resources to analyze the $150 million Medicaid shortfall in North Carolina and the rising costs of Medcaid IT infrastructure. Thanks for reading.

Sen. Goolsby sat down with WECT on Thursday to talk about the soaring cost of government Pre-K. Its programs cost about $5,000 per student as compared to $5600 for annual UNCW tuition.

On Mar. 9 Chancellor Gary Miller responded to Sen. Goolsby’s plan to stop tuition hikes, and on Mar. 11 the Star News Online published an editorial titled ‘Republicans will have to face consequences of damage to UNC system.’

UNCW professor and national columnist Mike Adams included Sen. Goolsby in a recent public letter to the chancellor. He filed a pending open record requests to the Office of Diversity and Inclusion regarding their activites, but the administration did not receive the request and normally responds within one or two weeks. That circumstance is ongoing.

Students active in the diversity office defended its funding and recently questioned the administration’s decision to relocate the LGBTQIA center without their input.

On Mar. 12 Bob Smith, a writer for the John Locke Foundation’s Wilmington blog Squall Lines, joined Sen. Goolsby in opposition to tuition hikes this year.

On Mar. 19 WECT spoke to Rep. Frank Iler, a Republican on the House Education Committee, about a report that 151 employees at UNCW make $100,000 or more per year. Chancellor Gary Miller responded in a public statement and detailed responses to WECT questions.

The Wall Street Journal reported on Mar. 22 that student-debt tops $1 trillion nationwide. College loans join the national conversation on unpaid credit card and mortgage debt. Solvency doubts impact students directly when experts consider whether they will repay their loans. Amid a financial crisis, those loan packages are devalued along with the dollar. This creates further detriment to the economy, interest rates and the job market.

On Wednesday, Mar. 28 the Seahawk reported that the LGBTQIA resource center would remain in its previous location, the Upperman Center, due to student protests.

On April l5 national columnist Michael Barone mentioned UNCW in an article titled ‘Colleges skim on science, spend big on diversity.‘ He writes for Town Hall along with Prof. Mike Adams.

Thank you for visiting Sen. Goolsby’s Web site. Please contact him if you wish to take action on this topic or have related submissions.

On Thursday, Mar. 8 at 4 p.m. the New Hanover County Commissioners will plan the agenda for a full meeting on Monday, Mar. 12 at 3 p.m. Commissioners may elect to discuss this annexation and submit resolutions.

The application seeks annexation of four acres at 4900 S. College Rd in the Monkey Junction area. The development was labeled Lockwood Village Apartments by Spaulding and Norris, an engineering firm in Raleigh that submitted the request.

In January the city council unanimously approved a similar request from Flourney Development, a group seeking to build near Porter’s Neck. That decision strained relations with New Hanover County commissioners and prompted a lawsuit.

Last year city council members and Mayor Bill Saffo vowed to package incentives for voluntary annexation and denser development during a legal challenge to the new annexation statute.

Opinion points

City officials and developers hope to obtain a federal block grant or local assistance to support this project. There is an opportunity cost to those tax dollars, meaning they could be used by the city in other ways.

Mayor Saffo defied county zoning laws calling them ‘a little nebulous’ and ‘open to interpretation.’ When he says it ‘speaks volumes’ that ‘people want to come voluntarily into the city,’ he omits the incentives of taxpayer supplements and denser development rejected by the county.

These actions reach beyond the stated goals of forced annexation, which were sustainable growth and fair taxation for non-residents who use city services.

Denser development puts an undue burden on roads, utilities, New Hanover County Schools, New Hanover County Regional Medical Center and other programs without proper authority.

I agree with Commissioners’ Chairman Ted Davis that voluntary annexation could be appropriate if the zoning was approved by county authorities and necessary to deliver city services.

Citizens deserve priority consideration in these decisions and a cost-benefit analysis of the outcomes. Collusion between developers and local government officials for insider gain does not fit that model.

That’s where I draw the line on voluntary annexation. Thanks for reading.

Presentations submitted to the Property Insurance Rate Making committee in the 2011-2012 General Assembly are public resources that offer helpful updates on this issue.

​The 2009 reforms were painful for coastal property owners yet didn’t generate enough incentive to move the private markets. Families saw their premiums and deductibles double, if not triple, while State Farm and other insurers dropped private policies by the thousands.

Moving forward
​A new leader of the plan proposed tax-free bonds to replace traditional reinsurance and maintain cash reserves. Bonds could offer the plan a lower net premium by unloading the profit and expense costs of a reinsurer for direct investment from private funds and banks.

Experts doubt these measures would make an immediate difference for policy holders, but such directives require foresight amid uncertainty. The approach is an alternative to a multi-state residual pool on the east coast. A bond groups more investors with potential upsides, but the financial package must be attractive enough to buy.

Here are some questions to ask about the consideration:

What are the coupon payments (premiums) associated with these bonds? Are they consistent with the cost of reinsurance premiums or other state government bonds?

Investors need incentive to buy this bond instead of other government bonds with less risk. A major hurricane is much more likely than the state’s financial default.

​Is the retention of the plan’s surplus funds, mandated in the 2009 reforms, affected between bonds and reinsurance choices?

That provision was a win for the plan’s long term security and participants soaked by the 2009 reforms.

​Can the public plan shed participants in this model?

Reforms should contribute to making the program transitory – it is a plan of temporary or last resort. Since this consideration is only for paying claims in catastrophic events, it may not have much effect.

Do ​the plan’s operations drain funds from private insurers in the same market?

High participation in the Beach Plan created this effect and discouraged private coverage.

Experts recommend we expand the private market to realize low costs and quality coverage in both sectors. Why is that easier said than done?

​Small insurance agencies fear a single hurricane could wipe them out if they offer significant storm coverage in these areas. They are required to participate in the Coastal Property Insurance Pool, so if it grows too large they are further hesitant to voluntarily offer wind and hail policies on the coast.

Larger companies, ten of which provide 83% of homeowners insurance statewide, worry writing those policies threatens financial assessments. Positive ratings of total write-downs and reserves are critical to insurers, so they protect those indicators and their bottom line from risky activity.

Policy providers simply seek larger pools with less financial risk than this market.

Statewide equity in the coastal insurance market makes property readily available for all demographics and income ranges. It provides stability to the real estate market with coverage for property owners in transition.

That guaranatee, though temporary on an individual basis, is critical for homeowners and real estate developers in New Hanover County. Insurance companies in this market need ‘instant recognition’ to benefit from tax incentives, and for similar considerations property owners need wind and hail insurance at the point of purchase.

The Coastal Property Insurance Pool needs flexibility to meet its unique obligations. As this market evolves, the public pool should slow its growth from the last decade and address its specific purpose directly.

In worst case storm scenarios and annual risk assessments, bonds may offer more attractive choices than reinsurance. I look forward to your input.

Thanks for reading.

The spending is not from the university’s general revenue fund, rather it is provided directly through anonymous private donations. The generous alumni and friends of UNCW also carried ‘The Campaign for UNCW: Soaring to Greatness’ well past its revenue targets last year.

Maintaining the status quo for ceremonial costs should raise eyebrows given sacrifices statewide. There are limits to private donations and administrators set the expense targets for the event.

Putting $20,000 of the installation fund towards preventing tuition hikes would save 33 in-state UNCW students from the $600 increase next year. If that seems like a drop in the bucket, consider that two science departments were consolidated last year to save less money than the event costs.

UNCW Professor Moorad Alexanian revealed in a 2011 letter that academic realignment decisions are closed to input from faculty. He said he was shut out of an initiative to merge his academic department with another and save $80,000. Naming specific alternatives for cuts and publicly criticizing his bosses was bold action.

He further expressed the opinion that nonacademic programs should receive cuts first in a transparent process. It’s notable that tuition hikes were the only official proposals presented by administrators as austerity measures.

Consequently, no one knows what the university would cut without new revenue from students. I propose officials publicly consider guidance and advising cuts, higher course loads for professors, cuts to funding for student groups and elimination of administrative personnel as additional alternatives.

No single program or sector need be hurt disproportionately from proper management decisions that businesses and families make everyday. With shared sacrifice and openness, students could at least see which services they’d lose to keep an extra $600 in their pocket next year.

That’s likely a forum they would attend without protesting.

Thanks for reading.

I supported tax incentives for these productions because they attract an entire industry to our state and draw the high-profile exposure of TV and movie productions. These numbers validate forecasts that our region’s resources and setting are attractive to private investment if economic conditions are favorable.

From the commission’s director, Johnny Griffin:
“We are thrilled with the results,” said Griffin. “In previous years there were projects that wanted to film here, but they couldn’t justify it. We just weren’t competitive. Now, thanks to the hard work done by our State legislators and Governor, productions see our performance-based incentives as strong and stable.”

Every business considers economic and social policies where they develop, and I agree with Griffin that strong and stable incentives benefit investors most. School-choice options, an increased business revenue tax empemption and the elimination of a land transfer tax are other stable Republican initiatives that make North Carolina more attractive.

A potential sales tax increase, our top-ten gas tax rate and the dozens of local initiatives to raise taxes do just the opposite. Long-term viability of a customer base and pro-business policies that cut taxes and layered regulations are more sustainable incentives than ad-hoc negotiations and handouts.

Further, this approach prevents political posturing towards credit for the work of investors, businesses and legal counsels in the private sector. Celebrations of successful deals are certainly warranted, but business owners take the financial risks that create jobs and deserve the praise. If government does deserve some credit, it’s likely for favorable business policies and not successful negotiations.

As the impressive success of our local film commission demonstrates, lawmakers and the governor should get to work making North Carolina a great place to work.

Thanks for reading.

Before you assume every higher education dollar is critical to students, consider this. The UNCW Office of Institutional Diversity and Inclusion receives over $630,000 in annual funding and has 12 full-time staff members. Even if those coordinators, directors and the provost averaged just $30,000/yr in salary, their positions comprise well over half the funding for this non-instructional service. Needless to say, the department’s leaders make much more.

A 50% cut to that diversity office budget would offset the impending $600 tuition increase on about 500 in-state students. A series of moderate reforms could do much more, and administrators’ decision to forego those choices and raise tuition cannot be ignored.

As a legislator I experience the pressure to spend from bureaucrats who work hard, believe in their cause and know their department could do more with better funding. However, it is my responsibility to mitigate their concerns with those of the taxpayers, and university officials must balance the plight of students with demands from professors, provosts, deans, chancellors, directors and coordinators.

College students are a less influential crowd than the UNC Board of Governors, a panel that approved a staggering 40% in-state tuition hike over 5 years. That proposal was later softened by chancellors, but most joined the chorus that our quality of higher education will diminish.

If the officials who manage these institutions are more sympathetic to the system’s dollar than the students, I think the quality is already in question.

Three sectors of statewide public policy could undergo major insurance reforms this year. In a four part series I’ll address challenges facing auto insurance, the Beach Plan and health care coverage in North Carolina.

Today I’ll explain how a hidden fee on auto insurance premiums and price mandates by state government are raising costs for most drivers.

Strict auto insurance regulations unique to N.C.

Competing bills in the General Assembly address North Carolina’s unique overregulation of automobile insurance. We are the only state to wield price setting authority over the cost of premiums. That control places a fee on 85% of policy holders to subsidize artificial rates for ‘clean risk’ drivers, usually teenagers and city dwellers.

​State Senator Bob Rucho (R-Mecklenburg) is one member advancing reform via S.B. 490. He says the fee, which cost drivers $900 million over the last five years, lacks transparency because it isn’t noted on financial statements. The revenue gain pays claims when clean risk drivers cause property damage or personal injury, covering for their low premiums.

That means insurance companies can’t raise appropriate revenue from higher risk drivers, rather they receive tax-and-spend assistance to cover their claims. Sen. Rucho argues eliminating the regulation won’t just cut that fee for drivers, it allows providers to earn market-driven revenue margins and offer lower premiums overall.

​Taxing insurance premiums statewide to benefit a small set of drivers fits the mold of socialist redistribution. Charging at-risk policy holders more isn’t discriminatory, it’s the business practice of actuaries and insurance companies nationwide.

​Department of Insurance Commissioner Wayne Goodwin, a former Democratic state representative, says providers could already offer lower rates if that was their intention. In his opinion, reform threatens our distinction as the cheapest state in the southeast to purchase auto insurance. We have the 8th lowest average premiums nationwide.

​There are two flaws in Commissioner Goodwin’s defense of his formidable authority. If providers are forced to price premiums below market assumptions and the government’s fee is reserved for paying claims, insurance companies can’t raise the revenue necessary to lower rates.

​Further, his argument that our average premiums are low compared to other states isn’t convincing when regulators set the price ceiling. These are common spins from interventionist governments.

Our average costs are relatively low because high-risk drivers pay more in other states instead of receiving price protection from government fees. Most individuals in North Carolina will pay less when the fee is eliminated and insurance companies can offer lower premiums backed by free market revenues.

Bottom line

-​Most drivers would see lower costs with elimination of the government fee and return to a free market insurance exchange.

-There is heavy competition among auto insurance providers. They can’t raise rates unreasonbly without consequences from customers, so that’s an empty threat from bureaucrats clinging to control.

-Our distinction as the only state government using this practice warrants its reconsideration.

Thanks for reading.