NCACC Board of Directors hears from new DHHS, DOR chiefs

• Interview with DHHS Secretary Lanier Cansler

By Jason King
Assistant Communications Director

The same day that Governor Beverly Perdue announced that the state's current fiscal year budget deficit had reached roughly $3.2 billion, two of her Cabinet appointments addressed the NCACC Board of Directors on April 28. Department of Health and Human Services Secretary Lanier Cansler and Department of Revenue Secretary Kenneth R. Lay each addressed budget woes and how their respective departments are adjusting, and touched on issues such as mental health and ideas to restructure the state's system of taxation.

Cansler said much of his focus since his Jan. 6 appointment by Governor Perdue to head DHHS has been on restructuring management and rebuilding trust in the department.

"We need to make sure people believe DHHS will do what it says it will do," he said.

Addressing mental health, Cansler said the state's focus is building crisis bed capacity at the local level. He said the state has purchased 110 beds in local hospitals and hopes to get that number up to 180.

"What we're trying to do is build another state psychiatric hospital 10-12 beds at a time," he said. He reiterated that state beds should be used for treatment of chronic cases of mental illness, and that patients should only be admitted to a state institution if they require treatment longer than seven days.

Lay, a veteran of the banking industry, was named Jan. 7 to head the state's tax collection agency. As the state's budget shortfall has grown larger, Lay said the Department of Revenue has been working to grab "the low-hanging fruit" to quickly add cash to the state's coffers.

Lay said DOR sees about $3.5 million in overstated tax returns filed with Individual Taxpayer Identification Numbers (ITIN) instead of Social Security Numbers. These are mostly filed by foreign workers who claim a large number of dependents.

"Their definition of dependents differs from ours," Lay explained. "They consider it to be anyone they send a check to back home."

Lay said DOR has found 6,609 instances of people who purchased ATVs in another state and failed to register them in North Carolina. The state brought in another $1.3 million by bringing those taxpayers into compliance with the law.

"We're getting pretty aggressive in trying to find people who are not doing what they are supposed to do," he said.

Long-term, Lay said getting a new Information Technology system in place will allow the state to collect another $60 million, in part through a more timely capture of withholdings problems.

"Our IT system is about 15 years old," he said. "I measure IT systems in dog years. So it's really about 105."

The real solution to fixing the state's income problems, Lay said, involves a rewrite of the tax policy to allow taxation of a larger number of services, similar to what is called for in a recent proposal by Senate Finance leadership.

Current tax policies, written in the 1930s, were "based on a very different economy than what we have today," he said. "So it seems we need to redo it.

"The economy is broken. It really is. The State of North Carolina is in a ditch. Our tax policy really doesn't address the way our economy is built today."

By broadening the tax base to include services, the overall rate can be lowered, he said.