Bringing Home the Bacon

In 2022, Catawba County Schools started using a software program for middle school students in summer school. The students, like others across the country, showed learning loss from the pandemic, and the district was keen on getting them back to grade level. 

More than 200 students booted up Failure Free Reading, which is produced by a company started by a Concord-area educator-turned-businessman. But the district soon identified problems with the software and stopped using it. While the company has received $4.5 million from the state legislature since 2021, few North Carolina schools currently use it, if any.

The taxpayer money funneled to Failure Free Reading is not unusual. Over the past four years, the legislature’s use of secretive, no-bid grants—sometimes called pork barrel spending or earmarks—has exploded. 

Lawmakers have directed billions to private organizations, many of which were recently created, have little track record, and used the state money to pay for property, construction, and equipment, rather than to provide services that would benefit taxpayers, an analysis by The Assembly found.

Thirty years ago, giving state money to local groups without debate was relatively modest. A two-year state budget in the early 1990s included $64.7 million for 37 groups, according to a 1996 analysis from the legislature’s Fiscal Research Division. 

In the 2017-19 budget, earmarks totaled $76 million to roughly 200 private organizations. 

By 2023-25, they rose to $1.4 billion doled out to more than 600 groups—with nonprofits typically receiving at least $300,000 each. 

The Office of State Budget and Management, which tallies earmarks to include grants to non-state governmental organizations, says that’s an undercount. It says the state awarded $5.46 billion to over 1,100 groups in 2023-25 when including grants to counties, municipalities, school districts, and airports. By any measure, the growth in earmarks has far outpaced the growth of the state budget.

In the case of Failure Free Reading, no lawmaker has taken credit for the $4.5 million awarded to the parent company, JFL Enterprises. 

The company’s founder says the software is based on learning principles like predictability and structure. But school districts have raised concerns. Newton-Conover City Schools stopped using it “due to concerns about student data security, the program’s effectiveness and feeling that it took the teacher out of the classroom,” Tammy Brown, the chief academic officer for the district, said in an email.

The state auditor, an elected position, has the authority to review all state spending and issue reports on whether the money was spent appropriately. The office hasn’t audited JFL Enterprises, and it doesn’t comment on any ongoing or future audits. Despite unprecedented levels of taxpayer dollars going to private organizations in recent years, the state has audited few, if any, of the groups. 

That could change. Top candidates for state auditor—incumbent Jessica Holmes, a Democrat, and Republican Dave Boliek—have expressed interest in scrutinizing earmarks.  

Some of the increase in earmarks is likely temporary. Federal pandemic relief funds and Medicaid expansion dollars led to a large state surplus, enabling legislators to push money out the door to one-time causes. 

Still, the local appropriations, which are often used to reward legislators who support the budget, have been criticized for years. When Democrats ran the legislature, Republicans bashed the practice. Now Democrats say Republicans, who control both houses of the General Assembly, are doing the same on a larger scale. 

John Hood, founder and former president of the conservative John Locke Foundation, said that while the legislature is a policy-making body that can fund certain programs, it should not be in the business of naming who gets funded.

“If you could reduce the extent to which the legislature specified certain private recipients of funds, that would be a tremendous benefit to the public,” Hood said. With billions already out the door, Hood said the state auditor should evaluate whether the money has been cost-effective and aligns with the legislature’s intent.

Hood’s view is similar to that of the left-leaning North Carolina Budget and Tax Center.

“What we have seen is this proliferation of deal making and use of public money for very narrow interests that don’t serve the broader public’s priorities or needs,” said Alexandra Sirota, the center’s director.

Pork on the Menu

In 1987, Mercer Doty, the inaugural director of the state legislature’s Fiscal Research Division, criticized earmarks, which amounted to $7.9 million that year.

“It needs to be said that some of us feel pork barrel spending is completely unethical as long as North Carolina has so many real unmet human needs,” Doty told North Carolina Insight magazine.

Doty had a track record of going to battle for his cause. The West Point-educated, retired Army lieutenant colonel with a master’s degree in public administration served in Korea and Vietnam, where he was part of a force that fought a two-day battle on the Rach Ba Rai River. 

Upon his return to the U.S., Doty directed North Carolina state government’s reorganization from more than 200 fragmented agencies to fewer than 20, correcting a “duplication of efforts and inefficient allocation of the state’s scarce resources,” a 1970 report says.

When Doty spoke about earmarks in 1987, the pork barrel spending accounted for just 0.2 percent of the roughly $3.5 billion state budget. The Greensboro News & Record found that over four years (1983-86), those earmarks ranged from a low of $1.64 per capita in Alexander County up to $77 per resident in Jones County in current dollars. 

The amount appropriated in the past four years would cause Doty to roll over in his grave, said Cate Doty, his granddaughter. Former Fiscal Research Division analyst Richard Bostic agreed. 

In 1996, Bostic wrote a report showing that private organizations received $64.7 million in state funds in the 1991-93 budget. The report noted that State Auditor Edward Renfrow, who left office in January 1993, said that private organizations are the most likely to waste the state’s money.

“Nothing there compares to the dollar amounts they were giving out in recent years,” Bostic said.

Since 2021, the amount of money earmarked for private organizations totaled roughly $2.3 billion, 4 percent of the state’s budget, data from the Fiscal Research Division shows. The most recent budget includes more than $17.5 million for crisis pregnancy centers, $31 million for volunteer fire departments, and roughly $49 million for YMCAs.

Sirota, of the North Carolina Budget and Tax Center, says the process of awarding earmarks is deeply flawed. No committee reviews the requests, and often it’s not even clear which lawmaker is requesting the money. The earmarks are placed in the budget by legislative leaders. 

“It’s not a competitive process. It’s unclear what the need is. It’s unclear if this is motivated by political considerations such as in exchange for support,” Sirota said. “It is unclear how we can measure the impact of these dollars because there is no process for reporting out.”

Hood, formerly of the John Locke Foundation, said the lack of transparency in how grants were awarded “creates the appearance of impropriety or the appearance of malfeasance and that does damage on its own.”

Some earmarks are given to nonprofits that long have received state money, like Brevard’s Muddy Sneakers, whose state funding dates to 2016, when founder and then Republican Rep. Chuck McGrady helped it secure $500,000 to provide outdoor education to fifth graders. 

David Rahahę́·tih Webb, Muddy Sneakers’ executive director, said it’s “essential to recognize that many vital services across North Carolina are provided by nonprofit partners–services that would otherwise be inaccessible to many communities.” Webb said Muddy Sneakers also had invested $7 million in public schools through its fundraising efforts.

Sometimes money has been earmarked to flow to specific private organizations. In July, the News & Observer reported that a $35 million contract for affordable housing in Dare County was largely stripped of local control and went to an inexperienced private company founded by former legislative aide Jordan Hennessy. 

In 2021, NC Health News reported on $10 million granted to a Lumberton church to set up an 82-bed drug addiction rehabilitation facility, despite having no experience with substance-abuse treatment. The church’s funding was tied to Sen. Danny Britt Jr. (R-Lumberton), who, along with several of his family members, were Facebook friends with the pastor, the outlet reported. 

In August, The Assembly reported on $55 million awarded to the U.S. Performance Center, a company that trains athletes, and its affiliated nonprofit in hopes of luring U.S. Olympic governing bodies to North Carolina. The company previously failed to meet the city of Kannapolis’ economic development milestones and skirted similar requirements it would have had to meet to get funding from the state’s Commerce Department.  

“Something like the U.S. Performance Center at best is a speculation,” Hood said. “It involves a lot more risk than tending to the capital needs of proven economic development strategies like fixing sewer systems.” He added that the state has plenty of “capital needs in the university system, the community college system, the DMV, other agencies.”

It’s a sentiment echoed by Democratic House leader Robert Reives. “I just don’t think that’s the way that you spend money,” Reives said about earmarks. “Because we’ve got so many needs in a state that’s growing exponentially.”

Republican Rep. Donny Lambeth, a senior chair of the House Appropriations committee, told the News & Observer that the budget process needs a “wholesale overhaul,” suggesting that there should be separate staff for the House and Senate to vet proposals.

Jason Saine, a Republican and former top House budget writer who resigned in July, declined to comment on whether the process needs to be improved. “That’s a better question for someone who is serving in office,” he said. 

Saine added that choosing what to fund is a decision made by both chambers, though an individual legislator’s passion can influence what is funded. “There are a lot of worthy causes; some get better favor than others,” he said. “I don’t deny that; that’s human nature.”

Trimming the Fat

The two leading candidates for state auditor say they would audit private organizations, though their promises vary. A third candidate, Bob Drach, a Libertarian who is aligned with Andrew Yang’s Forward party, said earmarks were a matter for the legislature to decide.

Holmes, who was appointed auditor by Gov. Roy Cooper last December, said in a written statement: “Pork barrel spending and special projects that do not support the core functions of government are concerning and raising alarms on both sides of the aisle.”

She noted that the state legislature had increased the amount of money given to private organizations behind closed doors and without debate. Holmes added that these grants may lack clearly defined success metrics and a tangible return on investment, breeding “a perfect storm of increased risks of fraud, waste, and abuse of taxpayer dollars.”

Holmes said she is considering creating a searchable, online database of grant recipients, as existed under former State Auditor Ralph Campbell. 

She supports more transparency in the budget process, such as requiring legislators to attach their names to earmark requests. She recommends competitive bidding for all government contracts and wants grants to include a process to evaluate conflicts of interest.

Boliek, the Republican candidate, said his first priority is to audit the Department of Motor Vehicles but added that he’s “made auditing nongovernmental organizations a priority of the campaign from day one.”   

“We’re gonna take a look at all those programs through the lens of what is the return on taxpayer dollars,” he said about money flowing to private organizations, as well as state agencies.

Republicans control the legislature and are likely to do so again after this year’s elections. Boliek said he would “fight waste, fraud, and abuse, regardless of where it comes from, and it’s going to be taken on without respect to party label.”

The candidates’ backgrounds appear similar on a resume. Neither is a certified public accountant. Both are attorneys, North Carolina natives, and University of North Carolina at Chapel Hill grads. 

Holmes served on the state Industrial Commission and was chair of the Wake County Board of Commissioners. Boliek was chair of the Board of Trustees at UNC-Chapel Hill and chair of the university’s Endowment & Foundation. Up until last year, when Boliek switched his affiliation, both were lifelong registered Democrats.

Holmes, 40, grew up in Maple Hill, a rural community in Pender County, the oldest of five kids. Her mother worked in meatpacking plants. Holmes leans into her personal history—receiving food stamps as a child, living in affordable housing, and growing up in a flood-ravaged region—when she promises to put the state auditor’s spotlight on “services and programs impacting our most vulnerable residents.” She embraces her role as the first Black woman on North Carolina’s Council of State.

Boliek, 56, grew up across North Carolina, the oldest child of two journalists. His family followed his father—Dave Boliek Sr.—from Lincolnton to Eden to Greensboro to Raleigh, and from radio to TV. His mother, a news correspondent, was the first to break news of a county GOP chair not supporting Richard Nixon during the Watergate scandal. The younger Boliek practiced law in Fayetteville for 27 years, is a critic of Diversity, Equity and Inclusion policies, and points to his role in creating the School of Civic Life and Leadership at UNC-Chapel Hill. 

Boliek has also said he would audit the State Board of Elections and look for nonprofits spending state funds on undocumented immigrants, highlighting two issues important to Republican voters. 

Speaking on The Hometown Holler, a new podcast about Democratic politics in North Carolina, Holmes cautioned against using audits in the way Boliek has promised. “In the wrong hands, the office can be weaponized,” Holmes said. 

Boliek, for his part, called Holmes “the disappearing auditor” in a Carolina Journal interview, criticizing her for conducting fewer audits during her tenure than her predecessor. He’s been endorsed by former State Auditor Beth Wood, a Democrat who resigned after pleading guilty to misusing state resources.

He wants recipients of state taxpayer dollars to know that they could be audited not just for things like financial compliance, but for their performance. 

“I’m putting everybody on notice,” he said. 

This story has been updated to correct Jordan Hennessy’s former occupation.