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Thursday, September 30, 2010

Bev Perdue Throws Ken Lay Under The Bus Over Millions In Tax Revenue!

NC Tax Secretary Chief Is Out, N.C. State Senator Is His Replacement

North Carolina Revenue Secretary Kenneth Lay is leaving his job after a series of problems involving refunds that have frustrated North Carolina taxpayers seeking any little bit extra in their wallets in the extended downturn.

Gov. Beverly Perdue's office announced she had accepted Kenneth Lay's resignation Wednesday and will replace him with outgoing state Sen. David Hoyle, D-Gaston, until recently the longtime co-chairman of the Senate Finance Committee.

The resignation's effective date is Oct. 22 for Lay, a former Bank of America executive who took the Cabinet position when Perdue was sworn in January 2009.

"I thank Ken Lay for his service to the state, and for the progress he has made in seeking a new strategic direction for the Department of Revenue," Perdue said in a statement.

When asked if Lay was forced out, Perdue spokeswoman Chrissy Pearson said only the governor and Lay agreed Wednesday that it was the right time to bring in new leadership. Asked for an explanation of his departure beyond a two-sentence resignation letter, Lay said in a prepared statement only that the strategic vision "has reached a point of inflection, which is a perfect time for new leadership."

Lay had been under fire in recent weeks after a new department policy made public was making it harder for North Carolina residents to get refunds when they overpaid their taxes by mistake, potentially leading to millions of dollars in withheld funds. Last year's change, following a 2007 law, led department officials to direct workers not to review returns flagged for a refund if they were more than three years old.

Perdue said last month she hadn't known earlier about the department policy change. Lay and the governor announced soon after a plan to eliminate a backlog of 230,000 returns since 1994 in the agency's computer system by year's end and pay refunds.

But Lay told The News & Observer of Raleigh recently the General Assembly would have to alter the law so that refunds for returns older than three years could be paid.

Hoyle, who decided not to run for a tenth term in November, said the price tag on the ill will with taxpayers with the policy change costs more than the refunds that had been otherwise withheld.

"We have an obligation to the citizens to administer everything fairly," Hoyle said in an interview. "People are suspicious of government anyway ... it's just not right."

The tax collections department also had been forced to delay tax refunds the past two years because of cash flow problems within state government. More than 300,000 refunds valued at $222 million hadn't been distributed this year, nearly a month and a half after the April 15 filing deadline.

Lay also took criticism after a WRAL-TV report found two department leaders had been reimbursed tens of thousands of dollars for mileage and lodging while commuting between their Charlotte area homes and their Raleigh offices.

Hoyle, 71, said he accepted Perdue's job offer Tuesday. He said he wanted to help Perdue, a former senator and president of the Senate as lieutenant governor.

Hoyle "has seen the Department of Revenue from the inside and out. He has spent years helping to write the state's tax laws, and I'm sure that experience will prove invaluable in his new role," Perdue said in her statement.

Hoyle was often a foil of the department as the Finance Committee leader, criticizing the agency for putting small business owners over a fiscal barrel because of poor advice it gave taxpayers or vague rules.

"I think a lot of people get caught in a trap," he said.

Hoyle said he would resign his Senate seat the day before he assumes his new job. Perdue said Hoyle's appointment was subject to a usual review by the state Ethics Commission. Hoyle said he doesn't believe his extensive business dealings will generate potential conflicts of interest.

Bev Perdue Right To Replace North Carolina State Revenue Secretary

Gov. Bev Perdue was right to replace N.C. Secretary of Revenue Kenneth Lay, a former Charlotte banker, after his department changed state policy and kept taxpayers' overpayments if they did not request a refund with a three-year statute of limitations.

That policy was unethical, undermined public trust in state government and, not to put too fine a point on it, was dumb.

Perdue's office said the governor never knew about it until a newspaper report in mid-August revealed the department was not informing taxpayers about the overpayments, making it harder to get refunds if taxpayers had not asked for them.

The Revenue Department has released e-mails that suggested it had consulted staffers in the governor's office about the change. In stories that ran Sunday in the News & Observer of Raleigh and the Charlotte Observer, Lay said he could not explain why the governor didn't know about the policy change and said he thought her office had checked off on it. Her staff said the matter was mentioned only in the briefest way, not in a formal policy discussion.

The department should have recognized the political storm that would blow up over keeping money that shouldn't have been paid to the government, and Perdue was rightly incensed when she learned of it. She ordered the department to eliminate a backlog of flagged returns by the end of this year and send the overpayments back to taxpayers. Officials have since determined the state owes $949,000 in overpayments to 3,300 taxpayers, but refunding them all will require a change in state law when the legislature convenes next year.

We don't know what Perdue thought when she saw Lay's remarks Sunday saying the governor's office had acquiesced in the change, but we imagine the words "new leadership" were among them. She announced Wednesday that she had accepted Lay's resignation and that outgoing state Sen. David Hoyle, D-Gaston, would replace him.

That Perdue would turn to a longtime ally is not surprising. Hoyle is an experienced politician and businessman unlikely to make a blunder such as hanging on to tax overpayments. And as co-chair of the Senate Finance Committee, he knows state tax policy. Whether he's the right person to run a large bureaucracy is another question, but Perdue's office surely will be careful to make sure he has a good staff - and that the governor's office knows what it's doing this time.

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Sources: McClatchy Newspapers, WRAL, Google Maps

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