House Oversight and Reform Committee members sought to get solid answers on the value of the North Carolina Reinsurance Facility—the state’s residual auto insurance market system for higher-risk drivers.

The Department of Insurance struggled to answer clearly whether the benefits of the facility outweigh its costs.

Although insurers do not make a profit on their ceded policies, Causey and DOI staff admitted that insurers are able to charge an administrative fee and make profits on other coverage connected to the ceded policy. When Causey said some companies sell all of their policies through the Facility, Committee Co-Chair Harry Warren asked how they could stay in business if they do not earn a profit from these policies.

North Carolinians paid $360 million in the fiscal year that ended in June to subsidize insurance companies selling policies through the Facility. The two surcharges for the current year are set at 13 percent of premiums, which is more than the combined nine percent premium increase over two years the Commissioner approved.

Rep. Allen Chesser questioned the second of those two charges, which is set to keep the Facility from losing money: “The fact that we have to charge a recoupment surcharge for a deficit, does that mean that the rate that we’re charging on those particular policies would be inadequate?”

Chief Actuary Rick Kohan replied, “There is a recoupment that people have to pay because they don’t collect enough money from people ceded.” Which he acknowledged could be simplified to “Yes.”

Additionally, Causey did not know how many members make up the Facility’s governing board. The commissioner, who makes the appointments, is also responsible for accountability.

In his closing statement, Co-Chair Warren said, “I think the discussion today has raised more questions than it answered.”

Another hearing may be necessary for the Reinsurance Facility and Department of Insurance to show if the Facility provides more benefits than costs for North Carolina.

Do North Carolina drivers pay more than they should for car insurance? Would a change in regulations lead to higher or lower rates?

These are among the questions the House Oversight and Reform Committee will seek to answer December 11, 2023, at 1 p.m. in the Legislative Building Auditorium.

The committee will hear testimony from Dr. Jonathan Murphy, assistant professor of economics at Nicholls State University in Thibodaux, Louisiana, and North Carolina Commissioner of Insurance Mike Causey.

The House Oversight and Reform Committee commissioned Murphy, a former Western Carolina University professor, to conduct a study of North Carolina’s auto insurance regulations and residual market.

The state’s residual market—the North Carolina Reinsurance Facility (NCRF)—is a group of insurers required to cover high-risk drivers. Currently a quarter of drivers fall into this category, higher than any other state.

Murphy will testify about North Carolina’s market and the benefits of moving the state to an assigned-risk system where drivers are assessed, and premiums are calculated based on risk. Using similar reforms in South Carolina as an example, he predicts that if North Carolina implemented the move, premiums would fall for drivers at all risk levels over time.

Causey will address his disagreements with Murphy’s report, the specifics of North Carolina’s insurance market, differences in insurance premiums across states, and other regulatory needs of the Department of Insurance.

“Auto insurance is an expense for anyone who drives,” said co-chair Rep. Harry Warren. “If North Carolinians are paying more than they should because of the system we have, it is our responsibility to understand why and to examine alternatives.”

“Price distortions distort behavior,” said co-chair Rep. Jake Johnson. “If a voluntary auto insurance market would create competitive premiums and promote safe driving, we owe it to our citizens to investigate such financial implications.”

Division of Employment Security (DES) Assistant Secretary Antwon Keith touted his agency’s efforts in correcting improper unemployment insurance payments and the timeliness of first-time payments in his testimony before the House Oversight and Reform Committee Wednesday. In response, State Auditor Beth Wood questioned that the recommendations from two audits by her office were being implemented.

Keith and Wood appeared before the committee to address those long-time problems and how the agency has worked to fix them.

“The thousands of North Carolinians laid off during the pandemic shutdown overwhelmed the system and brought new urgency to fixing those chronic flaws,” committee co-chair Rep. Jake Johnson (R-Polk) said. “Now that unemployment rates are again near three percent, it is a good time to improve the system.”

In the past, DES has complained that the federal improper payment rate relies on a small sample. “It needs to be re-evaluated,” Keith said but did not offer an alternative. Using the current methodology, however, North Carolina’s 16.67% improper payment rate is better than other southeastern states, Keith emphasized.

Reps. Allen Chesser (R-Nash) and Maria Cervania (D-Wake) pressed him on getting better estimates and better performance, regardless of the measure. Wood reinforced their point. “It’s not good enough for North Carolina,” she said. “We should be pushing to be better.”

Wood’s audit on improper payments found that DES had failed to prepare for the inevitable economic downturn or to implement recommendations from the U.S. Department of Labor. “The biggest issue we need to talk about was the lack of preparedness for what happened,” Wood said. “We don’t know when a disaster is going to happen, so I would have expected DES to be more ready than they were.”

Keith noted that 54,000 people filed for unemployment in one day in April 2020 due to Covid shutdowns. The agency also had to implement multiple new programs with little federal guidance and few guardrails. The federal Government Accountability Office reported in September that the laxest of these programs, Pandemic Unemployment Assistance, had up to $135 billion in outright fraudulent payments.

Another Auditor’s report on first-time payments found DES was slow with $438 million in benefit payments during the pandemic. Committee members and Wood herself emphasized that this was not simply a result of demand. Federal requirements state that 87 percent of these payments must be paid within 14-21 days. North Carolina has not met this standard since 2010.

Stressing that North Carolina should do better, Rep. John Torbett (R-Gaston) noted that the federal requirement is lacking. He asked, what if our payroll, bank account, or doctor’s diagnosis were only 87 percent accurate. “What about when you get in your car or truck, knowing that there’s an 87 percent chance it’s going to start and take you to where you need to go?” Torbett asked. “What about our schools? What if kids in our schools, we knew there was an only 87 percent right our kids would be educated?”

Wood faulted the heavy reliance on manual interventions that can take between 40 and 110 days to complete, far beyond the 21-day federal guideline. She tested the system herself and found a need for improvement in getting help. A claimant seeking help for to correct a mistake, such as a mistyped social security number, encountered a maze of options to select and information to give, only to end in a message that told callers the system was busy and to try again later.

Auditor Oversight

Members were interested in what it takes to merit a performance audit from the State Auditor. Wood responded, “We look at where there is a lot of money spend or impact [on the greatest number of North Carolina citizens].” She also commented on the importance of follow-up on her recommendation through legislative oversight committees. She noted that HB471 would put more onus on agencies to show they had taken steps to implement recommendations.

Members and Wood discussed the vulnerability of local governments and the options available to improve their financial oversight. Wood mentioned efforts by the recommended that these smaller towns and rural counties hire outside help, such as a CPA firm. Local government associations can provide assistance, she said.

In a surprise announcement closing the hearing, Auditor Wood said she would not seek reelection, but “that leaves us 14 months to kick some butt.”

Raleigh, NC — The House Oversight and Reform Committee has invited Division of Employment Security (DES) Assistant Secretary Antwon Keith and State Auditor Beth Wood to appear before the committee Wednesday, November 1, 2023, at 1 p.m. in the Legislative Building Auditorium.

The committee is following up on recommendations from the State Auditor and the U.S. Department of Labor to improve the accuracy and timeliness of unemployment payments. Committee members expect to learn about the progress DES has made and other steps the agency is taking to provide more timely and accurate payments.

“The pandemic highlighted flaws in the ability to make timely first-time payments and to ensure the right amount goes to the right person,” said co-chair Rep. Jake Johnson. “Federal pandemic unemployment benefits were particularly vulnerable to fraud and mistakes. North Carolinians need to know the unemployment system is fair, fast, and free of fraud.”

“It is good that both the State Auditor and the General Assembly can hold agencies accountable,” co-chair Rep. Harry Warren said. “I look forward to working with her to ensure broad and deep oversight on behalf of taxpayers.”

Assistant Secretary Keith and Auditor Wood have submitted presentations ahead of Wednesday’s hearing. Those can be found on the committee’s website.

Division of Motor Vehicles Commissioner Wayne Goodwin defended the DMV’s handling of two driver’s license controversies in his testimony before the House Oversight and Reform Committee Wednesday. Goodwin and Chief Deputy Commissioner Portia Manley told committee members the unusual process to select a driver’s license printing vendor was appropriate. Goodwin also addressed questions about a budget provision to extend the eight-year driver’s license renewal period to sixteen years.

Sixteen-Year Driver’s License Renewal Period

 The REAL ID Act of 2005 requires that state driver’s licenses cannot be valid longer than eight years. Goodwin said he did not realize this until after DMV made its legislative request in February 2023, but he was less than clear why legislators were not made aware of this. He said the original request was an attempt to reduce wait times at DMV offices. Goodwin did not directly address the portion of the provision that would allow unlimited online renewal of driver’s licenses, merely stating that a new photo is required every sixteen years.

Rep. Jeff McNeely (R-Iredell) pressed the timeline of awareness and communication.

McNeely, chair of the Transportation Committee, said he did not receive any communication asking that the provision be removed. Members of the committee asked for email communications to track the chain of requests.

“Lack of communication to the chairs is the problem,” McNeely said. “More eyes could have realized what was happening and made sure we corrected this. In the future we need to broaden our net as we cast it.”

Driver’s License Issuance Contract

Goodwin testified that appropriate procedures were followed in selecting CBN Secure Technologies as a new vendor to produce North Carolina’s driver’s licenses.

Only a small number of companies produce credentials that meet federal, state, and American Associate of Motor Vehicle Administrators (AAMVA) requirements. He explained that DMV chose to interview three of five companies that met its initial criteria. After site visits and presentations in Raleigh, DMV officials chose CBN based on their secure technologies.

Goodwin defended the process DMV used to select the company. Citing Session Law 2021-134 (HB650) that allows DMV to exempt five information technology projects from DIT oversight and requirements to increase the speed of technology modernization projects.

North Carolina General Statute 20-7(n)(4) requires that a driver’s license must contain a color photograph. Goodwin testified that CBN can print in color, but the company prefers black-and-white based on industry standards and security best practices. He said passports and “half” of U.S. state driver’s licenses are black-and-white.  Goodwin said DMV’s request to add the words “or monochromatic” was rebuffed by “DOT leadership.”

Rep. Allen Chesser (R-Nash) raised concerns about data security given the CBN Secure Technologies is a global company. He further urged caution and a full, unrushed vetting process because of the importance of security.

Goodwin reiterated that the process used for selecting CBN Secure Technologies was in accordance with state law and included representatives from multiple departments. “No one person made the decision,” he said. “The decision relied upon the 2021 law…[was] discussed at the meetings earlier this year, is also based on recommendations of subject matter experts, it tracked DOT procurement and RFP process, and followed the direction, approval, and blessing of then-Secretary Boyette and our legal team.”

More to Come

Committee members were not satisfied with Goodwin and Manley’s responses on either issue. They requested more documentation of the procurement process and of communications related to the legislative provision. Chairman Harry Warren said the Committee also hopes to have the Commissioner back to discuss customer service at driver’s license offices.

Raleigh, NC – The House Oversight and Reform Committee has issued a letter to the Division of Motor Vehicles Commissioner Wayne Goodwin and Deputy Commissioner Portia Manley requesting their appearance before the committee Wednesday, October 11, at 9:00 a.m. in the Legislative Building Auditorium.

The committee is investigating the process that DMV used to award a contract for printing driver’s license to Canadian company CBN Secure Technologies. DMV exempted the project from IT procurement oversight and did not use a competitive bidding process. Members will probe the process, timing, and rationale behind DMV’s decision. They will also pursue allegations that the vendor’s technology may not be able to produce driver’s licenses that comply with state law.

Additionally, the committee will seek to understand the reversal in Commissioner Goodwin’s support for extending the 8-year driver’s license renewal period to 16 years. Goodwin made the legislative budget request for DMV in February. Since the budget passed, however, the commissioner has spoken out against the provision, saying the extension violates federal REAL ID requirements. Members attempt to determine when DMV learned that the longer renewal period would not meet federal requirements, why it was not until after making the request, and why the agency did not make legislators aware sooner.

“One purpose of oversight is to examine if department officials are complying with the law,” said committee co-chair Rep. Jake Johnson. “We have to wonder whether this contract is even valid if the company cannot produce a legal state driver’s license. The speed and lack of oversight in awarding this contract also raise concerns related to the security of North Carolinians’ personally identifiable information.”

“The commissioner has provided little to back up his statements that 16-year license renewals do not comply with federal REAL ID requirements,” co-chair Rep. Harry Warren said. “To the extent that he is correct, it is not clear why it took until after he made the legislative request to learn this. We want to clear up the confusion.”

It’s been five years since Hurricane Florence made landfall near Wrightsville Beach and sat for five days before moving inland. It was the wettest storm on record in the Carolinas, dropping 36 inches of rain in Elizabethtown alone. The storm dumped an estimated 10 trillion gallons of water in its path, turning I-40 into a river, other areas into lakes, and leaving much of the region devastated. Floodwaters continued to rise for a week or more after the storm passed. By the time it was over, Florence had claimed 42 lives and caused more than $22 billion in damage.

Worse for eastern North Carolina, Florence hit less than two years after Hurricane Matthew struck the same area. Between the initial storm surge and later downstream flooding, Matthew killed 29 people and caused $1.5 billion in damage.

Today, 3,000 residents are still waiting to have their homes repaired or replaced through the government’s Rebuild NC program. As they wait, they are living with family or friends, in hotels, or in their damaged and often mold-infested homes.

In March, Rep. Carson Smith (R-Pender) and Rep. Phil Shepard (R-Onslow) saw firsthand the living conditions of families in their districts, offering support and help in the lengthy process.

Six months later, has anything changed for those homeowners?

Marcy Bea and her family were living in a mobile home with holes in the floor and walls and prevalent mold. Since an emergency move-out in March, they have been in a hotel. Bea said things are “progressing.” The contractors demolished her old mobile home, staked the front and back porches, had supplies ready to go, and were waiting on permits.

“The supplies are all there, so I have no complaints,’ Bea said.

However, while the contractors were waiting on permits, thieves stole the bricks for the foundation. A neighbor’s camera caught the theft, authorities were notified, and the contractors have ordered replacement materials. This has not caused a delay in construction.

Willie and Carolyn Northern were still living in their home in March, despite its damaged floors and mold. They moved out in June and have been staying at a hotel in Wilmington, adding 30 minutes each way to Carolyn’s daily commute. Work has begun on their home—the carpet has been removed, and the ceiling has been painted, so there should be an end in sight.

Alverda Holmes’ home also has mold, floor damage, and roof leaks. She said the process is “moving.” The contractor has completed the pre-construction walk-through. She and her husband can begin moving out once the contractor receives the notice-to-proceed and temporary storage PODS arrive.

Holmes and her husband are using a new program that allows homeowners to accept a stipend toward rent while their homes are under construction, instead of Rebuild NC paying hotels directly. Rebuild has not documented their payment process, so Holmes is finding landlords are hesitant to rent. Without documentation from Rebuild, she cannot establish sufficient income beyond her husband’s disability payments. Rebuild staff are working on a temporary solution until the program is officially implemented.

Robert Sault’s peaceful, remote home along the Northeast Cape Fear River flooded above the windows after Hurricane Florence. The inside of his home was unlivable. The easy-going retiree lived on his screened-in back porch before Rebuild granted an emergency move out and he moved to a hotel in January 2022. Delays at the modular home manufacturer held up progress. His home was demolished earlier this year, but a change in leadership at the county level, changes in county construction rules, and an additional environmental study caused further delays. Construction cannot begin until the study is complete.

Sault has kept a positive attitude about the long road but is ready to be back home. “If I had known it would take this long,” he joked, “I would have bought a houseboat.”

Sonya Black and her family were living in an RV behind their home waiting for repairs to begin. Since the visit in March, the family received TRA benefits from Rebuild NC and is living in a hotel. Work is slowly progressing on their home. The contractors are working on the kitchen and flooring.

“The work has been slow but sure,” Black said.

However, Hurricane Idalia didn’t leave the Blacks’ home unscathed. Their basement flooded with 3 to 4 feet of water. “We were able to put another sump pump down in there,” she said. “It took us 12 hours to drain the basement!”

Five Years Later

Everyone wants every homeowner to be home as soon as possible. Rebuild NC has been completing an average of 55 homes per month this summer but must finish more than 90 each month to beat the federal fund deadline of August 2026. Since September 14, 2022, the Joint Legislative Commission on Governmental Operations Hurricane Response and Recovery Subcommittee has been assisting homeowners and addressing accountability.

“It is unacceptable that five years after Florence, and nearly seven years after Matthew, our neighbors are still suffering. Governor Cooper stood by for years while the pace of work nearly came to a halt,” said subcommittee co-chair Rep. John Bell (R-Wayne). “In the year since our first hearing, however, Rebuild has made faster progress but not fast enough. The legislature is holding Rebuild accountable and clearing unnecessary roadblocks so they can continue to accelerate.”

The original stories can be found here and here.

North Carolina State Board of Elections (NCSBE) Executive Director Karen Brinson Bell recently responded on July 26 and July 28 to outstanding questions from her June 22 appearance before the House Oversight and Reform Committee.

In Brinson Bell’s responses explaining steps the NCSBE has taken to clean voter rolls, committee staff recognized opportunities for improvement even without joining an interstate group. North Carolina already has data streams that can verify a person’s identity and address. In response to questions on publicly available data, Brinson Bell said the NCSBE already provides a great deal online or through records requests and suggested a new data management system would be needed to make more data easier to access. She also provided committee staff with data to compare all voters with same-day registrations.

Improving Voter Roll Accuracy

Based on its experience in other states Electronic Registration Information Center (ERIC) Executive Director Shane Hamlin estimated that nearly 600,000 voter registration records could be inaccurate, Rep. Jeff McNeely (R-Iredell) noted at the June hearing. Brinson Bell acknowledged this in her response while providing additional context. Two-thirds of those are people who moved to another county in North Carolina and another group were in-state duplicates. The two groups of problem registrations “would involve corrections to existing voter records, rather than removals of ineligible voters,” Brinson Bell wrote in her July 26 letter.

North Carolinians who die in another state could be another 16,000 problem registrations. Rep. Allen Chesser (R-Nash) had asked about using Social Security Administration death records to identify those people. Brinson Bell explained in her letter that getting access to the data directly from Social Security is cumbersome, but the North Carolina Government Data Analytics Center (GDAC) already receives that information and can make it, and other data sources such as public assistance program enrollment, available to the NCSBE with less hassle. Committee staff are working to connect the two agencies.

Staff asked three additional questions tied to recommendations from the Public Interest Legal Foundation. Although county boards of elections provide voter rolls to courts for jury duty pools, Brinson Bell wrote, “We are not aware of an example” of a court notifying a local board of election when a potential juror is excused for citizenship or residency reasons “ever occurring.” A provision in the recently passed election reform bill (SB747) would require weekly notification and removal of individuals from voter lists for this reason. According to the National Conference of State Legislatures, six states permit such sharing. Under California law, “county elections official may contract with a consumer credit reporting agency or its licensees to obtain use of change-of-address data.” Finally, county boards could add a property record search against Register of Deeds and tax records in addition to current matches against the North Carolina Geodetic Survey.

Improving Data Access

Responding to concerns from Rep. John Torbett (R-Gaston), Brinson Bell shared more information on the steps the NCSBE has taken to improve access to and understanding of voter history and voter records data such as updates to the website, presentation of voter registration statistics, voter turnout, election maps, individual voter registration data, voter history data, and frequently asked questions. With 7.3 million registered voters, some of the data files are necessarily large. Committee staff hope to work with NCSBE staff to make more understandable data available and reduce the need for unique public records requests.

Same-day Registration Trends

Brinson Bell provided same-day registration data from the past four statewide elections (2016, 2018, 2020, and 2022). Committee staff compared race, party, and county of same-day registrations against the total electorate in each election. The percentage of voters using same-day registration doubles in presidential years even as total number of voters also increases. Racial composition is relatively consistent over time: black and “undesignated” race voters are a larger share of same-day registration than of total voters, white voters are a much smaller share. Democrats are a consistently larger share of same-day registrants than of total voters, Republicans are a consistently smaller share. Unaffiliateds vary from year to year. Watauga and Jackson counties stood out for the larger share of same-day registrations, which seem to be due to their university populations. Watauga County is home to Boone and Appalachian State University, and Jackson County is home to Cullowhee and Western Carolina University. Consistent differences in same-day registrations suggest a need to expedite the address verification process for those voters.

Brinson Bell’s follow-up responses highlighted opportunities to rely more on data sources the state and local governments have available, including Social Security death records, government program enrollment, jury duty exemptions for citizenship or residence, and property tax records. The NCSBE could also contract with a consumer credit reporting agency or other commercial data warehouse for address confirmation. Many of these actions can be done with existing resources, such as GDAC. Committee staff expect the State Board and its staff to identify any hurdles and provide plans to overcome them, including any legislative fixes.

On Tuesday, May 2, House Oversight and Reform Committee members pursued allegations by State Bureau of Investigation Director Bob Schurmeier of overreach and strong-arming by Governor Roy Cooper’s office.

Director Schurmeier testified in March that the governor’s Chief of Staff Kristi Jones and General Counsel Eric Fletcher attempted to interfere in his personnel decisions and intimidate him to resign. He also testified that SBI General Counsel Angel Gray was unsure what responsibilities she had either to the Bureau or to the governor.

Jones, Fletcher, and Gray appeared before the Committee to address the allegations. But the hearing ended with more questions than answers. The three cited rules of professional conduct and other impediments that left them unable to discuss or refute any of the allegations. Despite this, they did mark areas of disagreement with Schurmeier’s testimony and made clear statements that they did not engage in anything that could be deemed inappropriate.

Gray stated that, contrary to Schurmeier’s testimony, she was not conflicted or confused about her role as general counsel of the SBI. “My job is to give advice to my client to make the best decision possible.”

Likewise, Jones, amidst repeated attempts to divert the Committee’s attention, also denied Schurmeier’s accusations of intimidation and interference. She said her relationship with the director was collaborative on hiring practices, training, recruitment, and retention.

Governor Cooper nominated State Capitol Police Chief Roger “Chip” Hawley as SBI director when Schurmeier’s term ends. When questioned by Representatives, Fletcher and Jones seemed confused about the process as well as the provisions in place if the successor had not been confirmed and duly qualified.

Schurmeier testified to meetings with Jones and Fletcher in late 2022 where they asked him to resign and threatened him with an investigation due to discrimination complaints. Jones did not dispute that the meetings happened but that he mischaracterized those meetings and the nature of the look into SBI practices.

Co-Chair Jake Johnson brought to light email communications that did not include Schurmeier between Gray and governor’s staff on SBI matters dating back to 2019. Some of the emails included little more than a personal cell phone number and an invitation to continue communication that way. They suggested significantly more contact between Gray and the governor’s staff without Schurmeier’s knowledge than they had testified to earlier in the hearing.

After the hearing, Johnson said, “I think it is extremely troubling that the general counsel of an independent state agency, and the chief of staff of a sitting governor would be discussing personnel and who knows what other issues behind the back of the sitting SBI director. This testimony raises more questions than answers and certainly merits a follow up.”

Co-Chair Harry Warren called for further investigation in his closing statement and expressed his frustration afterward.

“Interference in personnel matters is much more fundamental than interference in any specific case at the SBI. It is extremely unfortunate that the governor’s office chose not to answer committee members’ pertinent questions. Hopefully, they will be more forthcoming as the committee continues to investigate Director Schurmeier’s allegations,” Warren said. “North Carolinians are entitled to the truth.”

The transcript from the hearing can found here.

Representative Jake Johnson: “I think it is extremely troubling that the General Counsel of an Independent state agency, and the Chief of Staff of a sitting Governor would be discussing personnel and who knows what other issues behind the back of the sitting SBI Director. This testimony raises more questions than answers and certainly merits a follow up.”

Representative Harry Warren: “Interference in personnel matters is much more fundamental than interference in any specific case at the SBI. lt’s extremely unfortunate that the governor’s office chose not to answer committee members’ pertinent questions. Hopefully, they will be more forthcoming as the committee continues to investigate Director Schurmeier’s allegations. North Carolinians  are entitled to the truth.”