News & Updates
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Wall Street Journal Columnist Stephen Moore: Even with lower rates, tax revenues have increased 6% this year, and the state has a $400 million budget surplus.
Published June 3, 2015 - Source: Wall Street Journal
Four years ago North Carolina’s unemployment rate was above 10% and the state still bore the effects of its battering in the recession. Many rural towns faced jobless rates of more than 20%. But in 2013 a combination of the biggest tax-rate reductions in the state’s history and a gutsy but controversial unemployment-insurance reform supercharged the state’s economy and has even helped finance budget surpluses.
As Wells Fargo’s Economics Group recently put it: “North Carolina’s economy has shifted into high gear. Hiring has picked up across nearly every industry.”
The tax cut slashed the state’s top personal income-tax rate to 5.75%, near the regional average, from 7.75%, which had been the highest in the South. The corporate tax rate was cut to 5% from 6.9%. The estate tax was eliminated.
Next came the novel tough-love unemployment-insurance reforms. The state became the first in the nation to reject “free” federal payments for extended unemployment benefits and reduce the weeks of benefits to 20 from 26. The maximum weekly dollar amount of payments, $535, which had been among the highest in the nation, was trimmed to a maximum of $350 a week. As a result, tens of thousands of Carolinians left the unemployment rolls.
In an interview at the governor’s mansion, Gov. Pat McCrory tells me that when he took office in January 2013 he looked at the data and knew “we couldn’t stay on the course we were on. We had the highest unemployment benefits and yet at the same time businesses were routinely complaining they couldn’t find workers until benefits ran out. We heard a lot of stories of workers waiting until benefits ran out before going back to work.” In sum, the state was paying people not to work.
While these measures were passing the legislature, the state capital boiled over with rancorous political rallies, called Moral Mondays, designed to block the “cruel” GOP agenda. Rev. William Barber II, one of the protest organizers, lambasted Republicans for making the Tar Heel State a “crucible of extremism and injustice.” The national media piled on with claims that the Republican agenda cut taxes for the rich while slashing benefits for the poor.
Then a funny thing happened. After a few months, the unemployment rate started to decline rapidly and job growth climbed. Not just a little. Nearly 200,000 jobs have been added since 2013 and the unemployment rate has fallen to 5.5% from 7.9%. There is a debate about how many of North Carolina’s unemployed got jobs and how many dropped out of the workforce or moved to another state. But the job market is vastly improved and people didn’t go hungry in the streets. On the Tax Foundation index of business conditions, North Carolina has been catapulted to 16th from a dismal 44th since 2013.
The most recent news will make many other governors jealous. The state didn’t take the extra federal benefits—which require repayments later to the feds—and it cut the weekly benefits. So the state government has been able to pay back $2.8 billion in unemployment-insurance money owed to the feds, and it now has a trust-fund surplus. This means it will be able to provide employers with at least $500 million in cuts from the state and federal unemployment tax on payroll over 18 months.
This comes at a time when other states are having to raise payroll taxes to pay off the loans for the rich benefits they doled out in the recession and its aftermath. The lesson: Handouts from the feds are never free.
An even bigger surprise—even to supporters—is the tax cut’s impact on revenue. Even with lower rates, tax revenues are up about 6% this year according to the state budget office. On May 6, Gov. McCrory announced that the state has a budget surplus of $400 million while many other states are scrambling to fill gaps.
This is the opposite of what has happened in Kansas, where jobs have been created but revenues have fallen since the top personal income-tax rate was cut from 6.45% in 2012 to 4.6% today and the income tax for small business owners who file as individuals has been eliminated. North Carolina’s former budget director, Art Pope, says one difference between the two states is that “we cut spending too. Kansas didn’t.”
The story gets better. Because North Carolina built in a trigger mechanism that applies excess revenues to corporate-rate cuts, the business tax has fallen to 5% from 6.9%, and next year it drops to 4%.
You won’t hear much about this in national news media, where the preferred story line is that tax cuts don’t work because they were followed by budget deficits in Kansas. In North Carolina, policies to reduce taxes and stop paying people for not working have created jobs and surpluses. Mr. Pope says: “I wish people criticizing Kansas would look at what’s happened here.”
Mr. Moore is a senior fellow at the Heritage Foundation.
On Sunday, May 10, the News & Observer covered the recent North Carolina budget surplus in their special ‘Under the Dome’ Sunday Section. Former state budget director Art Pope (Chairman and CEO of Variety Wholesalers and Chairman of the John William Pope Foundation) provided his thoughts.
April surprise – budget gains as tax rates cut
Former state budget director Art Pope says tax cuts are aimed at long-term growth, not a one-year budget surplus.
Ethan Hyman | J. Andrew Curliss
The people who watch the state budget like to talk at this time of year about the April “surprise,” the moment (usually in May) when April tax collections are counted and weighed against the official forecast in an exercise that produces certainty about the state of the state’s finances.
The new numbers, if off too much, can lead to scrambling across state government in the final weeks of the budget year, which closes on June 30. It can also alter how lawmakers approach writing the next budget, a process already underway for the spending plan that takes effect on July 1.
But the news last week that North Carolina will have a $400 million surplus in the current budget year – and about $600 million more for the next – generated responses from Republicans and Democrats that weren’t much of a surprise.
Republicans who are in charge were giddy, emphasizing that the sky isn’t falling and their policies are working.
Democrats furrowed their brows, saying the extra money came from middle-class folks who need a break.
There was some truth – and shading – from both sides.
This year’s final forecast was especially viewed through partisan lenses: It’s a measure of the Republican-led tax overhaul, which passed in 2013 but was in effect for the 2014 tax year.
The overhaul included the elimination of a tiered income tax system with rates as high as 7.75 percent in favor of a flat, 5.8 percent income tax on all. (It’s at 5.75 percent for the current year.) Corporate tax rates were reduced. The standard deduction and a child tax credit were increased. But it wasn’t just tax cuts or breaks. Lawmakers broadened what is taxed (extending the sales tax to capture certain items and services) and eliminated certain deductions and exemptions that had lowered many taxpayers’ tax bills.
At one point in the tax overhaul debate, mortgage interest and charitable deductions were on the chopping block. Those survived. A deduction for high medical expenses didn’t. An exemption on $50,000 in business income also went away.
How all those changes would shake out has been a major focus of the state’s political, government and business communities – and added plenty of uncertainty for the budget forecasters.
Views on surplus
In reacting to the news of a surplus, some Republicans pointed to the tax cuts. The speaker of the House, Tim Moore, said in a statement: “The lower, flat personal income tax rate has spurred economic growth and job creation that in turn has provided North Carolina with a budget surplus.”
One of this budget’s key architects was Art Pope, a Raleigh businessman and supporter of Republican causes who was state budget director until last fall. He’s watched closely even after returning to private life.
“Let me just clarify or emphasize one thing right now,” Pope told Dome in an interview after the surplus was announced.
“There was never any expectation that tax cuts would pay for themselves during the very next fiscal year, or the next two fiscal years,” he said. “In the long term Gov. (Pat) McCrory and the legislature believes – and I believe – that reducing taxes will allow for more economic growth as people keep more of their hard-earned dollars and as businesses and employers keep more of their hard-earned dollars and reinvest them.”
But the surplus is not because of the tax cuts, Pope said.
“I was never in a single meeting where we said if we reduce the corporate tax rate or the personal tax rate by X percent then next year revenue will grow by Y percent,” Pope said. “There never was any prediction there. Long term, yes. Short term, or the fiscal year, no.”
And that, Pope said, “is not what happened.”
Democrats have expressed concern that seniors who lost a medical deduction and small business owners who lost the income exemption fueled the surplus.
The Senate’s Democratic leader, Dan Blue, described the surplus in a statement as a “so-called budget surplus.”
“Seniors, small businesses and middle-class families across North Carolina got slammed on Tax Day,” Blue said.
But the forecasters had long ago made assumptions about those changes and the effect on the budget. To use a cliche, those changes – which affected millions in tax receipts – were already “baked in.”
What happened, according to interviews with economists, forecasters and legislative staffers, was that personal incomes were more robust than anticipated. The economy is good, here and in other states. More people are working – the state added 50,000 jobs in 2014 – and paying taxes. A state report notes that capital gains from stock and real estate sales were a part of the growth.
Forecasters had been cautious all along, predicting a shortfall as recently as February. But as tax returns came in, that melted away.
The result in context
It is worth noting that the forecast for an extra $400 million is on a $21 billion budget – a miss of about 2 percent.
Pope said it’s now clear that predictions by Democrats in 2013 of dire results, of major shortfalls below what was budgeted and would hamstring the state, were wrong.
He said he believes, on the broad scale, that the surplus is most likely a result of how people’s paychecks were handled. For 2014, the state reset the tables that determine how much tax money is withheld from taxpayers’ check.
The new withholding schedules were set up with a goal of seeing a pure balance – aiming for an outcome of no refunds and no one writing a check to the state on April 15. Workers saw a bit more in their paychecks each week as a result, and received much less money in refunds in the tax season that ended on April 15.
In previous years, the state had been issuing lots of refunds.
“Good public policy and fairness to taxpayers is not to ask them to give free loans to the government by overpaying their taxes,” Pope said.
Then, personal incomes performed better than expected, and that meant more tax money for the state.
“The surplus is really just a function of a forecast that was pretty close to predicting how this would all shake out,” Pope said. “And it happened to be off – on the good side – by a little bit.”
UNDERSTANDING A SURPLUS
State officials announced a $400 million surplus for the current budget year, which ends June 30. Dome breaks it down.
A consensus of legislative and administration staff says the surplus is the result of:
▪ Caution: All previous forecasts were “very cautious,” and left room for a positive change.
▪ Growth: April payments to the state were up 15 percent to 20 percent, well above expectations. The increase was driven by business income, often paid as personal income tax, and gains from stock and real estate.
▪ Refund decline: More accurate withholding tables (see related story) reduced refunds to taxpayers. Refunds were down much more than an expected 35 percent, yielding about $357 million in additional income tax collections than were forecast.
Steep refund decline
The refund decline, tied to the withholding tables change, was a big driver. Officials say the dropoff in refunds was “more than double the biggest year-over-year decline” going back 25 years.
No. refunds issued: 2.3 million
Refunds amount: $1.2 billion
No. refunds issued: 1.8 million (down 22 percent)
Refunds amount: $591.1 million (down 51 percent)
Tax overhaul changes
Some paid more in income taxes as a result of the 2013 tax overhaul. The majority paid less. Here’s how 2014 tax season shaped up for taxpayers:
Taxes decreased: 55 percent to 60 percent
Taxes increased: 30 percent to 35 percent
Little or no change: 10 percent to 15 percent
The updated forecast shows a budget for 2014-15 that misses the original forecast by about 2 percent. Here’s how much the forecast missed in recent budget years, which run from July 1 to June 30:
2014-15: +1.9% (May forecast)
Sources: General Assembly Fiscal Research Division, Office of State Budget and Management, N.C. Department of Revenue
Read more here: http://www.newsobserver.com/news/politics-government/politics-columns-blogs/under-the-dome/article20578353.html#storylink=cpy
Rep. Holley, Art Pope, and Councilman Weeks at the April 1 Save-A-Lot grand opening
On Wednesday, April 1, 2015, Variety Wholesalers CEO Art Pope, joined Variety Wholesalers President Wilson Sawyer to officially open the doors to their newest store venture, a Save-A-Lot grocery store at 1610 Martin Luther King Jr. Blvd. in Raleigh.
Several local representatives were on hand to mark the occasion including Rep. Yvonne Lewis Holley and Raleigh District Councilman Eugene Weeks. Holley praised Variety Wholesalers for the social impact the store will have on Raleigh, noting that some issues were beyond politics. She praised the number of jobs created and the effort Variety Wholesalers made to hire from the community.
At the grand opening, two separate $2,000 checks were presented to Inter-Faith Food Shuttle and the Salvation Army on behalf of Variety Wholesalers.
The news article below appeared online with the News & Observer on April 1.
Save-A-Lot store opens in Southeast Raleigh
Kroger left in 2012, leaving residents with few grocery options
BY SARAH BARR
A new Southeast Raleigh grocery store aims to fill a need for fresh, affordable food in a neighborhood where residents were left with few grocery options after a Kroger closed two years ago.
Save-A-Lot, part of a chain of more than 1,300 discount grocery stories, opened Wednesday in the former Kroger building on Martin Luther King Jr. Boulevard.
Variety Wholesalers, headed by former state budget director Art Pope, owns the 18,000-square-foot store, along with a Roses store that’s connected to the new grocery.
Shoppers toured Save-A-Lot after a grand-opening ceremony Wednesday, searching out deals on fresh produce, meat, dairy and other foods.
They found an 8-pound bag of Red Delicious apples for $2.99, a box of elbow macaroni for 87 cents, a 2-pound pack of boneless pork chops for $6.55 and a gallon of whole milk for $3.75.
Lisa Toon, 51, said she’s relieved to see a grocery store return to the shopping center. Since Kroger closed, she’s had to drive past the empty building to get to the nearest grocery store and hasn’t been able to find groceries as cheaply as she would like.
“It will make life a whole lot easier,” she said as she and her husband, Ledell, pushed a cart with chicken, paper towels and eggs.
In late 2012, Kroger announced it would pull out of the location because of declining sales figures. Residents and elected officials said the move was a major loss and worried about how it would affect the neighborhood.
They especially had concerns about those without cars who have had to rely on several buses to get to the nearest full-service grocery stores about a mile away.
Of the 4,000 households within a mile of the store, 25 percent earn less than $15,000 a year and more than half earn less than $35,000.
The median household income in Wake County is about $66,000, according to data from the U.S. Census Bureau.
Variety Wholesalers bought the Kroger building last summer for $2.57 million, prompting public criticism from some community leaders who dislike Pope’s support for conservative causes.
At the store’s opening, Rep. Yvonne Lewis Holley, a Wake County Democrat, said the issue is not a political one.
“Guess what? When you’re hungry you don’t say are you a Democrat or a Republican,” she said. “Some issues exceed politics.”
In the state legislature, Holley has pushed to bring attention to the issue of “food deserts,” communities where families don’t have easy access to fresh, healthy and affordable food.
She said the new store also is important for the economic development it could help spur in the area by adding jobs and anchoring the shopping center.
The Save-A-Lot employs 27 people, and the Roses employs 70.
Variety Wholesalers officials have said the pairing of the Roses with a Save-A-Lot should encourage residents to make the trip to the shopping center, heading off the problems Kroger had in the location.
Customer Sharon Paige, 60, showed up to shop for groceries before the ribbon across the front of the building was even cut. She’s looking forward to buying household items at Roses, then heading next door to Save-A-Lot.
“You can do everything in one step,” said Paige, who said she may even walk to the store from her home in Chavis Heights.
Variety Wholesalers, a Henderson, NC- based company which owns and operates a chain of retail stores including Roses, has honored two long-term employees who have spent nearly six decades with the store.
Article by The Daily Dispatch (Henderson, NC)
Written by: By Sarah Mansur
March 21, 2015
Ruth Bartholomew and Pete Pegram each have spent nearly six decades as employees of Variety Wholesalers in Henderson.
They are two of 12 employees honored recently by the Henderson-based company, which owns Roses Inc.
Communications Director Mel Hanks said the total service of all 12 comes to 382 years.
“That is just an astounding number,” said Wilson Sawyer, chief operating officer of Variety Wholesalers, in a press release. “We are proud of all our associates, but we are especially happy that the ones we’re honoring have been so loyal and productive for so very long.”
The other employees celebrated for varying lengths of service between five and 40 years are Dot Inscoe, Rickey Owen, Debbie Taylor, Kay Ayscue, Candy Stevens, Mary Beth Boynton, Dave Stinson, Mike Burgess, Alex Ellington, and Kelly Currin.
Pegram and Bartholomew are the longest serving employees at Variety Wholesalers.
Bartholomew, 78, has been with the company in several different roles for 58 years.
She began in 1957 as a data entry employee when she was 20 years old.
Her title now is senior merchandise distribution specialist.
“Every boss I’ve had has been a good boss,” Bartholomew said. “I’ve not had a problem with anyone since I been here.”
Her daughter worked in the Roses Inc.’s offices before she had children.
And Bartholomew’s husband worked there for more than 30 years before retiring.
As of now, she has no plans to retire.
“We work but we have fun,” she said.
Pegram, 79, trails not far behind Bartholomew with 56 years at the company.
When he began working for Variety Wholesalers, the company sent him to New York City for four weeks for training.
It was his first plane ride and his first trip to the Big Apple.
His current job is working as a computer programmer in the accounting department.
Pegram said technology has changed drastically since he started his career.
“We went from punch cards to saving things on magnetic tape and disk storage,” he said. “Now, it’s all online. It’s all on the screen in front of you.”
He said he feels fortunate to have worked this long in the same company.
“I am fortunate to have been able to grow and learn here,” he said.
Triangle Business Journal Reports new Variety Wholesale owned store opening
March 10, 2015: Triangle Business Journal: Real Estate Inc.
By Amanda Jones Hoyle
The owner of the Roses discount store chain has set an April 1 opening date for its first Save-A-Lot grocery store location in a section of Raleigh declared as a “food desert” by a federal report due to its lack of grocery options for neighboring residents.
The Save-A-Lot store will share a building with a Roses discount store that opened in January.
Former state budget director Art Pope, who is also chairman and CEO of Henderson-based Variety Wholesalers, stated in a news release that his family-owned company is “committed to building stores in areas that need access to fresh, nutritious food at great prices.” Variety Wholesalers is the parent company of Roses, and it is partnering with Save-A-Lot as a franchise owner of the national discount grocery brand to open the Raleigh location.
Pope says both stores will also be staffed mostly by residents from the surrounding southeast Raleigh neighborhoods. The Roses employs 76 people, and the Save-A-Lot will employ about 25 people.
Kroger closed its grocery location in the 60,000-square-foot building at 1610 Martin Luther King Jr. Boulevard two years ago.Variety Wholesalers bought the building for $2.7 million in July.
The area around the building had been classified as a “food desert,” according to USDA guidelines, because of the number of low-income population around it who live more than one mile from a supermarket or large grocery store.
Read the article at Triangle Business Journal here: http://www.bizjournals.com/triangle/blog/real-estate/2015/03/save-a-lot-roses-variety-wholesalers-raleigh.html