In Feature

After taking the job to run the UNC System amid much controversy, Margaret Spellings has shown a masterful ability to impress her overseers. Honeymoons don’t last forever, of course, and recent North Carolina politics suggest that she hasn’t seen anything yet given tighter ties between state lawmakers and the Board of Governors.

Consider the scrap over UNC Chapel Hill’s Center for Civil Rights. The center’s aim is to research social-justice issues and help law-school students learn how to represent underprivileged people. Its privately funded, five-person staff is part of the law school, led by a dean who reports to UNC Chapel Hill Chancellor Carol Folt. She, in turn, works with a 13-member board of trustees.

But some members of the UNC Board of Governors, which oversees all 17 campuses, want to block the center from filing new lawsuits. Operating a public-interest law firm is outside the school’s mission, says board member Steven Long, a Raleigh lawyer. North Carolina counties have wasted lots of money defending themselves from lawsuits filed by center representatives, he says. “It’s outrageous that the university hasn’t dealt with the issue. I’ve met with the chancellor, the provost and the dean, and nobody will do anything.”

Indeed, UNC Chapel Hill officials “have never given us any grief,” Director Ted Shaw says. “UNC has a wonderful, complex history with respect to race, and this center recognizes there is a place for the betterment of the African-American community that is poor and faces discrimination.”

While a micro issue for the $9 billion system, the civil-rights center debate is a signal of increased partisanship as state lawmakers assert more control at the BOG. Much bigger issues are at stake, with some members of the 28-member board calling for major changes. “I want to look at what we can do to get the cost structure fixed, because the system is unsustainable. I don’t see how a family on a $40,000-a-year income can afford it,” says Harry Smith, a former filter-company CEO from Greenville who was re-elected in April to a second four-year term. “No one today would build the model we have with 17 campuses and a corporate office in Chapel Hill.”

That tone is jarring to Paul Fulton and other North Carolinians who take great pride in the system. “We’ve got one of the best systems in the country, and there is no more important driver of our economy than UNC,” says Fulton, a former board member who heads Higher Education Works, a Raleigh-based nonprofit that seeks public support for the system. “I do worry that the board is becoming too politicized.”

UNC Chapel Hill ranks among the nation’s 30 top national universities, according to U.S. News and World Report; the only higher-ranked public university in the South is Virginia, which charges nearly double the tuition for in-state students. No other state operates as many historically black universities and colleges, while few have as many geographically dispersed campuses. Few offer tuition as low as UNC or provide as much financial support per student.

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Unfortunately, too many students still leave before graduating, incur extensive debt or can’t find jobs after earning degrees, Smith says. He and other board members want Spellings to move promptly to cut personnel costs, limit tuition hikes, collaborate more with community colleges — and improve graduation rates. Her response, a strategic plan unveiled in March, sets benchmarks to guide the system’s progress. Whether she can attract additional state funding to reverse declining per-student spending and substantial tuition hikes is a question mark.

Politics have always mattered at the BOG, which was formed in 1971 in a consolidation of the state’s flagship campuses with regional and historically black institutions. Bill Friday, who engineered the merger and served as president for 15 years, wanted to bolster statewide support for campuses stretching from Wilmington to Cullowhee. While state lawmakers retain ultimate control, the system’s birth created what became a 32-member board that is being trimmed to 24 over the next two years.

A board seat has always been one of the state’s most prestigious appointments. The state House and Senate split the selections, which follow weeks of private jockeying between prospective members and lawmakers. Campaign donations, business ties, friendships, regional balance and diversity have mattered.

In 2002, members included nine women, former Republican Gov. Jim Holshouser, three bank CEOs, the head of the largest U.S. black-owned insurance company, the future CEO of the state’s biggest insurance company, the CEO of a big TV-station group and Asheville’s leading real-estate developer. Most were business-friendly Democrats, though an unwritten rule for decades reserved four of the 32 seats for Republicans.

Since 2010, when Republicans gained control of both the state House and Senate for the first time since 1896, the board makeup has shifted. Four members of the incoming board are ex-Republican state legislators. At least four lobby the legislature. Members Temple Sloan III, Anna Spangler Nelson and Wendy Murphy are second-generation heirs of legendary North Carolina businessmen. (Murphy is the daughter of pork-industry leader Wendell Murphy.)  Six of the 28 members are women, while five are African-American or Native American. Two are registered Democrats. Four are unaffiliated.

The most recent selections approved by the N.C. General Assembly include former state Rep. Rob Bryan, a Charlotte lawyer who pressed for state-sponsored vouchers for private K-12 schools; former Raleigh Mayor Tom Fetzer, a former state Republican Party chairman whose lobbying clients include Blue Cross and Blue Shield of North Carolina; and former state Sen. Bob Rucho, a Matthews dentist who championed tax cuts and partisan redistricting.

Plenty of politicians had board seats when Democrats ran state government, to be sure. John Jordan Jr., a Raleigh banking lawyer, served 24 years after three terms in the state Senate. But nominees now reflect a less-centrist style, according to interviews with more than a dozen current and former board members and UNC officials. “The people who were not radical one way or another are not there anymore,” says G.A. Sywassink, a retired trucking-company president whose term ends this year. He’s a Republican whose appointment was promoted by former House Speaker Thom Tillis, now a U.S. senator.

Sywassink previously served as an Appalachian State University trustee for more than 20 years and wanted another four-year BOG term. He criticizes the selection of members whose day jobs involve asking legislators to favor or oppose specific legislation. “Hell no, it’s not a good thing for lobbyists to be on that board,” he says. “I disagree with how they are handling things.”

Involving political insiders can be valuable because the state funds about a third of the system’s budget, says former board member Sam Poole, a Raleigh lawyer and a Democrat. Tuition increases have made up for most of the slack. But Poole decries the trend. “More members are being picked today because of their political activity and influence with legislators,” he says. “It used to be that members had substantial influence in the state, rather than being heavily partisan on one side or the other.”

A brazen example: Greenville broadcaster Henry Hinton, seeking re-election to the board, emphasized his fundraising work in an email to House Republican leaders in March. “I would challenge you to find anyone who has worked harder than myself to get conservatives elected and keep them there,” he said in the email obtained by the N.C. Insider newsletter. Hinton was not chosen to return to the board.

A Republican member who asked to remain anonymous says the board’s role “is to protect the university from political intervention. But there are appointees who have said their only job is to do what the legislature says — I’ve heard them say that. That’s a very bad thing.”

Lawmakers’ efforts to influence the board escalated in January 2015 after the board voted to replace President Tom Ross, who wanted to retain a job he’d held for five years. The former Davidson College president also had worked as executive director of the Z. Smith Reynolds Foundation, a Winston-Salem-based philanthropy that regularly funds Democratic-leaning groups.

No one dictated that the board oust Ross, but members concluded a change agent was needed given increasing financial pressures at universities and the state’s shifting political leadership, says John Fennebresque, a Charlotte lawyer and major Republican donor who was elected chairman a year earlier. Ross was 65, the typical retirement age for the post.

Only one member — Greensboro developer Marty Kotis — voted against Ross’ removal, indicating a strong consensus, Fennebresque says.

Any consensus didn’t last long. Over the next 10 months, a board search committee narrowed the candidate pool from more than 100 to 10 who had formal interviews, then three finalists and, finally, Spellings. Each member, except Kotis, had voted to hold a private search process and signed confidentiality agreements. But leaks quickly sprouted about potential candidates and Fennebresque’s brusque style, leading to a clash with Raleigh’s tight circle of political insiders.

In mid-August, Fennebresque received a call from board member James Holmes, a Raleigh insurance-agency owner. “Jim told me he had just had a meeting with Tim Moore, Tom Apodaca, Phil Berger and Clayton Somers, and he was directed to tell me that the new president of the system would be Peter Hans.” Otherwise, the system would face serious consequences, Fennebresque says.

A Hendersonville native, Hans built friendships with Moore and Somers while the three attended UNC Chapel Hill in the early ‘90s. He later worked for Republican U.S. Sens. Lauch Faircloth, Richard Burr and Elizabeth Dole and, in 2002, helped Apodaca, a Hendersonville bail bondsman, win a state Senate seat. Somers was chief of staff for N.C. House Speaker Moore before leaving in January to take a $280,000-a-year job reporting to Carol Folt.

Fennebresque then called Berger, N.C. Senate president pro tem, who confirmed that Hans was his favorite, Fennebresque says. Holmes says he only expressed Hans’ interest in the job. “I talked to a ton of people about the position. There was no pressure from any factions,” he says.

Berger never made a threat or heard such a statement, his spokeswoman Shelly Carver says. Moore and Somers didn’t return phone calls.

Three other members back Fennebresque’s version, citing Holmes’ comments. “The legislators were extremely serious,” says a search-committee member who asked to remain anonymous.

The committee decided against selecting Hans as a finalist. “Peter is a great guy, and I think the world of him, but you don’t turn over a $9.3 billion organization to someone who has never run anything,” says Sywassink.

Amid the rancor, a proposed bill emerged to require a majority of the General Assembly to approve the president’s appointment and cap the annual salary and benefits at $500,000, an obvious swipe at the board’s power. Enraged board members contacted Berger, and the legislation was never filed.

On Oct. 23, Spellings took the job. Three days later, Fennebresque quit amid criticism of his handling of the transition. Members including Holmes and Harry Smith had called for his ouster. Smith says the Fennebresque-led board disrespected Ross. “You don’t treat a lifetime public servant that way,” he says.

Asked about Smith’s comment, Fennebresque says, “Harry was among the noisiest about moving out Tom Ross.” Fennebresque says he’s proud of rejecting legislative pressure and helping attract Spellings. He notes two of his biggest critics on the board, David Powers and Thom Goolsby, are lobbyists.

“They said they were taking heat from the General Assembly, where both of them make a living,” he says. “It set a bad precedent for the future that the leaders of the General Assembly tried to get so involved with deciding who the next president of the UNC System would be.” While still close to Sens. Tillis and Burr, he’s changed his political affiliation to independent.

“John got railroaded out because he was doing the right thing,” Sywassink says.

Maybe she wasn’t the insiders’ choice, but Spellings has impressed many board members with her welcoming style. “I think we had a weak candidate pool, and she stood out head and shoulders,” Harry Smith says. “She will be out front, and we’re here to help.”

Spellings adroitly navigated the House Bill 2 quagmire, criticizing the law as unenforceable. In addition to crossing the state to visit campuses and leaders, she’s made repeated trips to meet lawmakers. “The president of the university has to get along with the majority party in the legislature, and she is in the [legislative] building all the time,” Steven Long says. “They appreciate that. She’s a pro, and she gets it.”

Spellings has yet to speak out on the civil-rights center controversy, which is being examined by a board committee. It must decide if trimming the project’s sails, while satisfying conservative lawmakers, is worth ensuing protests and a likely PR storm. One suspects Spellings would prefer a focus on more compelling issues.

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