Fracture in NCI board over $168m state budget ask 

As state budget writers consider this week whether to claw back NCInnovation’s $500 million taxpayer-funded endowment, the private nonprofit’s board has been debating over how much money lawmakers should provide in its place — and whether the organization should remain bound by current transparency, oversight, and overhead restrictions.

The NCInnovation board voted May 27 to ask lawmakers for $28 million annually for six years if the endowment is reclaimed. But that vote exposed a split between legislative appointees and self-appointed board members over whether lawmakers should receive a “Minority Report” warning against loosening statutory guardrails on the use of taxpayer money.

It comes as the budget debate labors on over, among other things, what to do about NCInnovation, a private economic development nonprofit seeded with a $500 million taxpayer-funded endowment. According to those close to the budget process, the question appears to be not whether the legislature will claw back the NCI endowment, but how lawmakers will restructure replacement funding and governance.

In the NCI Board of Director’s meeting members voted to respond to lawmakers’ requests for its legislative position amid questions about oversight and management, and to previously reported concerns about the organization’s high “burn rate.” During the one-hour meeting, a majority of the NCI board agreed to suggest that if lawmakers claw back the half-billion endowment, they would fund the private non-profit with $168 million; $28 million each fiscal year for six years. In a letter to lawmakers, they pointed to a seven-to-10-year runway for success for programs in other states that they say are comparable, plus a commitment to some private fundraising.

The runway represents a change from 2025 when former NCI CEO Bennet Waters told the News & Observer, “We’re typically looking at no more than a two-year funding horizon for our piece of [the] valley of death.” The “valley of death” is a term NCI uses to describe the drop off facing university research as it tries to achieve commercial success.

“NCI is committed to continuing to raise private dollars on an annual basis to supplement state funding for non-allowable expenses,” the letter read. “A reasonable annual fundraising or private funds spending target is $2 million in 2026 dollars.” 

The letter does not suggest changes to the current governing law surrounding NCI, other than to say “During the time NCI receives State support, we will continue to comply as directed with all legislative/governance requirements or prohibitions on the use of State funds in law.”

Clash over a “Minority Report”

The Board of Directors’ May 27, 2026 vote on the legislative ask was nine to three. However, the group fractured along appointment lines over inclusion of a “Minority Report.”

Those with legislative appointments to the board voted in favor of including a report to lawmakers that detailed the three dissenting members’ opposition position — that NCI should maintain its current governing requirements laid out in statute if it continues to take taxpayer money. That statute includes oversight measures like adherence to public meeting and record rules, legislative appointments, and limiting NCI’s spending on overhead — salaries, legal fees, and lobbying — to privately raised funds, not taxpayer money.

Even those legislatively appointed members who voted in favor of the final ask voted to include the “Minority Report,” drafted by NCI Board of Directors member Art Pope and joined by directors Blannie Miller and Wayne Sasser. 

Remaining board members voted to block lawmakers from receiving the official minority position report. 

which projection justified the $28 million ask?

While the NCI board voted to ask lawmakers for $28 million each year for the next six years, NCI’s budget vote earlier in May was based on an estimated $18.9 million in projected endowment earnings for FY27 with a 3.7% yield assumption, according to NCI. That figure is referenced in the minority report as evidence that NCI’s ask of taxpayers is $10 million more than their projected budget.

“The NCI Board minority voted ‘no’ on this motion because $28 million per year — about 48% above projected state endowment revenue — is excessive, especially in a year of limited state revenue growth and expected average state employee raises of only 3%,” the Minority Report reads.

“The NCI Board minority believes that the 2023 agreement, as enacted in N.C. Gen. Stat. § 143-128, should remain in effect and continue to require that Overhead and Administration be funded solely with private funds,” it continues.

The dispute also follows previously reported concerns about NCI’s spending pace, or “burn rate,” particularly the amount of money needed to operate the organization before it has produced measurable returns from its grantmaking model. Those concerns, raised by Pope in a November board meeting, have centered on whether taxpayer-backed funds should support administrative costs, salaries, legal expenses, lobbying, or other overhead while the organization is still building out its programs.

“We’ve got $10.3 million in non-state assets and a $5.9 million burn rate a year,” Pope warned in the November, 2025 meeting. “We’re running out of money, in about two years. We don’t have a development officer or fundraiser. We don’t have a grant application officer, and we’re adding expenses. This needs to be addressed sooner rather than later.”

As reported by the North State Journal last year, NCI also spent nearly $1.7 million in an investigation of Pope by their Special Litigation Committee, chaired by director Ven Poole.

shifting investment strategy

In an email to Carolina Journal following the May 27 vote on their legislative ask, NCI’s chief communications officer, Michelle Fiscus, offered updated financial projections as “clarification” for the Minority Report, indicating the $18 million figure used in it was outdated.

“Since that estimate was developed, Wells Fargo has updated its projections to reflect the investment strategy approved by the board on May 12,” Fiscus wrote in email. That organizational investment strategy included moving toward equities in 2027.

The shift to an investment strategy with more equity exposure projected higher returns for the endowment. It would also introduce greater risks of loss for the taxpayer, something board members sought to avoid when evaluating proposals while selecting an investment manager in early 2025.

“Based on the revised asset allocation, Wells Fargo now projects FY27 endowment earnings of approximately $29.4 million, reflecting an expected annual yield of approximately 5.7%. That projection is approximately $10.5 million higher than the $18.9 million estimate referenced in the minority opinion.”

According to the email from NCI, the new projections were requested on June 1 and delivered to board members by CEO Michelle Bolas on June 3. Both dates came after the board’s May 27 vote.

 “The sequence of events is notable,” said Donald Bryson, CEO of the John Locke Foundation and publisher of Carolina Journal. “Five days after voting to ask lawmakers for $28 million a year, NCI obtained a revised Wells Fargo projection that raised projected FY27 endowment earnings by more than $10 million — from $18.9 million to $29.4 million. But that higher projection depends on taking greater market risk with a $500 million taxpayer-funded endowment.”

oversight in statute

The May 27 board meeting discussion was heated at times, as members dug into Roberts Rules of Order and the original 2023 statute setting up NCI in the first place. Members opposing inclusion of the Minority Report said in the meeting that it was too prescriptive.

“I would just caution us that we need to kind of keep our discussion tailored to that task at hand, which is for providing a funding runway for a number of years so that we can continue to demonstrate the success of NCI, and not take policy positions on how the legislature wants to go and enact that,” said Poole. “I would suggest we have a more narrow focus on what we communicate.”

Among the restrictions in the original statute is a 1.5% cap on overhead spending, outside of private donations.

“We are asking for a different overhead model here after main operating,” said Director Kirk Bradley, defending omission of the Minority Report. “It’s really asking for flexibility to allow for public funds to cover some of the salaries of our headquarters staff who do work overseeing both the hubs as well as the grants.”

The state Senate included the clawback in its 2025 budget (SB 257), but that bill also repealed NCI’s governing statute, removing overhead funding requirements and legislative oversight through appointed members. That Senate budget was not passed by the NC House or signed by the governor, setting up the current budget negotiations underway at the General Assembly.

Pope also raised concerns in the May 27 meeting that the Senate’s 2025 budget language — to reduce funding for NCI while removing oversight provisions — was influenced by former NCI leader Bennet Waters and Josh Howard without the knowledge of the board of directors. 

“So now, the Senate is asking us what our position is,” he said. “I think our position as a board should be we’re going to keep the original agreement, on the original terms on transparency and disclosure, public appointees, public records, open meetings, and restricted use of the funds.”

NCI’s updated financial projections are slated to be presented to the NCI board in the August board meeting, while the state legislature continues to negotiate the budget with a July 2 self-imposed deadline.

“Fracture in NCI board over $168m state budget ask ” was originally published on www.carolinajournal.com.