The Governor's Budget: Bailing Out Corporate NC
Updated March 20, 2009
During her State of the State Address on March 9, 2009, Governor Beverly Perdue was adamant that her administration would be different. “This is the time to stand up to the sweet seductions of special interests, the temptations of politically popular pork barrel spending, and end the practice of backroom dealing,” she said. “We cannot afford them in these perilous times.”
A week later, Perdue awarded $130,000 in taxpayer funds to HC Composites, a boat manufacturer that plans to pay salaries averaging almost $3,000 less than those in its home county – breaking North Carolina’s long-running rule that subsidized companies must exceed local average wages, while spending money that North Carolina apparently doesn’t have.
Are we moving in the right direction?
Amidst a two-year budget gap projected to be around $6.4 billion for the biennium beginning July 1, 2009, Governor Beverly Perdue offered her first proposed budget for the state of North Carolina.
Years of massive overspending had created a hole much deeper than it needed to be in the current economy, and Perdue admitted that she worries about day-to-day operations for the current fiscal year ending June 30, for which funding appears to be coming in about $2.2 billion short. Citing cash flow management problems, in March she raided the Rainy Day Fund and other reserves to maintain solvency for State Health Plan for the remainder of the year and to keep other state programs operational.
Even income tax refunds to citizens were being delayed.
Perdue’s comments during her State of the State address echo those made by President Barack Obama, who stated that earmarks to private companies are a corrupting element in today’s political climate. Yet just as Obama promised that he’d start the elimination process after approving a budget which included 9,000 earmarks, Perdue’s pledge to curtail unnecessary spending appears to pertain to the future. The Governor mentioned that lawmakers in North Carolina, “cannot ignore or neglect the state’s more pressing needs.” But based on her actions this spring, as well as her proposed budget, the Governor has a seemingly distorted view of what encompasses the term “pressing needs.”
North Carolina leaders have perfected the science of pork barrel spending in recent years, even gaining national infamy for funding a tea pot museum in Sparta. Budgets have been liberally sprinkled with political favors and discretional spending. Billions have been forked over in the name of “economic development” for projects like the failed Global Transpark, the politically-inspired Golden LEAF Foundation, and the disastrous Randy Parton Theater as well as to individual corporations like Dell Computer Corp., which is refusing to disclose how many employees will suffer from the current layoffs – or even, for that matter, how many individuals are employed at the Winston-Salem facility.
Governor Perdue has voiced regret over having to make difficult decisions to address today’s dire economic circumstances, including reductions in school funding and the elimination of some state jobs. But the real problem is that the state continues to spend on things that couldn’t be any further from “pressing”.
Though the Governor must be applauded for an overall budget total which shows enormous restraint over the spending sprees of recent years, Governor Perdue’s proposal doesn’t hold back on funding for items that could arguably wait until the state sees unemployment rates decline and revenues increase. For example:
- The proposed budget includes $1.5 million is budgeted for tourism, film, and sports subsidies.
- $1.56 million is earmarked for the Wanchese Seafood Industrial Park.
- Perdue allocated $5 million for her own “walking-around” capital in the One NC Fund.
- Another $5 million is earmarked for the One Green Business Fund, also for cash hand-outs.
- Millions are designated for other corporate welfare subsidies, including $27 million for the Jobs Development Investment Grants (JDIG) fund, $2 million for the NC Small Business Fund, and $3 million for the Main Street Solutions fund.
Of course, taxpayers won't know the specifics of individual pork projects or the recipients of corporate welfare until the final budget is ratified this summer, or later.
In our current economy, it isn’t economically sound to make cuts in critical services and other areas while concurrently throwing millions in corporate welfare at companies who don’t need bailing out. Pork and other initiatives that are unlikely to permanently & positively impact the economy should be considered unnecessary spending, and it's time for them to go. It’s one thing to “go green”, but it’s altogether different to ignore your own budget director.
Taxpayers have expressed enormous outrage at the practice of awarding cash to private companies and earmarks for unnecessary projects at the federal level, bemoaning that these practices are unfair and smack of corruption. Why, then, have these types of spending become perfectly acceptable at the state level?
Where is the outrage?
In the current economic environment, North Carolina simply can’t afford to continue gifting cash to targeted corporations while other businesses – and our state tax ranking - continue to suffer. In Perdue’s State of the State address, she proclaimed that, “We all must exhibit extraordinary leadership, courage, determination, and make the tough, but right decisions.”
When it comes time to sign the North Carolina budget into law, we hope she'll follow that sage advice.
