Economic Outlook - February 2006

Mike Easley plays up the lottery and what else he has done — and wants to do — for economic development.
By Frank Maley

Last year, the first year of Gov. Mike Easley’s second term, the General Assembly passed a state lottery, a key plank in the platform he first ran on in 2000. What effect will it have on the Tar Heel economy when it begins later this year? That’s one of the questions Senior Editor Frank Maley posed to the Rocky Mount Democrat as 2005 came to a close. Here’s an edited transcript of his answers.

BNC: If you were writing a history of your time as governor, what would the squib on the back cover say?

Easley: The true measure of success is not making progress in good times. The true measure of success is making progress in tough times. North Carolina has flourished despite the many challenges it has faced, including everything from budget shortfalls and 9/11 to natural disasters such as ice storms, hurricanes and drought. The state is stronger because of leaders who remained committed to fiscal discipline, to investing in knowledge and innovation and to building one North Carolina that provides educational and economic opportunity to every citizen regardless of where they live.

You’ve fussed with Democrats as well as Republicans and are our first governor to use the veto.

There is always going to be some tension and conflict between the executive and legislative branches when the state is facing tough budgetary times. And that is true even when the same party is in formal control of both branches. On my very first day in office, I had to take control of the budget because the state was in an emergency shortfall situation. The budget was no longer a static document crafted by the legislature but a dynamic process managed by the executive branch. We also have faced court cases, like the Leandro education case, mandating state action even if the legislature has not acted. Tension and conflict have been unavoidable, but I am still proud of all the progress we have made with the legislature on education while getting spending under control and fixing our economic engine. At the end of the day, the people were the winners, and that soothes all the hard feelings.

Are you hoping to shed the “crisis governor” tag your second term?

People call me many things. “Crisis governor” is among the kindest. I believe that with the fiscal discipline we have instilled over the past five years we will be able to avoid any budget crises in the second term, but I cannot speak for natural disasters. We will continue to be prepared for any storm that may come to visit so that we are able to minimize damage and loss of life and to complete recovery quickly.

What do you consider your biggest mistake so far?

I try to focus on the future and not the past.

We now have the lottery. How will it affect things?

It will make sure that our progress in education on class-size reduction and academic pre-K for 4-year-olds is sustainable and paid for.

It will help address school-construction challenges and make college more affordable for needy students. An educated work force is the most important component we can supply for the business community in the state. In addition, the lottery provides a voluntary way for North Carolinians to support education without raising taxes.

“Capital follows labor, and good jobs will have to locate where the best work force is located.”

Much has been made of your love of King of the Hill. What has watching the animated TV series taught you?

A lot of the characters remind me of people I grew up with and occasionally remind me of myself. They struggle with everyday social issues that leaders should be mindful of when making decisions.

What could other Tar Heel politicians learn from your success?

They should learn that you are better off not falling into the trap of passing any ideological litmus test, whether from the left or the right. Stay in touch with regular people and know their needs and challenges.

In 2004, the legislature prohibited advocacy groups from spending corporate or union money to help any candidate within 60 days of a general election. Some called it the “Mike Easley Protectionist Act” because it hindered efforts by your challenger to close a gap in fundraising. Will you push for more reforms, or are you satisfied with the system as it is?

I do not agree with the premise of your question. This was a measure with strong bipartisan support in the legislature. It simply extended federal campaign law under the McCain-Feingold legislation to state campaign laws. North Carolina has a history of excluding corporate contributions to campaigns, and that is what the legislature did. I believe we should continue to evaluate our campaign-finance laws to see where we can improve them.

After his links to lobbyists were questioned, House Speaker Jim Black said he’ll refuse all gifts from them. Do you favor requiring all state officials to do likewise or other changes governing their relations with lobbyists?

I know a legislative panel is looking at this right now, and I want to see their findings and recommendations.

Would you favor a ban on campaign contributions by lobbyists?

To be effective, I believe campaign-finance laws need to include appropriate disclosure and enforcement provisions. As noted earlier, I believe we should continue to evaluate our campaign-finance laws to see where we can improve them. As attorney general, I worked to find ways to limit those contributions with our Better Campaigns Commission, which concluded it would be subject to many legal challenges. Our best chance at passing something effective is to follow the federal laws like McCain-Feingold that have been approved by the Supreme Court.

AP Image of Mike Easley

Before taking office, you said the Department of Environment and Natural Resources troubled you because of turnover and inconsistency in the way it applied rules. Has it improved?

Absolutely. DENR has an important role to play in preserving and enhancing North Carolina’s reputation as the best place to do business in the country. To that end, it has worked

aggressively to streamline, expedite and enhance its environmental-permitting processes. Through its express permitting program, processing time is being reduced by 60% to 90% on average. This program has met with rave reviews from the business community and now plays an important role in our job-creation efforts. More than 600 permits were issued through the program in fiscal year 2004-05.

How do you think Jim Fain has performed as secretary of commerce?

Jim has done a great job, as has everyone in my Cabinet. It is hard to argue with results. Since 2001, we have created nearly 150,000 jobs, secured $22.7 billion in investment, and our business climate has been ranked No. 1 for four out of five years.

Many say the William S. Lee Act — which provides tax credits for job creation and investment — needs changing, yet the legislature has avoided that. What needs to be done?

We have shifted emphasis to more flexible tools such as the One North Carolina Fund and Job Development Investment Grant. The Lee Act is too complicated and needs to be simplified. I believe it should be more targeted toward rural communities and that it should be changed to make sure that it makes a true difference in whether a company locates or expands in North Carolina rather than someplace else.

What about overall incentives programs?

Through the use of smart, targeted investments, like the One North Carolina Fund and JDIG, we have been able to secure more than $4.2 billion in investment and 25,947 jobs since 2001. My budget will include additional funding for the One North Carolina Fund and the new One North Carolina Small Business Fund, which will provide grants to small businesses to help them conduct research and technology-development projects.

"Tar Heels must have “strong minds, not just strong backs, to find jobs that will support their families.”

Can anything be done to lure better-paying jobs without paying incentives?

By continuing to build a highly skilled work force and cultivating a high quality of life, we will be able to continue to recruit high-quality jobs and industry. Capital follows labor, and the good jobs will have to locate where the best work force is located.

What’s your plan for improving the skill level of the work force, aside from spending the lottery money on basic education?

The education lottery is just one piece of the puzzle that provides a dedicated source of revenue for pre-K class-size reduction, school construction and scholarships for needy students. We are investing in education at all levels. Since 2001, we have invested billions in education. North Carolina is a national leader in high-school reform efforts aimed at lowering the dropout rate and giving students the skills they need for the workplace. The Learn and Earn program, which allows students to earn an associate degree and a high-school diploma, is in 14 counties and will be expanded statewide by 2008. In the past year, we have opened 11 small, economic-development-themed high schools across the state as part of the New Schools project. These schools have 400 students or less and focus on growing economies such as health care, biotechnology and information technology. Our goal is to have 75 of these new schools by 2008. This past year, we also launched

the nation’s first Center for 21st Century Skills, which will redesign the state’s high-school curriculum and assessments to ensure that what is taught better prepares students for college and work in the 21st century.

What implications does the shrinking manufacturing sector have for the state?

Our citizens have to have strong minds, not just strong backs, to find jobs that will support their families. We must continue to invest more in education, we have to train those who lose their jobs, and we have to stop federal trade policies that continue to send our jobs overseas faster than we can create new, sustainable ones here. We are attracting manufacturing jobs that require high skills, such as biomanufacturing. Our biotech job-training network is a model for the world, not just the nation. The service sector jobs in finance, health care and business services are good jobs as well.

“North Carolina is going to emerge with one of the best business climates and most highly skilled work forces.”

Can the state stop trade policies that send jobs overseas?

Only the federal government can make changes to federal trade policies, and that is what I have been asking them to do since 2001. Since my plea has fallen largely on deaf ears, I have focused our attention in North Carolina on transitioning our economy. We have made great progress. Despite the loss of thousands of jobs in textiles, apparel and furniture industries due to federal trade policies, we have gained 53,000 jobs in the past year. Unemployment is down a full percentage point from record highs two years ago, and the rate has come down for four consecutive months.

Before taking office, you said we need to be ready to churn low-paying jobs in traditional industries and attract better-paying jobs. Since then, the state has used incentives to lure or keep jobs in furniture manufacturing and tobacco packaging.

I have not changed my position on this issue. There will always be good jobs in the high end of those enterprises that built this state. The jobs we are attracting are sustainable, high-wage jobs that serve niche markets and require higher skill levels than those we have lost. Nonwovens are an excellent example of where we have recruited textile jobs that are sustainable. Eight of the 40 largest nonwoven firms in the world have manufacturing plants in North Carolina. In the past two years alone, 11 nonwoven textile companies have announced new facilities or expansions in our state that have created 835 jobs and $375 million in new investment.

What about small business?

We have expanded our existing-industry focus and established the Business ServiCenter as the first place a company or individual goes for help in starting a business, obtaining a business license or getting permits. We work closely with the Small Business and Technology Development Center, the Community College System, the Small Business Administration and the Rural Center to provide support and resources to entrepreneurs and small-business owners. Services could include technical advice and contacts for outside resources that may provide financial assistance.

What about rural areas?

I was raised in rural North Carolina, and I want to see it grow and prosper along with the rest of the global economy. We can no longer rely on the three-legged economic stool of textiles, tobacco and furniture that fueled the state’s economy in the past. We must build an education system designed to prepare our work force for a high-skill economy, which in turn will sustain and grow high-skill industries. As attorney general, I helped create Golden LEAF, which has been and will continue to be an important player in helping with the future economic prosperity of rural North Carolina. In addition, we are continuing to invest in our low-wealth schools, many of which serve rural communities, in our community-college system and in high-school reform.

Describe the state as you hope it will be when you leave office.

I truly believe that we are on a path to creating one North Carolina, where every citizen has access to the education they need to be successful in the global economy. As we continue to transition our economy from manufacturing and textiles to one that is reliant on skill and innovation, North Carolina is going to emerge as a dominant state with one of the best business climates and most highly skilled work forces in the world.

And what are your plans once you finish your second term?

I am focusing on getting through the next three years right now.