ď Iíve been very honest with everybody: Who knows what weíll have to do?

Gov. Beverly Perdue takes office amid a budget crisis
and one of the weakest economies since the Depression.
By Scott Mooneyham

On Jan. 10, Beverly Eaves Perdue became the 73rd governor of North Carolina ó the first woman to hold the office. The New Bern Democrat spent eight years as lieutenant governor and 14 as a state legislator. Like predecessor Mike Easley in 2001, she took the reins during a recession that threatens state services and programs. She also faces a budget shortfall that her advisers saymight exceed $2 billion ó a gap the state constitution charges the governor with closing. Before Christmas, Perdue discussed her plans to do that and for economic development with Contributing Editor Scott Mooneyham. Questions and answers were edited for brevity and clarity.

BNC: What cuts have been considered so far?

Perdue: We went through the budget yesterday for a couple of hours. There is going to be pain across the board, but Iím going to concentrate on two core goals. One is not eating our seed corn, which is education. My goal is to not hurt the classroom, to keep the teacher and kids at the forefront of my priorities, but also to remember that the budget canít consume 100% of the time of the governor of this state.

Will you support tax increases?

I have said that I would be willing to consider a tobacco-tax increase if it were earmarked solely for health. There are no absolutes today because nobody during the campaign season had a clue what the global economy was going to look like in January 2009.

Could we see other tax hikes?

My reluctance to even consider raising taxes is very strong. I told the budget team yesterday to flag any tax ideas that were on the page ó I refuse to discuss them now. Iíll do whatever it requires of the stateís leader to make sure that our basic services continue to run. Iíll make sure that the people are safe, that the kids have school buses, that there is health care available and that the lights are on, if you will, in North Carolina.

During the 2001 budget crunch, Easley angered state employees by intercepting pension-fund contributions as well as city and county officials by diverting tax streams earmarked for local government.

I think that the governor has done a really remarkable service to the state of North Carolina and to me and to the General Assembly by offering up the cuts he has imposed. He didnít have to do that. So he took one last hit, trying to leave the financial house in order. What he did in 2001, he did because he had to do it. Iíve been very honest with everybody: Who knows what weíll have do to?

How can local government do its job in such an atmosphere?

Iíve already begun to gather a working group. I donít know what weíll end up calling it, maybe a round table of locally elected officials ó urban, rural, county, city, town. Iím going to have a council. As I make tough decisions, theyíll at least have a chance to look me in the face and say, ďHey, thatís just crummy.Ē At least theyíll know it. They wonít have to read about it in the paper.

What about state employees?

Iím going to do the same thing. The health plan is a real challenge. Pay raises? Who knows whatís going to happen? But I think weíre bet- ter off if we have a conversation early on about the challenges and decisions I have to make.

You were quoted as saying the lines of authority and responsibility for state and local services should be re-examined, as they were during the Great Depression. That would cause quite a fuss.

Iím never worried much about creating big fusses. My point was truly and simply that we couldnít just say itís OK the way it is and that weíre not going to do anything in the next four or five years. You have to figure out a way to have a revenue source to continue to invest in the future. I donít know what thatís going to require.

Will the federal stimulus package help the state out of this mess?

I donít look at this as a bailout of the states. I look at this as a really tremendous opportunity for our federal partner to help grow jobs across this country. North Carolina will surely do our part. Weíve already done our part. Weíve just authorized the bonding and indebtedness for a billion dollars in university construction. Weíre not reluctant in this state to take care of ourselves. Iím very eager for us to build roads and to put people back to work, to build water and sewer and broadband.

You mention Easleyís decision to hasten the sale of $700 million of construction bonds. Wonít the debt service rip a bigger hole in the budget?

Right now, short-term is where you have to head. Iíve been told by the state treasurerís office and the chief budget officer that the additional debt service and bonded indebtedness doesnít put our bond rating at risk. I wonít do that. But I do believe to get that money on the street now and put some of these folks back to work is really important.

Will the budget shortfall and recession stall some ambitious proposals and promises made during your campaign?

Iím a realist. I know it is going to be much slower. I intend to have my economic program, though. And one way or the other, I get a first shot at the budget to set some priorities. I intend to grow a green economy, a military-aerospace economy, an agri-biotech economy. I intend to help manufacturing and small businesses and agriculture.

Other than being the stateís chief cheerleader, how does a governor do that?

This governor has already created a military foundation outside of government thatís very involved in whatís going on in Fayetteville, bringing in new business and industry around the defense industry. The Department of Commerce now has a whole section earmarked for aerospace and that kind of dynamic technology. The Charlotte [regional economic-development] partnership has just taken the military as one of its four major priorities for the next seven years. Its members see General Dynamics, and they see what can happen if you have a leader in the private or public sector who understands that if we really, really aggressively pursue these companies, North Carolina can create a whole new platform.

Thatís not just a wing and a prayer?

I think whatís going to happen around the Fort Bragg area is remarkable because the money is going to follow FORSCOM [the Armyís major command headquarters moving there from Fort McPherson, Ga.]. All of these huge companies that get these big Army contracts are going to want to locate near those generals. Itís just common economic sense. We are really on the cusp.

Youíve been involved in the creation of a startup fund for green industry.

Itís a tiny amount of money. I want someone to do an assessment. I want to know exactly where we are in terms of green business. They tell me that the solar farm in Davidson County is remarkable. They tell me that there is a chance that we can manufacture steel pieces of windmills here that can be marketed all over the world and that we may have some wind capacity off the coast. It is so untapped.

Can the governor help small businesses?

I was in the Triad earlier today and was reminded very strongly that small businesses are the core of North Carolinaís success. We must remember that smaller businesses have never received incentives. There is a disproportionate amount of work done by many of us on big business. My focus is going to be on small business.

How?

The bottom line is we have to have a taxing structure and a regulation system and an assistance system in place that helps grow and seed small businesses. The one thing we can do is try to force our financial agencies to begin to loosen the strings on loan money. Right now money is hard to borrow anywhere in the country. There is just a lack of financing or capital moving through the loan or financial systems of this country.

The General Assembly has considered tax breaks for corporations that donít have substantial earnings, but most small businesses arenít organized as corporations.

Iím looking at what options there are in this budget climate to incent in some way the continual investment and dreams of the new business owner and how the state might make the startup and regulation of a business less heinous, less bureaucratic. I donít have a package yet. I will by the time the General Assembly convenes Jan. 28.

As of this interview, you havenít named your commerce secretary.

Iím looking for someone who can help me grow and shore up the economy. [Perdue picked J. Keith Crisco, president and chairman of Asheboro Elastics Corp., a textile manufacturer with operations in Latin America and ties to India. ďThis man understands the future,Ē she said. ďHe understands global.Ē

Does the way the state recruits industry need to change?

Nothing needs to remain stagnant. Weíve done a fairly good job. I think the incentives are the root of all evil across the country, but they are what they are. Until all the states unilaterally disarm, Iím not going to try to disarm North Carolina. I am in the process of developing a business-recovery plan, a business-creation plan. Iím working on my own economic-development proposal.

Should governors band together to ask Congress to curb incentives?

Or we can do it ourselves. If all 50 of us unilaterally sign a pact to disarm, we donít have to have Congress do it. But as long as one or two of us continue to do it, then the other 48 are going to be made to do it.

When Easley and Commerce Secretary Jim Fain came to the legislature with the idea of using cash grants ó the Job Development Investment Grant program ó some thought that the Bill Lee Act tax credits would be dropped.

I think you need to have both. We need to have a toolbox filled with a lot of different options. I was intrigued to see Google offer its money back. That clawback provision is incredibly important, that companies know that if they donít have the accountability standards in place that the contract and the initial agreement called for that they have to give the money back to the state and the local governments.

The Google deal was criticized because a local government desperate for jobs gave up critical property-tax revenue for years. Should the state constrain local incentives?

Local governments should continue to have the power to do what they need to do. Thatís their local peopleís tax dollars. There was a time when I was a state senator from a place near the Global TransPark and we voted ourselves to pay five bucks a year and a fee on cars to help pay our share of the stateís mandate for the TransPark. And weíve just begun to see a derivative from all those investments. It takes a whole lot of grit from leaders at the local level ó or the state level for that matter ó to say, ďIím willing to lose an election over this issue.Ē

Business leaders complain that the workersí compensation system is tilted toward workers, causing employersí costs to rise.

There is nothing worse than a fight over workmanís compensation in the legislature. I know that it is high on the list of some business leaders. I know that it is low on the list of some legislators. Weíll see what happens.

Most Democrats elected statewide have been seen as pro-business moderates. Does the partyís recent reliance on union campaign contributions threaten that?

I donít believe youíll ever see a change. Iím of the generation that understands that North Carolina must be very pro-business to be globally competitive. Iím a member of the State Employees Association of North Carolina. If that makes me a union member, so be it. Iím proud of the work that SEANC does as they stand up for state employees. They articulate for health care and benefits and workplace conditions. I think thatís what is good about a capitalist society. We all want whatís good for all of us.