Capital Goods - February 2009

The best-laid plans of governors
By Scott Mooneyham

In 16 years as governor, Jim Hunt never let anyone doubt what he wanted his legacy to be. During his final two terms, people parodying him always began by talking about “the little bitty chil’ren.” Improving public education was his priority, and when he left office, schools certainly were better than when he first took office in 1977. But even his fiercest fans wouldn’t claim he was solely responsible for that improvement, and eight years after he departed, those schools still have serious problems, including a dropout rate above 30%. Hunt is far more likely to be remembered for strengthening North Carolina’s executive branch — cajoling legislators and the public into allowing gubernatorial succession and the veto — than for an education agenda that produced mostly incremental gains.

A review of Hunt’s tour of duty should serve as a lesson for the newcomer to the job. What’s possible and what’s not, what might get you a few sentences in the fourth- and eighth-grade history books, might not be what you anticipated. Beverly Perdue, as she makes clear in the interview that begins on page 18, considers reinvigorating and reshaping North Carolina’s economy as one of the top priorities of her administration. She wants to see industries and jobs created around alternative energy and military contracting. She wants to give small businesses and entrepreneurs tax and regulatory advantages to help them grow. She wants to loosen the strings on capital that will support industrial and small-business development.

But just as it was with Hunt’s drive to remake public schools, forces beyond Perdue’s control will determine whether a revamped state economy will be her legacy. She won’t be able to escape the reality of the times, tough times that are going to squeeze state budgets and dry up tax coffers. She won’t be able to immediately overcome the scarcity of capital and its effect on fostering business growth. Perdue surely recognizes the difficulty of her circumstances. The budget may well be out of balance by better than $1.5 billion. A financial mess — independent of the economic downturn — in the state employees health-insurance plan could require an additional $300 million. Any plans for business tax breaks, even if narrowly targeted and with broad support, will be nearly impossible anytime soon.

Finding capital to encourage development of cutting-edge, high-risk alternative-energy businesses won’t be any easier. Last year, legislators with then-Lt. Gov. Perdue’s backing established the N.C. Green Business Fund, which handed out 13 grants totaling $1 million. But a million dollars won’t foster a major economic shift. Perdue herself acknowledged that the Green Fund money was “tiny.” Speaking the word, she held her thumb and index finger apart, light barely visible between them. But where do you find the huge amounts of capital needed to try to rearrange the economic landscape? Tapping the state’s pension fund, with its billions, is fraught with problems. Perdue talks about trying to get financiers to loosen up. Talk and action are two different things.

Perdue knows help is on the way on another front: her pursuit of military contracting jobs. The Army is moving a major command headquarters from Fort McPherson in Georgia to Fort Bragg, outside Fayetteville, which should attract companies interested in landing contracts flowing from decisions made by officers based there. The state Department of Commerce and local economic developers are already gearing up to pull in more of this business.

The financial difficulties confronting the new governor should be mitigated by her relations with the General Assembly. Perdue is a creature of the legislature. She understands how it operates — on the surface and below it — and she enters office on good terms with legislative leaders, particularly in the Senate where she once was chair of the powerful Appropriations Committee. But like any governor, she’ll butt heads with the legislature at times and will have to demonstrate some independence from old allies, including Senate strongman Marc Basnight, to make her mark.

Perdue will have to steady herself to the reality that faces all leaders, whether they operate in the public or private sectors. The landscape constantly changes: What looks like a promising opportunity today can become a troubled path tomorrow. And the troubles of today can turn into challenges in which you prove your mettle. As she begins in the state’s top political job, it’s clear where Perdue hopes to lead the state. It’s far from certain where she will leave it.

Scott Mooneyham is the editor of The Insider, www.ncinsider.com.