Free & Clear: September 2013

Lessions from the session
By John Hood

Whether or not you agree with the policy decisions of Gov. Pat McCrory and the General Assembly, it would be difficult to dispute that the 2013 legislative session was one of the most spectacular events in the state’s political history. Controlling the governorship and legislature for the first time since Reconstruction, Republicans enacted bills on a broad swath of issues. As far as I can tell, North Carolina adopted more free-market and conservative reforms than any other state has done in a single year. Here is just a partial list:

Tax reform. While reducing or eliminating dozens of tax breaks and exclusions, lawmakers replaced the multirate state personal-income tax, which topped out at 7.75%, with a flat 5.75% and slashed the corporate income-tax rate from 6.9% to as low as 3% (if revenue-growth targets are met). At a stroke, North Carolina’s business-tax climate improved from 44th to 17th, according to the Tax Foundation, a conservative-leaning Washington, D.C.-based think tank.

Budget reform. Lawmakers improved the state’s balance sheet by shoring up reserves, speeding up repayment of $2.5 billion in unemployment-insurance debt and imposing a debt limit that forces future legislatures to submit bond packages to voters for approval, a constitutional principle politicians have evaded since 2000. Giving McCrory the go-ahead to pursue competitive contracting for Medicaid services makes it more likely future legislatures can devote a higher percentage of revenue to public investment rather than consumption.

Regulatory reform. Legislators followed up bills passed in 2011 and 2012 by, among other things, requiring that existing state rules undergo review every 10 years. Regulations that no longer comply with state law or produce more costs than benefits automatically will expire.

Education reform. While increasing General Fund spending on K-12 public schools 4.8% over last year’s authorized budget, lawmakers focused on structural changes to North Carolina’s education system. These include replacing teacher tenure with multiyear contracts, introducing merit pay, assigning schools letter grades based on performance, strengthening charter schools and offering private-school scholarships to as many as 13,000 students with special learning needs and from families with below-average household incomes.

Transportation reform. Lawmakers rewrote the state’s funding formula for highways and other transportation infrastructure, detouring dollars from pork-barrel projects to high-priority investments that will alleviate traffic congestion and create jobs.

Major legislation in just one or two of these issues would have delighted conservatives and infuriated liberals. That the governor and General Assembly took action on all of them, as well as other matters such as election laws and social policy, made the session historic.

Democrats began the session with a weak hand, having lost the General Assembly in 2010 and then seeing Republicans rack up supermajorities in 2012. In my opinion, they could have played that hand better. Rather than strident and ultimately doomed opposition to virtually every GOP initiative, they should have picked their battles. If Democrats had as a group worked with Republicans on a voter-identification bill, rather than equating this popular idea with poll taxes and segregation, they would have been in better position to insist that more-controversial ones, such as ending same-day registration, be kept out of a bipartisan bill. Working with Republicans, they could have helped to shape school-choice legislation, which enjoys stronger support among Democratic-leaning voters such as blacks and Hispanics than among some Republican-leaning ones.

Despite their victories, Republicans had their own miscues. Their rhetoric and actions often seemed more about avenging past mistreatment by Democrats than about fair play and good governance. Allowing more notice and debate on controversial measures would have set a better tone for the session and strengthened their brand without imperiling the power of Republican supermajorities to pass most of the bills in question. Call me naïve — you’ll hardly be the first — but I continue to agree with the Roman writer Cicero that the means justify the ends, not the other way around.

Still, voters are likely to evaluate officeholders primarily on the effects of their decisions, not the niceties of legislative procedure. If the experience of other states and countries is predictive, the mix of fiscal and regulatory reforms will boost North Carolina’s rate of economic growth. Whether this will be evident by the 2014 elections is another matter. So we are going to witness months of rallies, speeches, debates, editorials and ads advancing the views of supporters and critics of what happened this year. Like it or not, the spectacle continues.

John Hood is chairman and president of the John Locke Foundation. You can reach him at jhood@johnlocke.org.