by John Hood
When it comes to addressing North Carolina’s most- pressing challenge, our lackluster economy, the state legislature deserves a grade of A- for its 2013 session. Here's how I computed the grade.
Last year I wrote and published Our Best Foot Forward: An Investment Plan for North Carolina’s Economic Recovery. The book explored the recent political and economic history of the state, analyzed 20 years of empirical research on state economic development, and offered a 10-point plan, a Carolina Manifesto for Growth, to boost employment and incomes in the state.
The recommendations contained in Our Best Foot Forward were hardly novel ideas. They were based on the practical experience of other states and countries. They were also familiar ideas to longtime readers of Carolina Journal and the research output of the John Locke Foundation, the think tank I have been privileged to lead for nearly two decades.
A few weeks ago, as the session was drawing to a close, I took a copy of the Carolina Manifesto and matched it up against enacted legislation. For each item, I awarded 10 points if the General Assembly took major action, half credit for some action, and zero points for no action. Here’s what my grading sheet looked like:
1. Tax reform: 10 points. The legislature replaced North Carolina’s graduated income tax with a flat tax, slashed the corporate tax, and eliminated dozens of special exemptions and deductions in the tax code.
2. Budget reform: 10 points. The legislature shored up the state’s rainy-day fund and used a “fiscal trigger” to return a portion of future revenue growth to taxpayers.
3. Assets and liabilities: 10 points. The legislature sped up repayment of the state’s unemployment-insurance debt and limited the state’s ability to borrow money without a voter referendum. By reducing future debt service, these decisions will free up dollars for higher budget priorities or tax relief.
4. Entitlement reform: 10 points. The legislature adjusted UI benefits and gave the McCrory administration preliminary approval to pursue competitive contracting for Medicaid, which will free up dollars for higher budget priorities or tax relief.
5. Regulatory reform: 10 points. The legislature enacted an omnibus reform bill that, among other things, will subject existing state regulations to periodic review. If a rule is no longer needed, legally authorized, or cost-beneficial, it will automatically expire.
6. Energy deregulation: 5 points. The legislature failed to eliminate the state mandate on electric utilities to buy high-cost energy. But it continued to prepare North Carolina for possible oil and gas exploration.
7. Transportation reform: 10 points. The legislature rewrote the state’s transportation-funding formula, redirecting gas and car taxes to high-priority projects that will reduce congestion and promote economic growth.
8. Privatization: 5 points. The legislature kept some infrastructure partnerships on track but did not authorize additional asset sales or privatization initiatives.
9. Public school reform: 10 points. The legislature replaced teacher tenure with fixed-term contracts, introduced merit pay, strengthened career and technical education, devolved authority to local districts, and simplified the grading system for schools.
10. Educational choice and competition: 10 points. The legislature made it easier for charter schools to grow and created new opportunity scholarships for lower-income and disabled students to attend private schools of choice.
Some of these decisions, such as tax relief and regulatory reform, can provide immediate economic benefits. Other policies, such as improving education and infrastructure, will take many years to come to fruition.
Overall, the General Assembly deserves high marks for fashioning a new, empirically based strategy for fostering economic growth in North Carolina.
Yes, I know that such policy experts as Bill Maher and Rachel Maddow disagree with this strategy. So what?
—Hood is president of the John Locke Foundation.