A troubling N.C. Senate jobs plan

The Observer editorial board

Sen. Phil Berger, President Pro Tempore of the N.C. Senate.
Sen. Phil Berger, President Pro Tempore of the N.C. Senate. cliddy@newsobserver.com

With the state’s main job-creation fund, the Job Development Investment Grant program, running low on money, the N.C. House in early March passed an economic development bill that would pump in $22.5 million.

In normal times, the N.C. Senate would take up that bill, tinker with it, and both sides would hash out their differences.

But with a clash of egos and ideology roiling the state’s GOP leadership, it hasn’t worked out that way.

The Senate on Wednesday released its own plan in direct opposition to the House’s bill, a legislative poke in the eye from power-hungry Senate leader Phil Berger to House Speaker Tim Moore and Gov. Pat McCrory, who backs the House plan.

The Senate’s economic development manifesto is nothing if not ambitious. It marks an attempt by the legislature’s more conservative upper body to rewrite the state’s approach to job creation.

While the sprawling Senate Bill 338 contains interesting proposals, it also contains wildly irresponsible elements. McCrory called it disappointing. He correctly predicts it will crater the state’s budget, not to mention pitting struggling rural areas against growing urban ones.

First, the more thoughtful ideas in the bill. The Senate took a tight-fisted approach to incentives, but made a wise exception to allow larger incentive packages when it comes to luring a major automotive project like the BMW plant transforming South Carolina’s Upstate.

The bill’s suggestion that North Carolina move to a corporate income taxing method known as single sales factor is also worthy of further study. South Carolina already reaps an advantage using this method, since it calculates corporate taxes based solely on sales, rather than factoring in payrolls and property taxes.

But the governor is right to express concern. He notes that state revenue would drop by $180 million annually, breaking GOP promises of revenue-neutral tax reform. Over time, that would surely mean deep cuts in vital services such as education and transportation.

Berger, who still can’t quite seem to understand he’s not the governor, suggests it’s no big deal. Given his cavalier “leap first, look later” approach to such a key consideration, we can only assume he’s not following the headlines from Kansas, a state considering tax hikes to fill the giant hole left in its budget by previous ill-considered GOP tax cuts.

But perhaps the most imprudent part of the Senate plan is its insistence that the state limit Mecklenburg, Wake and Durham to no more than half of the money from the JDIG fund, the state’s main incentives pot.

It seems blindingly self-evident that the state’s big urban counties drive job-creation not because of an unfairly structured government program, but because that’s where private-sector companies choose to go.

The JDIG fund already addresses the state’s rural-urban divide by giving fatter incentives in poor counties, and by funneling a slice of rich counties’ money to infrastructure in poor ones.

Senate Bill 338’s new JDIG rules won’t bring more help to rural North Carolina. With urban areas sought after by millennials, corporations considering Charlotte or Raleigh-Durham will simply take their jobs to similarly-sized cities in other states. Or if they want our area badly enough, they’ll head to Fort Mill, S.C.

There simply is no zero-sum game in which Charlotte’s economic development loss is Rockingham’s gain. The fact that the Senate leadership seems to think so suggests they know far less about business than they would have us believe.

(One hint about the depth of their scholarship: Berger even unveiled a pie chart depicting the three urban counties as a Pac-Man video game character gobbling the other areas’ share of the JDIG pie).

Undoubtedly, rural areas do need help. But this isn’t the way to do it. Lawmakers should have considered rural needs more carefully before slashing funding in 2013 for seven regional job-development agencies. The urban ones kept going; The four rural ones generally took a harder hit, and two merged.

The senators do deserve credit for putting forth a separate bill to more immediately replenish the JDIG fund.

Job recruiters from North Carolina spent last week in Europe, pursuing new companies. The uncertainty in Raleigh almost certainly put them at a disadvantage.

We urge the General Assembly to replenish the JDIG fund quickly. And with South Carolina a reported finalist for the new Volvo plant North Carolina has been pursing, GOP lawmakers must work with McCrory to hammer out a coherent, thoughtful vision for economic development.

For the sake of Charlotte, and the broader state economy it supports, let’s hope all involved are guided by common sense, not egos and ideology.