The budget battle in numbers

Perdue versus the GOP: Who’s on which side

Gov. Bev Perdue gathered 100 of the state’s business and academic leaders on May 19 for a free-swinging attack on the General Assembly’s savage budget cuttingespecially the slashes to public education.

At the meeting in Research Triangle Park, Perdue sat at the center of a long table and called on such business brass as Bob Ingram, formerly GlaxoSmithKline’s top U.S. executive, and Cynthia Marshall, president of AT&T North Carolina, to underscore the link between a company’s success and its access to a well-educated workforce. “The fact that our state is so focused on education is music to my ears,” said Marshall.

Former UNC President Bill Friday recalled how radical it was 50 years ago, when the state’s business, academic and political leaders hatched their plan to remake North Carolina’s economy using brainpowervia well-funded schools and community colleges and a first-rate UNC systeminstead of brawn. “It’s a great story,” Friday said. “But the question is, where are we headed now?”

Higher education has already sustained $600 million in budget cuts, Friday said. Cutting $400 million more, as the Republicans who control both houses of the General Assembly were proposing, would seriously damage the state’s future.

“You’re the man, Bill Friday,” a beaming Perdue said.

She then called on Jim Goodmon, CEO of Capitol Broadcasting in Raleigh, and a former Republican.

Goodman said it was insulting how Republican lawmakers seemed unfazed that North Carolina could drop from a dismal 47th place among all states in funding for K–12 public schools to 49th or even 50th place if their budget plans prevailed. “I’m mad as hell,” Goodmon railed. “I don’t want anyone in the House or the Senate to even act like this is pro-business, pro-economic development, pro-job creation. It’s not. This is the worst I’ve ever seen.

“What we’re going to do now is fight,” he added.

No doubt it is a fight: first, over the $700 million gap between the K–12, community college and UNC system funding in Perdue’s budget, unveiled in February, and the budget passed by the Republican-led House of Representatives a month ago. But much larger issues lurk below the surface.

Two weeks after the House vote, the two sides were digging in and heading for a government shutdown when the fiscal year ends June 30. Senate President Pro Tem Phil Berger went so far as to say that when his chamber was finished with the budget, it would be less than the House-passed planwidening the education gap.

The GOP’s strategy was ruthless: They tied a routine measure extending federally funded unemployment benefits for the long-term jobless to a requirement that if June 30 came and went without a budget deal, Perdue would be forced to swallow the Republicans’ budget.

Perdue promptly vetoed it, and she met the press halfway between the Capitol and the Legislative Building to tell reporters, in no uncertain terms, that the Republican move amounted to extortion. In no time at all, her office had posted a video on YouTube capturing the moment.

Perdue pushed back hard, campaigning across the state. At RTP, she saluted the business executives who attended for their “bravery,” saying their appearance with her was “high-risk”if nothing less than their duty. “Our commitment to education,” she said, her voice rising, “it’s in our bones.”

She had proposed a three-quarter-cent sales tax increase, but she was open to other ways of raising additional money, she said. “It’s not my way or the highway.”

But the Republicans weren’t listening to anything she said.

“From my perspective as someone who sees the whole state,” Perdue said, “there’s some high-stakes poker being played.”

As Memorial Day approached, however, it seemed the Republicans had blinked first. Instead of cutting, Senate budget writers actually added $100 million to the House plan, and reliable accounts were surfacing that House and Senate leaders were negotiating behind closed doors to add almost $300 million morealthough apparently without a tax increase.

Whatever the outcome of the budget fight, though, the contested ground between Perdue and the Republicans extends far deeper than the question of a single year’s spending. Brimming below the surface are fundamental issues of fairness in taxation, social justice, the role of the public sector in creating economic growth and how the public education system should be designedto serve all students or only some of them.

The Republican agenda, as Chris Fitzsimon of NC Policy Watch wrote, seeks nothing less than “the ideological transformation of North Carolina” away from the centrist, pro-business, pro-education policies embraced since the middle of the 20th century by every Democratic governorand by the only two Republican governors, Jim Holshouser and Jim Martinand toward the right-wing, free-market conservatism favored by today’s Republicans.

Can Perdue fight them off?

In political terms, what’s at stake, after eight years of Gov. Mike Easley (who didn’t matter much) is will this governor matter? Will Perdue be steamrolled by the Republicans? Will she move so far to the right that, even in victory, she becomes indistinguishable from them? Or will she instead draw strength from the budget fight, use it to thwart the GOP on other issues and successfully reassert the values that roused North Carolina to become the progressive leader of the South?

It’s a tough assignment for any governor, but especially one whose first term began so inauspiciously. But Perdue looks to be rising to the challenge.

Perdue’s first two years in office were troubled. She was elected in 2008 by a narrow margin: Her 145,000-vote win over Charlotte Republican Pat McCrory was less than half of Sen. Kay Hagan’s margin over incumbent Elizabeth Dole. But she won, and in doing so became the first woman governor of North Carolina.

Yet in Raleigh, Perdue’s election represented no fundamental change. Her former Democratic mentors in the General Assembly, then-Senate President Pro Tem Marc Basnight and Majority Leader Tony Rand, were still running things. She was too often seen as merely going along with the Democratic Party leadership.

Progressive measures like the Racial Justice Act, which reduced death sentences to life without parole if defense attorneys could demonstrate there had been racial bias in the prosecution, and the Healthy Youth Act, which requires public school kids to receive medically accurate sex education, were not Perdue’s initiatives. Neither was the School Violence Prevention Act, which directs school officials to protect kids from anti-gay slurs and bullying. These were products of the Legislature.

Still, Perdue didn’t hesitate to sign these bills, despite withering Republican criticism about pandering to blacks, promoting promiscuity and “special treatment” for gays. She also followed through with Democratic promises to beef up the ethics laws governing public officials.

But Perdue took a hit when The News & Observer reported how Basnight and Rand used toand still did, if not to her facecall her “Dumpling.” (Sexist? They said it was a term of endearment.)

And Perdue’s record on environmental issues was mixed. She advanced the prospects for offshore wind to generate electricity, a major step toward a clean energy future. But she stood aside as business worked to weaken clean air and clean water enforcement efforts, and she went along as the N.C. Home Builders Association succeeded in diluting a new set of energy-efficiency rules under the state building code.

To environmentalists, Perdue’s diffidence smacked of the old “pro-business means anti-environment” politics characteristic of so many previous Democratic leaders. They, too, were pro-education, but otherwise conservative.

Finally, there was the Easley factor. Her predecessor’s penchant for flying around in corporate planes with his buddies and the featherbedding of his wife’s job at N.C. State University dominated the headlines when they came to light in 2009–10, after Perdue released official records that Easley had concealed.

Easley copped a plea to a single felony involving one of his many unreported campaign flights. Unfortunately, Perdue’s campaign also failed to report some flights, a relatively minor transgression that the Republicans gleefully magnified to sound like she was Easley’s twin.

In fact she’s anything but, in terms of her work ethic. Mac McCorkle is a professor at Duke University’s Sanford School of Public Policy but was a political consultant who advised both Easley and Perdue. He didn’t want to draw comparisons between the two, but of Perdue, McCorkle said, “She is the most resilient, persevering and relentless” client he’s ever had, someone who is busy every day and will “out-work and out-meeting anybody. She’s a happy warrior.”

That trait, though, was relegated early on to a series of federal stimulus-funded project ribbon-cuttings. Even as the economy began to rebound, Perdue’s energies were devoted to what seemed an endless string of visits to some company somewhere that, aided by a state incentive grant, was managing to add some jobs.

With state revenues still lagging because of the recession, Perdue had no money available for grand new programs of her own. Her job: cut the budget. Even after Basnight and Rand helped her enact a $1.4 billion-a-year package of temporary tax hikes in 2009, including a 1-cent sales tax increase and small individual and corporate income-tax surcharges, she was able to balance her first two budgets only with the aid of more than $3 billion in stimulus funding and some $2.5 billion in budget cuts. She furloughed state employees. She furloughed teachers. It wasn’t pretty.

And then in the 2010 elections, the Republicans swept to victory in the General Assembly, taking control of the Senate by a veto-proof margin of 31-19 and the House by a 68-52 majority, just four votes shy of the 60 percent needed to override a veto. For the first time since the 19th century, Democrats didn’t control the state government.

Basnight retired. So did Rand. Other old, white male lions of the Legislature retired. Suddenly Perdue was left the undisputed leader of the Democratic Party in North Carolina.

“Our savior,” said Brian Lewis, the N.C. Association of Educators lobbyist, at an NCAE rally that Perdue attended.

“Our last line of defense,” said former Sen. Linda Gunter as she introduced Perdue at a party event hosted by the Democratic Women of Wake County.

Perdue was commanding a thin last line. Any time four or more House Democrats bolted, a Perdue veto wouldn’t be sustained.

She thus went cautiously into this new world of Republicanism in Raleigh. In her State of the State message in February, she stole a card from the other side’s hand by calling for a cut in the corporate income tax rate from 6.9 percent to 4.9 percent, which would make it the lowest in the Southeast. It was a costly, if audacious ploy: State revenues, still scant, would be reduced by at least $300 million more every year.

And when Perdue unveiled her budget, it contained another less-than-progressive surprise. She wanted the sales tax hike extended, but just three-quarters of it, not the full penny. Plus, she was willing to let go of the surcharges on income tax and corporate tax. What might’ve been a $1.4 billion tax package shrunk to $800 millionand all of the latter would come from the highly regressive sales tax, which hits poor people harder, not from taxes on the well-to-do.

Perdue’s proposed budget was almost $1 billion below what a simple continuation budget would’ve been. She had cut education budgetsagain, from continuation levelsby some $600 million. In political terms, her budget was well to the right, literally daring the Republicans to go further.


In better times, progressives might’ve howled. But locked in mortal combat with the Republicans, most Democrats rallied to the governor’s side. The “penny tax,” as virtually all of her allies refer to it, is virtually invisible to the voters, Democrats say, as if that’s a good thing.

Plus, they add, it’s not a new taxunlike, say, the progressives’ dream of applying the sales tax to such white-collar goodies as legal bills, landscaping services and other purchases that escape taxation now. (Buy a mower, it’s taxed. Pay a mower, it isn’t.)

In short, the penny tax may not be good policy, but it’s good politics as far as most Democrats are concernedand right now, the Democrats are in desperate need of a political victory.

Then too, any philosophical differences within the Democrats’ ranks paled in the face of the frontal assault launched by the new Republican legislators. They blew into Raleigh waving bills to, among other things, repeal the Racial Justice Act; prohibit the state from accepting federal funds for rail-transit projects; allow an unlimited number of charter schoolsbut, to the detriment of low-income kids, don’t require transportation or lunch; limit early voting; slow Election Day voting with a time-consuming photo ID requirement aimed at suppressing the Democratic vote; and force women to pay for an ultrasound exam and wait 24 hours before exercising their legal right to terminate a pregnancy. The quintessential Republican bill would allow gun owners to take a concealed weapon into a bar.

No right-wing Republican cause was neglected. Gay bashers were rewarded with a proposed amendment to the state constitution, the Defense of Marriage Amendment (DOMA) seeking to elevate anti-gay discrimination in North Carolina from mere law to a constitutional requirement. The DOMA would ban gay marriages or civil unions and could be on the 2012 election ballot.

Republicans then quickly went to work on the budget, demanding more severe cuts to education than Perdue had proposed. To keep their campaign promise of not raising or extending any taxes, they had to cut the education budgets, which account for about 60 percent of state spending; GOP leaders were trying to balance their spending plan without even Perdue’s three-quarter-cent tax.

Berger and House Speaker Thom Tillis took charge, promoting a plan to eliminate at least 20,000 jobsincluding 13,000 teacher assistants in grades K–12from public schools, community colleges and the UNC system. Additional job losses from cuts to Medicaid and other programs would push the number of lost jobs north of 30,000, the governor’s office said.

“Why would they do this now, when more than ever we need educated workers to attract good companies and good jobs?” Perdue shot back in a column published in The Fayetteville Observer.

The Republicans’ answer came straight out of tea party economics. Far from sparking economic growth, they said, every dollar spent in the public sectorand every public jobis a dollar and a job subtracted from the private economy.

Cutting 20,000 jobs from the schools and universities? The money saved would create 20,000 private-sector jobs, Republican leaders said. And it’s private enterprise that grows the economy, not the public sectornot even the public schools.

With the battle lines drawn, Perdue began to veto bills. Her poll numbers went up. She threatened vetoes. Her poll numbers went up again.

Before Democratic audiences, Perdue said she wouldn’t tolerate the Voter ID bill and that the Republicans better change it. Her audiences cheered. Through House Minority Leader Joe Hackney, she threatened to veto the charter-school bill as written. Democratic legislators cheered.

Republican political strategist Carter Wrenn, once Jesse Helms’ right-hand man, recognized the phenomenon immediately. For two years, he wrote on the Talking Politics blog he shares with Democrat Gary Pearce, Perdue had been battling “problems”faceless abstractions like deficits, unemployment and recessionsand she had been losing at every turn. “But now she’s face-to-face with a new enemy: Republicans,” Wrenn wrote. “And things are looking a lot better. Republicans are a lot easier to whip than ‘problems.’”

In the last 10 days, a poll taken for the conservative Civitas Institute in Raleigh put Perdue’s job approval rating at 46 percent (with 41 percent disapproval), “an uptick,” conceded Civitas President Francis De Luca. Another survey by Public Policy Polling, a Democratic firm, showed Perdue gaining on Republican Pat McCrory in a hypothetical rematch of their 2008 election contest. She trailed 46-39, her best showing since she beat him. PPP’s Tom Jensen attributed her rise to dispirited Democrats coming home and independent voters turning away from the GOP.

“The biggest beneficiary of the growing unpopularity of North Carolina’s legislative Republicans?” Jensen said. “It might be Gov. Bev Perdue.”

By declaring the battle of the budget, the Republicans handed Perdue a political gift: the chance to reassemble, after a rough two years in office, the old North Carolina Democratic coalition of public school teachers, university leaders, corporate executives and the African-American community that saw Jim Hunt through four terms as governor with a mantra that good schools equal economic growth equals more higher-paying jobs.

After three decades of near-anonymity as a state legislator and lieutenant governor, Perdue for the first time has established a clear public profile for herself. She’s pro-education, she smiles easily and is comfortable being in charge. And she’s pro-business, with all the plusses that conveysand the limitations that she’s yet to overcome.

Launching her Education Works campaign, Perdue has been in boardrooms and classrooms, at rallies with the NCAE (the teachers association) and in prayer meetings with the NAACP. Most of all, she’s campaigned in the mediaincluding the social media.

This is a governor who is easy to find, who likes answering questions, knows the minutiae of government cold and seemingly remembers by name thousands of people. If you don’t ask the right question, she’ll ask it herself and tweet (@ncgovoffice) the correct answer to you.

In school after school, Perdue talks about how education is “woven into the fabric of who we are in North Carolina” and that the job now is to improve schools, not “go backwards.”

These visits often seem improvised and are announced to the press on short notice. Such was the case when Perdue sped across town from the state Capitol one day in early May and burst through the front door of Southeast Raleigh Magnet High School, which has special science and technology classes.

Perdue wrapped her arms around Principal Beulah Wright, then headed upstairs to visit Michelle Greshock’s earth science class. Greshock didn’t need much prompting before telling the governor that her labs already feel the impact of budget cutting. Fewer teachers means that some of her classes have too many students performing a lot of hands-on work with potentially dangerous chemicals, she said. So instead of doing science with her students, she’s too often left to talk about doing science instead, which isn’t as effective.

Perdue turned to the reporters trailing along. “I didn’t put her up to this,” she quipped before turning serious. “This is the real world all of these students are going to face,” Perdue said. “I don’t believe there is a voter in North Carolina who would say, if you see this copper penny, I would rather keep it in my pocket than help keep a good teacher in my child or grandchild’s classroom,” Perdue said. “I don’t believe that.”

Her talk about the penny prompted the question, as she raced down the hall to another class, of whether Perdue wished that she’d put the full 1-cent sales tax in her budget rather than just three-quarters of a pennya difference worth $300 million a year to state revenues.

No, she said, pausing to confide in the questioner. When she put forward the three-quarter-cent plan, she said, she thought it was so reasonable the Republicans would agree to it on the spot. With a little smile, she added, “I guess I was naïve.”

Not naïve, certainly, but as Rob Schofield, research director of NC Policy Watch, says, it looks like Perdue set the budget bar too low. Her request for $19.9 billion was where a compromise should have come out, he said.

The problem is, North Carolina’s business leaders are pro-education, but they are not pro-taxes, nor are they early adopters of public investmentsin transit services, housing and other initiatives that the state needs.

But hewing close to the pro-business line, Perdue is hemmed in on anything that isn’t about education.

Her dilemma was apparent Friday when Perdue sent three of her cabinet secretaries into a press conference to say that their departments should get more money from the Republicans. Even if the GOP’s budget met Perdue’s budget, putting $700 billion more into education and matching her $19.9 billion total, it would still leave Medicaid funding woefully short, for example, and the Department of Environment and Natural Resources terribly short-staffed.

Meanwhile, the Republicans’ budget is loaded with anti-environment policy riders directing DENR to go easy enforcing the clean water and clean air laws. They add up, environmentalists say, to a return of the old Hardison Amendments, named for a crusty pro-bidness Democrat from the ’80s, which for years barred DENR from enacting any regulation unless federal law required it.

Environmentalists are watching to see if Perdue uses her newfound clout to take on the Republicans over the “Hardison” riders and a raft of other anti-enforcement measures moving through the General Assembly. “She faces a lot of very difficult policy decisions before the end of the session,” says Molly Diggins, state director of the Sierra Club.

The Indy talked with a dozen progressive leaders and legislators about Perdue’s performance in office. Almost all gave her good grades, considering the terrible economy she’s been up against and the lack of state revenues.

Ian Palmquist, executive director of Equality North Carolina, says Perdue has supported his organization’s work for gay rights. He hopes she’ll campaign against DOMA when the time comes.

Paige Johnson, a spokeswoman for Planned Parenthood Central N.C., calls Perdue strong on women’s issues, including reproductive choice, and she believes the governor will veto the bill that would force women to be “educated” about abortions before having one (Democrats call it “The Women Are Stupid Act”).

Still, some progressives expressed concern that Perdue may never break out of the pro-business box to fight for environmental and economic justice that goes beyond good schools.

Pete MacDowell, past president of the Progressive Democrats of N.C. and not a Perdue fan, hopes that the governor will meet the Republicans head-on and raise the Democratic flag in favor of needed public investments of all kinds.

As the budget fight stands, Perdue herself can hardly lose. Either the Republicans add to school spending, and she claims victory, or they don’t, and she goes into the 2012 elections with a winning issue.

But if her only issue is schools, MacDowell says, it will be tacit evidence that the Republicans were right about shrinking the rest of the public sector and letting those who need government’s help fend for themselves.

Perdue’s choice, he says, is between leading the Democratic Party back to power in the state, or being “the last Democrat standing as North Carolina goes Republican.”


The budget battle in numbers

As we went to press Tuesday, Republican leaders unveiled a new compromise budget plan. Total spending: Almost $19.7 billion, about $200 million less than Perdue’s budget request. Total education spending: $11 billion, $300 million less than Perduebut $400 million more (including $100 million more for UNC) than the GOP’s opening bid.

The Republicans didn’t go along with the “penny” sales tax hike or any part of it. They found extra money by cutting contributions to the state pension funds, trimming their proposed tax cuts for business and dipping into reserve accounts.

Gov. Perdue slammed the GOP’s offer, saying it “shuffled around” money to paper over the much bigger differences between her plan and theirs than the $200 million figure would indicate.

Last Friday, Perdue’s office issued a list of 10 things wrong with the old GOP plan. Four were about inadequate school funding, but the other six weren’t. The biggest non-education complaint: a $700 million cut to state Medicaid funds, which with the loss of 2-for-1 federal matching, will cost the state economy $2 billion-plus, according to Perdue.

Total BudgetEducation’s Share
Gov. Perdue$19.9$11.3
House GOP$19.3$10.6
Senate GOP$19.7$11.0
Continuation at 2009–10 levels$20.8$11.9
All numbers are in billions of dollars

Sources: Office of State Budget and Management, N.C. General Assembly

Perdue versus the GOP


House Speaker Thom Tillis, R-Mecklenburg: A former management consultant and IBM exec, Tillis is smooth and very conservative, as is his House GOP caucus. He’s reined in their kookiest ideas, but the voter-suppression bills start here.

Senate President Pro Tem Phil Berger, R-Rockingham: A blue-collar guy turned lawyer with blue-blood friends, Berger led the Senate to pass a right-wing charter-schools bill in record time. It’s on hold after a different version passed the House but is expected to resurface soon.

House Majority Leader Paul Stam, R-Wake: Stam’s the man when it comes to anti-abortion and anti-gay rights bills. He’s also for taxpayer-funded vouchers (“tax credits”) for private and parochial schools and thinks all public schools should be charter schools.

Art Pope, CEO of the Pope Empire: Retail-store magnate Pope controls a foundation with $148 million in assets at last report. It pays for the network of conservative organizations (John Locke Foundation, Civitas Institute, Real Jobs NC) writing the GOP agenda.


Jim Goodmon: He’s a good capitalist to have on your side. CEO of Capitol Broadcasting Company, which owns WRAL, he also chairs a family-funded foundation that backs such progressive groups as N.C. Policy Watch. Company motto: “We can’t meet our business responsibilities if we don’t meet our community responsibilities too.”

Cynthia Marshall, president AT&T North Carolina: Corporate executive and mother of threein middle school, high school and N.C. School of the Artsshe’s the prototype for Perdue’s pro-business, pro-education model. Competition demands more and better education, she says.

The Rev. William Barber, state NAACP president: He has stood with the governor and she with him. Her support for the Racial Justice Act was key, as was her outspoken criticism of segregated school systems in Wayne, New Hanover and (potentially) Wake counties.

Sheri Strickland, president N.C. Association of Educators: Teachers and teaching assistants are mostly women and Perdue’s natural base. They were unhappy with Perdue over the 10-hour furloughs and half-percent pay cut two years ago. Now, with Republicans threatening worse, their support has returned.

Tillis photo by Bob Geary; Berger, Stam and Barber photos by D.L. Anderson; Pope illustration by V.C. Rogers; Goodmon photo courtesy Capitol Broadcasting; Marshall photo courtesy AT&T; Strickland photo courtesy NCAE

Correction (June 6, 2011): Jim Goodmon, CEO of Capitol (not Capital) Broadcasting, is a former Republican; he has changed his voter registration to unaffiliated.