At its core, the budget Republicans in the state Senate passed last week is less a financial document than a manifesto, a Christmas list of conservative pipe dreams.
There are the predictable corporate and income tax cuts (though the regressive sales tax will be expanded and a tax break for nonprofits will be curtailed) and the continuation of the state’s recent tradition of underfunding education. There are efforts to eliminate historic preservation tax credits and retirement benefits for some future state employees, and defund the Human Rights Commission and Office of Minority Health. There are also raw political machinations, including a $3 million-a-year cut to the University of North Carolina-Chapel Hill School of Law, a rather transparent payback for employing hated legislative critic Gene Nichol.
But along with the policy grab bagmuch of which won’t survive negotiations with the more moderate Housethere’s also a more insidious undercurrent, one you don’t have to look too closely to spot:
Senate Republicans really, really don’t like North Carolina cities.
Or maybe it’s better to say they’re jealous: The Piedmont’s metro counties, especially Wake and Mecklenburg, are growing and thriving and becoming economic powerhouses, even as the rural areas many Republican lawmakers represent languish in poverty. Or maybe they fear the metros’ increasingand increasingly progressivepolitical clout. Or maybe it’s all of the above.
“I think there can be more than one explanation,” says state Sen. Josh Stein, D-Wake, an unannounced candidate for attorney general. “There’s a lot of hostility toward the million residents of Wake County in the Senate.”
The highest-profile example is the Senate’s plan to reallocate a portion of the state’s sales-tax revenue. Right now, most of the money goes to the point of salein other words, the county where you bought the thing you’re paying the tax on. The Senate wants to flip that formula, eventually diverting 80 percent of those funds to outlying countiesa move that would cost Wake $40 million a year once fully implemented in 2019, Durham County and its municipalities $26 million over the next four years, and Mecklenburg at least $63 million over the next five years, according to those counties’ estimates and media reports.
That alone would be a devastating blowin Wake, roughly equivalent to the property tax hike the county commission just passed to fund the county’s schools. But there’s more.
The Senate also wants to reconfigure the state’s economic incentives program, called JDIG, to make it harder for projects in Wake, Durham and Mecklenburgwhere most of the JDIG money has gone in recent yearsto qualify for tax breaks.
In addition, in earlier versions of the budget, Senate Republicans wanted to renege on Medicaid funding the state had promised Wake (a $10 million annual hit) and limit Wake’s ability to raise its sales tax to fund mass transit. Both of those proposals died during the amendment process.
All of that comes atop a string of earlier legislative slights to the metros, including:
• a statewide redistricting process that marginalized urban and minority voters to the benefit of rural (and conservative) whites;
• local bills that rejiggered elections for the county commission and school board in Wake as well as the Greensboro City Council, all to help Republicans get elected by increasingly blue electorates;
• attempts to strip Charlotte of control of its airport and Asheville of control of its water system, both of which have been stymied by the courts;
• the repeal of business privilege taxes, which cost the state’s municipalities $62 million a year and hit big cities the hardest ($7 million a year just in Raleigh);
• the Senate’s ultimately aborted effort to disrupt Raleigh’s deal to purchase Dorothea Dix Park;
• and the Senate’s plan, passed last week, to restrict cities’ ability to create bike lanes on some state highways.
“The rural areas are firmly in [Republicans’] political control,” says state Sen. Jeff Jackson, D-Mecklenburg. “With that control they are being very aggressive toward urban centers.”
Sen. Harry Brown, R-Jones and Onslow, the Senate’s majority leader and main budget writer, did not respond to the INDY‘s request for comment. But Chris Dillon, Wake’s intergovernmental relations manager and the county’s point person in negotiations with the General Assembly, says he doesn’t think the Senate’s plans are punitive.
Instead, they come from an abidingand accuratesense that while metro counties have prospered, rural areas have fallen evermore behind. And rural lawmakers have every reason to be frustrated.
Take tiny Scotland County, population 35,806. In April its unemployment rate was 10 percent, almost twice the statewide average. More than a third of its residents live below the poverty line, also nearly double the statewide average, according to the N.C. Budget & Tax Center.
By comparison, in April Wake had an unemployment rate of just 4.2 percent; Durham, 4.5 percent; Mecklenburg, 4.9 percent.
Throughout the state, rural counties are lagging, suffering from the loss of industries like textiles and manufacturing that aren’t coming back. They’ve also suffered from population loss, even as the state’s population has nearly doubled over the last four decades. Forty-nine of the state’s rural counties are actually losing people, in some cases by as much 7 percent between just 2010 and 2014, according to Ferrel Guillory, director of the Program on Public Life at UNC. Wake, meanwhile, is the seventh-fastest-growing large county in the United States, and is expected to grow by 9 percent by the end of the decade.
Brown, quoted in a press release from Senate President Phil Berger’s campaign, frames the Senate’s proposals in just that light: “When the current, archaic sales tax system was put in place, North Carolina was a different state. But times have changed, and the outdated distribution policy is creating a major obstacle to job creation in rural areas. These reforms strike a balance with our incentives policy and allow all of North Carolina to share in economic prosperityby giving our rural counties a fair shake while making sure our urban centers still benefit from incentives and sales tax dollars as they grow in population.”
The underlying idea is that metros are doing just fine, so it’s time for them to share the wealth. And they would: Under the Senate plan, the rural counties that are home to the Senate’s five highest-ranking leaders would rake in almost $160 million over the next four years, with Brown’s Onslow County alone bringing in nearly $36 million, according to a report last week in the Herald-Sun.
Guillory, who served on the Rural Prosperity Task Force convened by Gov. Jim Hunt in the 1990s, says the goal of improving rural economies is laudable. But taking the pine to metro counties may not be the best way to get there.
In April, when the Senate rolled out its sales tax plan, Guillory penned an article in EdNC that argued, in essence, that urbanization is the future and lawmakers better get used to it. “For the foreseeable future,” he wrote, “North Carolina will depend on its major metros for its overall economic vitality. To shift tax revenue from urban to rural may end up hurting both urban and rural. … Mecklenburg and Wake each have more than one million residents, and have emerged as such powerful economic engines that the state would suffer if these metro economies suffer.”
(Gov. Pat McCrory, a Republican from Charlotte, made a similar argument to the Herald-Sun: The sales-tax redistribution “will have a major negative impact on economic centers across the state.”)
A better approach, Guillory says, is to focus on rural educationas he points out, there’s nothing in the Senate’s redistribution plan that guarantees that those new revenues would go to schoolsand linking rural residents to urban job markets, even if that means they leave their hometowns for greener pastures.
“It is simply the right thing for North Carolina to do to give its rural young people the intellectual and social skills to become upwardly mobile and to exercise real choice in pursuing a career and deciding where to live,” Guillory wrote.
Besides, it’s not like the fast-growing metros don’t have their own needs: transportation, affordable housing, water supplies, schoolsnot to mention their own pockets of poverty. In fact, according to the Durham-based nonprofit MDC’s State of the South report last year, the Raleigh and Charlotte areas each experienced a 90 percent increase in people living in poverty between 2000 and 2012. Raleigh ranks at the bottom for income inequality among Southern cities, and both Raleigh and Charlotte rank low in income mobility.
“I understand the rural counties are having issues,” Dillon says. “Wake County has 110,000 people living in poverty right now. If that was a county, [that population would be] the 26th-largest county in the state right now.”
As lawmakers focus on rural development, Guillory told the INDY last week, they need to remember something: The past is gone.
“It’s important that our policymakers understand what North Carolina has become and come to terms with the real North Carolina,” Guillory says, “not the North Carolina of nostalgia and memory.”