North Carolina’s budget woes mean hard days ahead for WNC’s public, private workers

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Where will job losses fall as state leaders tackle balancing the budget and closing the $2.4 billion gap? Photo by Angie Newsome

Graham County leaders and residents awaited the release of North Carolina Gov. Bev Perdue’s proposal to balance the state’s $2.4 billion shortfall as eagerly as those from any other county in the state.

The county is already home to both the state’s smallest labor force and its highest unemployment rate; 15.8 percent of the 3,990 employable residents have no jobs, according to numbers released recently by the N.C. Employment Security Commission. Their unemployment rate is the highest among the state’s 100 counties.

“The proposed state budget is going to be devastating for us,” said Mike Edwards, chairman of the Graham County Board of Commissioners. “Our budget is down to the marrow already.”

With the U.S. Forest Service owning 113,00 acres and the Tennessee Valley Authority controlling large swaths such as the Fontana Dam area, only 25 percent of county land generates tax revenue. It’s that small amount that county leaders must now rely on to fund the new costs that Perdue’s proposed budget asks localities to absorb.

Graham is just one of many counties in Western North Carolina fighting to keep existing jobs and hopefully attract more despite three bienniums in a row of significant budget cuts from the state.

The Governor’s proposed budget, released in mid-February, is just the first stage of months-long debates between legislators about where budget cutbacks will fall for the next two fiscal years. The Republican leadership has said they hope to have the final budget settled by June 1.

Lines have already been drawn between cutting back tax incentives for businesses and cutting back the existing public-sector workforce. Public sector jobs stand to be cut at both the state level and county level, though how many won’t be fully understood until that final budget is released. Incentive funds intending to attract private sector jobs were targeted early for cuts by the Republican majority, but the governor vetoed the bill. It was her first veto of the current session and only her second of her administration.

For Edwards, creating and keeping jobs is essential to making Graham County a place where locals will want to stay and live. “I worked in the school system for years,” he said. “I’ve seen that our kids have to leave to make a life for themselves.”

To run government like a private business

Perdue, a Democrat, has said repeatedly that her highest priorities while formulating the proposed budget were to cultivate private-sector jobs and advance public education.

Her proposed budget aims to accomplish those goals by lowering the corporate tax rate, extending the temporary sales tax increase, saving all teacher and teacher assistant positions, suggesting reorganization of some state departments and requiring counties to share some costs previously funded by the state. It also calls for cutting 10,000 state jobs.

“The budget reinforces my administration’s commitment to make state government operate more like a private business,” Perdue said in a letter introducing her proposal.

This is the third budget in a row that has required steep cuts to balance.

“In a 24-month period, we have faced down a collective $5.5 billion deficit in the state’s budget.” Perdue said during her State of the State address on Feb. 14. “And we have made tough decisions as we cut services, saving more than half-a-billion dollars, furloughed workers, cutting another $60 million, and froze salaries and closed programs, saving a combined $350 million.”

State jobs at risk

But the governor’s emphasis on the importance of job creation in North Carolina does not apply to state government.

With the exception of her commitment to preserve all teacher and teacher assistant positions, 10,000 state employees’ positions are on the chopping block. Perdue recommended not filling 7,000 vacant state positions, reorganizing some departments and offering incentives to encourage as many as 1,000 eligible state employees to retire early.

Local school boards may still have to make cuts to non-educational personnel such as cafeteria workers and bus drivers. “I was cheered that she stopped the cuts at the classroom door so that we can preserve teacher positions,” Republican Rep. David Guice, of Transylvania County, said. “That is terribly critical.”

Legislators all across Western North Carolina say it is too soon to know exactly how budget cuts will affect their district. And while teachers and parents who’ve been organizing rallies to preserve jobs in public schools were relieved by her proposal, some legislators questioned the governor’s premise.

“We’ve heard and talked about the governor’s restructuring plan,” said Republican Sen. Tom Apodaca, from Henderson County. “We are not sure where she’s getting her numbers from. We’ve been working on it every morning at 8:30. All of our subcommittees are working on it.”

The governor’s figure of 10,000 jobs reduced is striking at first glance. But the Office of State Budget and Management acknowledges that the number equals the usual rate of annual attrition for the state government’s workforce. Employees retire, move out of state or move on to positions in the private sector.

Despite this argument, Cary Edgar, spokesperson with the State Employees Association of North Carolina, said the governor’s proposal will have a huge impact.

“While some of those positions are vacant right now,” Edgar said, “it’s still a service that’s not going to be provided to taxpayers when it’s not filled. There will be fewer nurses aides working in the public health system and fewer people operating snowplows. If the Legislature goes through with some of these job cuts, they’re going to face scorn from their constituents who need these services.”

Swannanoa Valley Youth Development Center and the Woodson Wilderness Camp, part of the state’s juvenile justice system and located in Swannanoa, closed Feb. 28. Fifty-eight of the 103 employees were offered transfers to three other facilities in the system: Stonewall Jackson Youth Development Center in Cabarrus County, Samarkand Youth Development Center in Moore County and Edgecombe Youth Development Center in Edgecombe County.

The closest of those locations is 170 miles from Swannanoa. Ten employees accepted the transfer.

“The reason those facilities were chosen, was that we needed to fully staff beds there,” said William Lassiter, director of communications at the N.C. Department of Juvenile Justice and Delinquency Prevention.

Haywood County Community College’s Regional High Technology Center in Waynesville is recommended for closure after 25 years of operation. Its mission, according to its website, is to give students “hands-on experience with state-of-the-art equipment and emerging technologies in many areas such as computer numerically controlled machining, 3D modeling for rapid prototyping, solar energy technologies and robotics.”

The N.C. Department of Cultural Resources faces a potential loss of 84 positions statewide and 10 percent of its operational budget. Among the cuts is an archivist position in the department’s Asheville office.

Counties’ costs going up, leaving jobs at risk, leaders frustrated

Under Perdue’s proposal, counties’ share of lottery proceeds would be reduced from 40 percent to 10 percent. There is also a proposed reduction in the set aside provided to counties by the state from the corporate income tax.

“If you take that set-aside and the reduction of lottery funds,” said Randy Wiggins, Cherokee County Manager, “preliminary calculations look as though just those two items alone would equate to $344,000 of lost revenue to Cherokee County.”

“We’re planning with departments at 5 percent cut below our current level,” added Chuck Wooten, Jackson County Manager. “That reduction has to impact your personnel somewhere.”

Republican Sen. Jim Davis, of Transylvania County, said the cost Perdue is asking counties statewide to carry is $250 million. “As a former county commissioner,” Davis said, “one of the banes of my existence was all these unfunded mandates we would get from the state and federal government.”

Perdue’s office acknowledges the counties’ frustration. “This is a tough year for everybody,” spokesman Chris Mackey said. “There is something for everyone to dislike in this budget. She’s sensitive to counties’ concerns and she knows about it, but we face a $2.4 billion shortfall.”

“For those of us in Western North Carolina,” Guice said, “we are always fighting to get our fair share to begin with. All they’re doing is making a difficult task nearly impossible.”

Jobs dependent on education, incentives and infrastructure: which will get cut?

Republicans welcomed Perdue’s plan to cut the corporate tax rate to 4.9 percent. North Carolina’s rate is now the highest in the Southeast, at 6.9 percent. “Our agenda has been to lower and phase out the corporate tax rate,” said Republican Sen. Debbie Clary, from Cleveland County, “so I am glad to hear that she’s on board.”

But Hendersonville Sen. Tom Apodaca, said that, while he is thankful for the governor’s proposed corporate tax cut, he’s not sure it will have a major impact on attracting jobs to his district.

“When you are talking to major corporation coming into the area, they do look at the rate,” Apodaca said. “But, here we need to incubate 10- to 100-employee companies.”

The key to attracting companies and a workforce outside the public sector, said economic development staff all over Western North Carolina, is creating an environment that provides infrastructure, an educated workforce and business incentives. At least some funding for all of three of the legs of that stool come from the state budget.

Inadequate infrastructure is and has always been a major barrier to entry for businesses to move into the more rural parts of Western North Carolina. Fulfilling a potential employer’s need for adequate water, sewer, transportation and high-speed Internet comes at great cost in counties with very low tax bases from which to work.

Community colleges play an important role in creating and maintaining a workforce attractive to employers. Under the governor’s proposal, public education high school students who maintain a B grade point average will receive funding for two years of career training or a two-year community college degree.

Community colleges’ budgets would see strain under Perdue’s proposal from a $5.50-per-credit-hour increase in tuition fees, elimination of the state’s subsidy for workers’ compensation for community college employees and a reduction in the system budget for office administration.

Incentive programs also came under fire early in the budget process, when N.C. Senate Bill 13 – eventually vetoed by the governor – proposed to cut funds from both the One North Carolina Fund and Golden LEAF grants for the remainder of the current fiscal year in a move to reduce the state budget by $400 million.

These funds have funneled significant amounts of money into Western North Carolina, Guice said. “Just in the last two years,” he said, “we had $11.5 billion given to projects in Western North Carolina alone.”

Finding – and making work – in Graham County

Stanley Furniture is the largest employer in Graham County, with over 450 jobs. Their Robbinsville plant is the last domestic facility for the company, which closed plants in Virginia and Kentucky over the past two years.

Last fall, the company received a $1 million Golden LEAF grant to modernize its production line to be able to begin producing a line of youth furniture. The company will pay back the grant with 3 to 4 percent annual interest into a fund that will further economic development in Graham County.

“There’s no way that the county could have mobilized that amount of money in the time that Golden LEAF did,” Graham County Planner Josh Carpenter said.

But Republican Jim Davis sits on the N.C. Senate Commerce Committee and sees these grants as a very political process.

“The payroll for staff for these funds is $1.6 million a year,” he said. “I am not convinced that we wouldn’t look at combining the overhead for some of these funds and make them less of a parking place for cronies to get a payoff.  We have a fiduciary responsibility to make sure that money is spent wisely.”

Guice contends that if there are ethical issues with the way that Golden LEAF funds are distributed, then they should be dealt with directly rather than dissolving or raiding the fund. “Do we fix the problem by saying if we don’t have the money there, then no one will do the wrong thing?” he said.

Graham County Board of Commissioners Chairman Mike Edwards is thankful that Graham County slipped in and received its Golden LEAF funds to support Stanley’s modernization before the budget fights ensued.

He said that his county needs all the help it can get to retain jobs, much less recruit new ones.

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About the Author

Lydia Wilson

Lydia Wilson is a contributing reporter for Carolina Public Press. Contact her at lydia.wilson@gmail.com.

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