Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
July 01--On a wall in Larry Hall'sNorth Carolina House office is a poster that welcomes visitors to the state. It's in the style of an interstate highway sign and advises those who look at it to set their clocks back 50 years. That touch isn't a demonstration of nostalgia -- it's a reminder from the House Democratic leader of his belief that the Republican majority currently running North Carolina has undone 50 years of moderate-to-progressive state government.
Hall sees the last half-century as one of steady achievement that pulled the state ahead of most of its Southern neighbors in everything from voter participation to higher education. Democrats, who ran the state during most of those years, now find themselves on the sidelines, watching a Republican legislature turn back decades of Democratic priorities and enact a starkly conservative agenda in a state that helped elevate Barack Obama to the White House. "Right now the environment is so antagonistic, so confrontational, you don't get to do those gradual changes," he says. "Everyone wants everything right now, and if you don't deliver right now you become the enemy."
Aided by a national backlash against Obama, North Carolina Republicans seized control of the General Assembly in 2010, putting the GOP in charge of both the House and Senate for the first time since 1870. For two years Democratic Gov. Bev Perdue acted as a counterweight to some of the Republican majority's ambitions, though she couldn't hold back abortion restrictions, slow down an effort to begin opening the state to natural gas drilling or blunt large cuts to the university system. Then, in 2012, Republicans added enough seats to establish veto-proof legislative majorities and won the governor's mansion with the election of former Charlotte Mayor Pat McCrory.
Finally in total control in 2013, Republicans passed a long list of contentious laws, from strict voter identification requirements to a system of private school payment vouchers. These moves have generated endless media coverage and drawn tens of thousands of people to "Moral Monday" protests on the grassy mall behind the legislative building in Raleigh. Depending on whom you ask, the Moral Monday dissidents are either a fringe group of progressives who can't handle the true color of their state or a spontaneous burst of grassroots opposition responding to legislative overreach. Both the protests and heightened scrutiny show no signs of letting up, despite the fact that the 2014 session was set to be far shorter and less combative than the one last year. The interlude of relative calm partly reflects the wishes of House Speaker Thom Tillis, who is trying to unseat Democratic U.S. Sen. Kay Hagan in a race that could decide Senate control.
But even in a quiet legislative session, bitter differences over last year's legislative product remain close to the surface. North Carolina is locked in a long-term battle over who best represents a state that has an undeniable conservative streak in some areas but has forged a more moderate identity than its neighbors through a commitment to infrastructure investments, support for public education and the kinds of policies that have made the state a scientific research magnet.
North Carolina certainly wasn't alone in shifting to the right after 2010, but the state's history, political makeup and changing demographics set it apart and helped fuel national attention to its transformation. Population growth has surged by 67 percent since 1980, making North Carolina one of the fastest-growing states in the country as immigrants, Northeasterners and Californians have flocked there. At the same time the white population fell 7 percent between 2000 and 2010 as minorities made significant gains. Minorities now account for about half of the population under 18 and constitute more than half in five of the six largest cities in the state. While North Carolina is experiencing a huge spike in the number of voters who don't identify with either party, Gallup routinely finds it to be among the most politically balanced in the country, most recently putting Republicans at 41.9 percent of the population and Democrats at 41.3 percent. Democrats believe the legislature has gone far beyond the wishes of an evenly divided state, and some voters clearly agree: In various polls, the legislature has registered approval ratings as low as the teens.
Starting in the 1920s, North Carolina took a different path to economic development than its low-tax Southern neighbors, adopting a "business progressivism" that emphasized spending on infrastructure and building a university system that would come to rank among the best in the country. For much of the last century there was generally a consensus in both parties around the idea that this public investment strategy was the best approach. The investment in the university system led to the creation of Research Triangle Park, an area stretching from Durham to Chapel Hill that's now home to more than 170 companies. "The corporate leadership went along with the political leadership and the public investments they supported," says Rep. Paul Luebke, a Democrat with more than two decades in office.
The state has always been socially conservative (it was one of the last to adopt a state lottery and liberalize the sale of alcoholic beverages), but the new Republican majority has also tacked to the right on economic policy. It has reduced spending on public education, rejected Medicaid expansion, cut unemployment benefits, repealed the Earned Income Tax Credit, passed billions of dollars in tax cuts and rolled back hundreds of environmental regulations. Many of those policies formed a 10-point plan Republicans campaigned on in 2010, and lawmakers argue they've been instrumental in taking North Carolina from the fifth-highest jobless rate in the country to slightly better than the national average. "We enumerated 10 things we would do, and we presented that 100 times," says Rep. Paul Stam, the speaker pro tem. "By the way, we've done 9 out of 10 of them."
With the legislature's help, McCrory has been given three times the number of slots for political appointees as his predecessor. Many of those at-will employees, who are expected to show political loyalty, are concentrated in the Department of Environment and Natural Resources, the agency responsible for overseeing the disposal of waste from companies like Duke Energy, where McCrory worked for 28 years. A massive coal ash spill into a North Carolina waterway near the Virginia border earlier this year has raised questions about how the Republican legislature and governor approach environmental regulation and the way agencies run.
Environmental advocates argue that the greater politicization of the agency and its chief's emphasis on treating businesses like customers has led to a weak response to a widespread problem that the recent ash spill helped bring to public light. Environmentalists have found groundwater contamination elsewhere and attempted to sue a number of times since January 2013 for the removal of leaky coal ash ponds, only to be stopped by the department, which has the authority to effectively preempt citizen legal action.
The department eventually proposed a settlement last year with Duke Energy that included a modest fine and no requirement to clean up ponds that are contaminating nearby water supplies. But environmental regulators abandoned that settlement after Duke Energy's coal ash spill this year.
In addition, the Associated Press revealed that the legislature's sweeping Regulatory Reform Act included provisions that weakened compliance rules for utilities such as Duke, and emails have shown coordination between the company and public officials on everything from the settlement to lobbying efforts. "We understand they have to work with companies, but we think the first responsibility of the agency is to protect the public and the natural resources, and they don't have customers," says Frank Holleman, an attorney with the Southern Environmental Law Center. "They're not a hardware store or a grocery store; they're a public agency that has been given the legal authority to enforce the law and to promote the public interest."
Under pressure to act, McCrory rolled out legislation this year that would require removal of coal ash ponds at some of Duke's 33 sites, but the announcement underscored some tension between the governor and his fellow Republicans in the legislature. Lawmakers said McCrory didn't consult with them about what they'd like to see in a bill or what they can achieve within their caucuses. "I think it's a learning curve on how to work with the legislature," says Sen. Tom Apodaca, a six-term Republican who has taken leading roles on major legislation. "I think when you've been a mayor you're not that well versed in how a legislature works and how policy is created."
Critics on the left say there's no longer any sign of the moderate Charlotte mayor who challenged conservatives at times, for instance telling a debate audience that he wouldn't agree to new abortion restrictions. His only vetoes last session came against a bill allowing drug testing for welfare recipients and against another expanding the period of exemption from employment eligibility checks for seasonal workers. The legislature easily overrode both vetoes. Before that, it added new abortion restrictions to a motorcycle safety bill that McCrory ultimately signed, although it toned down the abortion language when the governor threatened a veto.
Perhaps McCrory's biggest legislative priority this year is raising teacher pay, which has fallen to 46th in the nation after rising to the middle of the pack in the early 2000s. That could be harder with a $455 million budget shortfall that's partly the result of income tax cuts he signed into law last year, though Republicans created a reserve to absorb a gap they say was expected in the first year of the tax overhaul. Democrats are attacking Republicans over K-12 and higher education, hoping to tap into issues that have long been associated with North Carolina's business progressivism.
The tax plan Republicans passed last year eliminates $2.4 billion in state revenue over the next five years, making it harder to maintain the university system at its current spending levels and keep pace with K-12 enrollment if it doesn't spur the kind of growth lawmakers argue it will. In overall dollars, K-12 spending is higher than it was before the recession, but that's not the case when accounting for inflation and a 7.2 percent enrollment jump since 2004. The more polarizing changes under Republicans include ending teacher tenure, eliminating a cap on the number of charter schools allowed in the state, rescinding a policy that gives pay increases for those with a master's degree, passing a school voucher plan and most recently pitching a plan to allow students to attend schools outside their home districts. District leaders in Wake County, home to Raleigh, have blamed those changes and stagnant pay for a 41 percent increase in teacher turnover in the past year. "It is palpable how upset people are about public schools," says Sen. Josh Stein, the Democratic whip. "It comes down to a fundamental choice between millionaires and teachers."
Spending levels per student on higher education are 25 percent less than they were before the recession, and McCrory proposed a $49 million cut to universities in a new budget released just as the 2014 legislature convened. North Carolina was one of only eight states that reduced funding for higher education last year as states sought to reverse years of cuts, according to the left-leaning Center on Budget and Policy Priorities. Over the same period, tuition at state schools has jumped more than 30 percent. For Republicans, higher education spending had long been too high, and they point to per-student subsidies that ranked among the highest in the nation.
But if Republicans are upsetting the traditional North Carolina model of economic growth, there hasn't been much of a public outcry from the business world that full-heartedly subscribed to it for generations. There are a couple of reasons for that. The first is that corporations could see an immediate upside to lower taxes, at least in the short term. The second, says veteran political journalist Rob Christensen, is that the corporate leadership in North Carolina is no longer homegrown. Because of mergers and buyouts, more of the state's business leaders come from outside North Carolina, and many are neither intimately familiar with the state's past nor inclined to get involved in politics.
To be sure, though, there have been voices of caution. Among the most prominent is Republican U.S. Sen. Richard Burr, "the closest thing in North Carolina to the political voice of the business community," according to Christensen, who's written a book on the state's politics and history. Burr first entered the debate in 2011, when he said the state wins recruiting wars "more than our neighboring states" despite its status as the "highest-tax state in the Southeast," and that's in large part because of its university and community college system. "When an employer looks at an investment in North Carolina, they are not looking at the return next year," he said. "They are looking at the return 30 years from now. They need a future workforce that has the skills and knowledge."
With the sudden shift to the right and the growing number of independent voters in North Carolina, pollsters and political consultants are asking when -- or if -- the tide will roll back toward Democrats. Independents, who are typically younger and less ideological in North Carolina, now make up a growing share of the electorate. At the same time, Republicans controlled the redrawing of district maps after their 2010 win, allowing them to create a favorable legislative landscape for the following decade. That's led many political observers to estimate Democrats will pick up only a modest number of seats at most in the 2014 election, when every House and Senate seat is up for re-election. "That's the great risk Republicans run, assuming that because they've been given all the power they can do what they please without regard to the fact that we are a perfectly balanced state," says John Davis, an influential nonpartisan political consultant.
The most important election this year in North Carolina -- and perhaps the country -- is between Speaker Tillis and Sen. Hagan, who will try to make the case that Tillis has led an extremist legislature in dismantling valuable government initiatives. So far Tillis has given no sign he'll run away from that record, at least on the economic front. He has found himself split between running a campaign and a legislative session in Raleigh, where he opened the year's deliberations flanked by most of his GOP caucus and took questions from a crowd of reporters. Will there be any movement to dial back the rightward shift from last session, one reporter asked, particularly on Medicaid expansion and unemployment insurance? Tillis took issue with calling it a "rightward shift," noting the hefty debt the state owed the federal government on unemployment. Tillis welcomed attention from the national media. "It puts us on a stage and lets them know that North Carolina has made more progress than any other state in the last three years on economic policy," he said. "I'm proud of that."
It's a message that's likely to play well with Republicans and some independents. But can Republicans continue to govern a balanced state, one with a growing number of unaffiliated voters, from the far right? Democrats and other critics insist they won't be able to. As Bob Hall of Democracy North Carolina, a nonprofit focused on voter turnout and campaign finance, says, "Whether they have an 'R' by their name or a 'D' by their name, I think there will be an ultimate tilting back toward that more progressive direction."
Chris Kardish -- Staff Writer
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