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State
Government News
Commerce
secretary defends Bill Lee Act
North
Carolina's main legislative initiative for attracting good
jobs and critical industry investment is paying off overall,
but incentives offered by competing neighbor states "have
in most cases matched our tools, and then surpassed
them," N.C. Commerce Secretary Jim Fain said at a joint
meeting Tuesday of the House and Senate Finance committees.
"Without the William S. Lee Act, we would have been
without a major tool in an escalating interstate competition,
and it will continue to have an important place in our tool
kit," Fain said. But he added that North Carolina's
recruiting incentives "compare quite unfavorably with
those offered by neighboring Southeast states."
Fain made the assessment during delivery of a progress report
to the joint legislative hearing on the William S. Lee Quality
Jobs and Business Expansion Act. The act, enacted in 1996 and
amended each year to improve its effectiveness and
accountability, provides tax credits to manufacturing firms
for job creation, investing in machinery and equipment,
increasing spending on research and development, training
workers and establishing or expanding central administrative
office or aircraft facilities.
Fain said analyses of the Lee Act's performance by the
Department of Commerce and by Dr. Michael Luger of UNC's Kenan
Institute for Private Enterprise "generally indicate that
the act is doing what it was intended to do," including:
 Modernizing the
state's traditional industries by encouraging $2.6 billion in
investment in machinery and equipment.
Spurring $1
billion in increased research and development by N.C.
companies.
Stimulating a
more-than-proportionate share of jobs and investment in the
state's least prosperous counties.
 Creating
additional jobs and investment indirectly through increased
economic activity in the state.
Fain
delivered his update on the act in the context of troubling
economic trends for the state. In the past year, North
Carolina has lost nearly 36,000 manufacturing jobs, about half
in the textile and apparel industries.
"I don't
need to tell you that many of our communities and counties are
in distress," Fain said, adding that a national economic
downturn, energy price increases and a strong dollar has
caused "an ongoing loss of manufacturing jobs accelerated
at an alarming rate to what only can be called recession
levels." (more) Many of the job losses are in the state's
Tier Four and Tier Five counties, the most prosperous counties
under the state's system of identifying counties facing
economic distress. Fain said about 8,000 jobs have been lost
this year in Mecklenburg, Wake and Durham counties, for
example, and about 50 percent of the state's manufacturing
firms are located in the 21 most prosperous counties.
Fain also addressed criticism that a disproportionate share in
total dollars of benefits under the act is going to Tier Four
and Tier Five counties, which supposedly have less need for
the inducements offered under the legislation.
"Put aside for a moment the fact that the growth
generated in these counties creates tax revenues which can
support programs for all parts of our state," Fain said.
"In fact, some of the fiercest competition for business
recruitment is faced by some of our Tier Five counties, which
compete with places like Dallas, Austin, Atlanta, Boston and
the Silicon Valley… places that have similar amenities and
advantages. In tough times, we don't need to reduce their
arsenal as they are trying to get people who have lost their
jobs back to work."
Easley
releases local governments’ money
Gov.
Mike Easley on July 6 said he is releasing the $95 million in
local government reimbursements that had been set aside in
emergency reserve to balance the 2000-2001 budget shortfall.
The governor acted before the final budget numbers are in for
June, the last month of the fiscal year. Both Ron Aycock,
executive director of the N.C. Association of County
Commissioners, and Ellis Hankins, executive director of the
N.C. League of Municipalities, applauded the governor's
decision and praised Easley for managing a difficult budget
situation.
"The hardships of the past few months demonstrate why
counties need reliable, growing sources of revenue over the
long-term," Aycock said. "The legislature has before
it several bills, including local option sales tax authority,
that would provide local governments with the financial
security they need and their citizens deserve. We want to work
with the members of the General Assembly on these bills."
Easley said his administration cut nearly $500 million
in spending in the last five months to help plug the roughly
$850 million shortfall. If given greater flexibility, Easley
believes the state can make additional cost-saving cuts over
the long term. But he said cuts alone will not solve the
State’s revenue shortage.
“The last
five months have been tough on everyone, including our local
governments,” Easley said. “We made the tough cuts, and
the tough choices, to get the budget balanced. But it is
important now that we look ahead, beyond the current
shortfall. We must adopt a budget that goes beyond short-term
band-aid fixes. With revenues falling and unemployment rising,
it is clear that we will be headed for another deficit unless
we take responsible action.”
Easley renewed his call to legislators to pass a new biennium
budget that charts a long-range course of progress in
education without jeopardizing vital services for the
state’s most vulnerable citizens. He said earlier that the
two budgets proposed in the House and Senate fall short of the
mark. “The budget we enact this year will be seen as a
roadmap to North Carolina’s future,” Easley said. “We
must plan, think and act long-range, and enact a budget with
vision and fiscal integrity.”
Governor
says annual revenues fell $820 million below target
Gov.
Mike Easley said Tuesday that state agencies have cut $468
million in the last five months, giving the state part of the
resources needed to plug the 2000-2001 fiscal year shortfall.
Easley issued
an emergency declaration in February, setting aside nearly $1
billion in reserve -- including the agency cuts -- to cover
the shortfall. He also put a freeze on state hiring and
purchases earlier this year and directed agency heads to limit
travel.
The state
ended the year with a balance of $601.6 million. Easley said
he will use the emergency reserve plus a year-end cash balance
to cover the shortfall and replenish the Hurricane Floyd fund.
"We made
the tough choices and the tough cuts to cover the
shortfall," Easley said. "It is important now that
we come together in a bipartisan effort to pass a new budget
of vision and fiscal integrity, one that goes beyond
short-term fixes. I am committed to working with legislators
to craft a new budget that charts a long-range course of
progress in education."
Easley said
there is still room to cut additional waste from state
government, but he cautioned legislators against making deep
cuts in education or impacting services to the state's most
vulnerable citizens.
"With
revenues falling and unemployment rising, it is clear that we
will be headed for another shortfall unless we take
responsible action," Easley said. "The budget we
enact this year will be seen as a roadmap to North Carolina's
future. I have asked legislators to give my administration the
flexibility to find savings in state government without making
cuts in the classroom. And I have solicited their ideas for
improving the fiscal integrity of this state without putting
educational opportunities, or the well-being of our most
vulnerable citizens, in jeopardy."
Easley said
he will not yet release funds back to the state retirement
system or rainy day fund until it is clear that all
outstanding obligations have been met for the 2000-2001 fiscal
year and the 2001-2003 biennium budget is balanced.
The governor released the following yearend budget data
compiled by the State Controller's Office:
 Total Cash Year
End $601.6 million
 Outstanding
Obligations
Rainy Day
Fund, $157.5 million
Retirement
Fund, $140.3 million
Hurricane
Floyd Reserve, $426.0 million
Hurricane Fran
Reserve, $23.0 million
 Total, $145.2
million
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