Rob Christensen

Perdue cites '30s reform as blueprint for change

Like then-Gov. Gardner, she says state must reinvent itself Governor says once again it's time to remodel government

Staff WriterJanuary 25, 2009 

  • Oliver Max Gardner is regarded as one of North Carolina's ablest governors. A Shelby attorney and textile mill owner, Gardner served as lieutenant governor and governor, was a friend of President Franklin Roosevelt, was a top Washington lobbyist, served as U.S. treasury undersecretary and was named U.S. ambassador to Great Britain by President Harry Truman shortly before he died in 1947.

    He was also the boss of the state Democratic Machine -- called the Shelby Dynasty -- and helped make several allies, including his brother-in-law, governor. During much of the 1930s and 1940s he controlled Tar Heel politics by telephone from his apartment in Room 770 of Washington's Mayflower Hotel.

    (He also holds the distinction of having been captain of the football teams at both N.C. State University and the University of North Carolina at Chapel Hill as a law student, at a time when sports eligibility requirements were much looser. When Carolina played State, Gardner declined to play against his old teammates.)

    STUDY COMMISSIONS AND SAVINGS ADOPTED

    A series of commissions has been created over the years to examine state government. Although the recommendations did save the state some money, many recommendations failed because of political opposition.

    * Gov. Jim Holshouser, a Republican, created an Efficiency Study Commission in 1973. The commission made 767 recommendations with an estimated savings of $80 million. A year later, the commission estimated that two-thirds of its recommendations had been carried out.

    * Gov. Jim Martin, a Republican, created the Governor's Efficiency Study Commission in 1985 to look for savings. The commission identified $245 million in potential savings. Martin said he implemented 50 percent of the savings that affected the executive branch.

    * In 1991, the legislature created the N.C. Government Performance Audit Committee, which came up with 350 recommendations to save an estimated $200 million. One of the its major recommendations was to eliminate the Department of Crime Control and Public Safety. The department still exists.

    * In 2002, Gov. Mike Easley, a Democrat, created the Governor's Commission to Promote Government Efficiency and Savings on State Spending. It identified 80 examples of possible savings. The commission said it resulted in about $25 million in annual savings. Among its recommendations was shifting control of the N.C. Museum of Natural Sciences from the state Department of Environment and Natural Resources to the state Department of Cultural Resources, which runs most state museums. The museum is still run by the environmental agency.

    * The legislature created another more limited performance audit in 2006, which made its report in 2007. As a follow-up, it created a program evaluation division to examine various state government operations.

  • The state legislators return to Raleigh on Wednesday to begin the 2009 session of the General Assembly.

    Lawmakers will contend with an economic downturn that has severely eroded state revenues, taking a big bite of of this year's budget and creating a serious shortfall for next year.

    Beyond the budget, there will be other issues: how to fund the state health plan; how to respond to challenges to the death penalty that have created a de facto moratorium; how to answer labor unions' calls for collective bargaining; how to reform the state's mental health and probation systems.

    There will be some new faces -- and some familiar faces in new roles -- when legislators return to work. There will be a new lieutenant governor, Walter Dalton, presiding over the Senate. And there's a new governor, Beverly Perdue.

    On Wednesday, The News & Observer will provide a session preview and a guide to keeping tabs on lawmakers.

In the 1930s, when dozens of Tar Heel banks were closing their doors, thousands of people were losing their farms and scores of towns were declaring bankruptcy, Gov. O. Max Gardner saw an opportunity to overhaul government.

During the bleak times of the Great Depression, Gardner led a radical reorganization in which state government took over responsibility for schools, roads and prisons. State government as we know it today is largely the result of Gardner's work.

Now a new governor, also facing tough economic times, is invoking Gardner's name as she talks about transforming how state government does business to meet the needs of a different time.

Gov. Beverly Perdue, a Democrat, has been citing Gardner's time as governor, 1929 to 1933, in discussing what North Carolina should do as, once again, the jobless rate rises, businesses shut their doors, and state and local governments struggle to meet the state's needs.

"He used the Great Depression as an opportunity to transform the way this state did business," Perdue said at a recent conference sponsored by the N.C. Chamber of Commerce and the state bankers association.

"Now, perhaps, it's time to redo a lot of that thinking," she said. "It's time for us to transform the way we do business in North Carolina."

Perdue, in her first month on the job, has not offered any detailed plan for remaking state government. She has proposed a commission like the one Congress appointed to study military base closings to recommend whether certain state government programs should be changed.

Just as Congress could only vote yes or no on the base-closing commission's recommendations, the legislature could only vote yes or no on the budget proposals. No amendments would be allowed.

Perdue has proposed fundamental changes in how road-building decisions are made, saying that those choices should be left to professional engineers in the Transportation Department rather than the often political whims of the appointees to the state Board of Transportation. Perdue has also authorized a task force to look at a system of public financing for gubernatorial campaigns.

Perdue's proposals -- and her talk of remaking state government -- have been met with everything from skeptical guffaws to hopeful encouragement. Much of what she wants to do will require the approval of the the Democrats who control the legislature, which will return to work on Wednesday.

Making it happen

"If Gov. Perdue is serious about this, she has to make this one of a handful of priorities of the first term," said Chris Fitzsimon, executive director of the progressive N.C. Policy Watch. "She has to be willing to spend political capital to make it happen."

Some observers argue that the tough economic times could work to Perdue's advantage.

"If you are a student of history, you often see big changes in the public sector done during times of crisis," said Mike Walden, an economist at N.C. State University and author of "North Carolina in the Connected Age."

"It's based on human nature. [For] people who need to change personal habits, it sometimes takes a medical crisis to lose weight or stop smoking."

So it's not surprising, Walden said, that the most radical changes in government occurred during the Depression -- led by Franklin D. Roosevelt in Washington and by Gardner in Raleigh.

North Carolina was a poor, largely rural state of 3 million people in the 1930s, and the Depression made things much worse. In the days before federal deposit insurance, 215 Tar Heel banks failed. Thirty-nine counties and 78 North Carolina towns declared bankruptcy.

Gardner had been governor for nine months when the stock market crashed.

"I lay awake at night wondering how I let my ambitions lead me into the governorship at a time like this," Gardner wrote in a rare moment of self-pity.

In June 1930, Gardner slipped off to Washington to visit the Brookings Institution, a liberal think tank, where he arranged for a four-month study of North Carolina government. Gardner also created several working study groups to examine state government.

Gardner's chief aim was to provide property-tax relief so people would not lose their farms and houses. He also hoped to make state government more efficient.

The Brookings report called for the state to take responsibility for the roads, schools and prisons. It proposed creating a central purchasing agency and the consolidation of the University of North Carolina, the school then known as State College, and the N.C. College for Women into one UNC system.

Streamlining ideas

The 1930 Brookings report called for reducing the number of state agencies from 92 to 14, reducing the number of the state's elective executive offices from 13 to three and consolidating some of the counties in North Carolina. It proposed a state office to handle purchasing and contracts, a commission to oversee the issuance of bonds by local governments and a state commission to regulate banks.

Pushing the changes through the legislature was not easy. There were, for example, 150 local road boards, all connected to local courthouse politicians or powerful businessmen with alliances to road contractors.

So Gardner used radio to go over the heads of the legislature and sell his program directly to voters. He brought in former Virginia Gov. Harry Byrd and former New York Gov. Al Smith to address the legislature on the merits of his plan.

Gardner got most of what he wanted.

On July 1, 1931, North Carolina state government took over responsibility for 45,000 miles of roads and 4,000 county convicts.

To pay for it, the state levied a new gasoline tax and a corporate income tax and a franchise tax. It later imposed a state sales tax to pay for the schools.

Gardner's reforms received national recognition. They were hailed in an article in the Saturday Evening Post titled, "One State Cleans House." Gardner addressed the Virginia and Kentucky legislatures to talk about what North Carolina had accomplished.

More than 70 years later, Gardner is again providing guidance for North Carolina in difficult times. Faced with a budget shortfall estimated as high as $3 billion, Perdue says she has been reading up on Gardner. She says it's time "to transform state government."

"We will root out redundancy and make make North Carolina state government more efficient and responsive to state citizen's needs," she said.

Former state Sen. Robert Pittenger, a Charlotte Republican who has long pushed for more attention to possible savings in state government, says the time is right for Perdue.

"The crisis is the opportunity," Pittenger said. "Sometimes we don't deal with reality until we have to. I think they are forced to do it now."

Pittenger said he hopes Perdue will appoint a commission and tap into the expertise of retired executives such as Hugh McColl of Bank of America, John Allison of BB&T and Bob Ingram of GlaxoSmithKline.

Other states reform

He noted that in recent years, Massachusetts under then-Gov. Mitt Romney and Texas under Gov. Rick Perry and others have found ways to save billions of dollars after they faced financial crisis.

John Hood, president of the John Locke Foundation, a Raleigh-based conservative think tank, says there is significant duplication in North Carolina's government.

Does it make sense, Hood asks, for so many agencies to be involved in law enforcement, including the Highway Patrol, the State Bureau of Investigation and Alcohol Law Enforcement? In the area of finance, Hood asks, does the state need a controller, a state budget office, a Department of Revenue, a state treasurer and a state auditor?

Hood is skeptical that big change is coming. There have been periodic outside looks at state government in recent years, but few have led to dramatic overhauls. When economic times improve, Hood said, there has been very little impetus to change. He says there are often powerful special interests that benefit from the current arrangement and little push from the public for change.

"We've had previous recessions and people would say, 'Now is the time to make fundamental change,' and it hasn't panned out," Hood said.

Hood also argues that it's not clear that there is the political will for massive changes this time around.

"People in North Carolina are worried, but they don't think we are Michigan," Hood said, noting a state troubled by the decline of the auto industry. "They do not perceive us being at the bottom of the heap. So we don't think we will end up seeing changes as significant as Max Gardner's reforms."

Rob Christensen, a reporter and columnist for The NO=&O, covered his first legislative session in 1977. He is the author of "The Paradox of Tar Heel Politics," which was published last year by UNC Press.

rob.christensen@newsobserver.com or 919-829-4532

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