Rob Christensen

North Carolina regularly ranks among best states for business. Who’s responsible?

The downtown Raleigh skyline is seen from South Saunders Street in Raleigh, on Sunday, December 27, 2015.
The downtown Raleigh skyline is seen from South Saunders Street in Raleigh, on Sunday, December 27, 2015. News & Observer

There has been so much spin and political puffery about North Carolina’s economic development that it is enough to make your head hurt.

Every time there is a major economic expansion, it seems, we get into an argument about who or what should get credit: Democratic Gov. Roy Cooper, the Republican legislature, tax cuts, corporate tax incentives and so forth.

The idea that some companies might have come to North Carolina regardless of who controlled the political machinery seems to have occurred to no one.

Putting aside the partisan one-upmanship, a few things do seem to be true.

North Carolina seems to be an attractive place to do business. Within the past year, CNBC named North Carolina fifth in a list of top states for business, Chief Executive Magazine named North Carolina third and Forbes Magazine found that North Carolina had the strongest business climate in the nation.

This has been true for years, regardless of whether Republicans or Democrats are in control.

“North Carolina has built one of the country’s strongest business climates over the past two decades, fueled by low business costs, incentives and a young educated work force, many of whom have been trained at the strong universities in the state and Research Triangle Park,” wrote Forbes Magazine, which calls itself “The Capitalist Tool.”

“The Tar Heel State is the only one to rank among the top five Forbes Best States for Business for 12 straight years, but it never reached the top rung until now,” the magazine said in November.

“An improved employment outlook and the second lowest business costs (labor, energy, taxes) have propelled North Carolina to first in our annual ranking, a spot previously only attained by Utah and Virginia since we launched the list in 2006.”

Forbes also noted that North Carolina helped itself in the business community by repealing – or partially repealing – the so-called bathroom bill that required people in schools and other government buildings to use facilities that corresponded with the gender on their birth certificate.

There are several takeaways from the Forbes article. Republicans can take solace from the mention of low taxes – they pushed through a program of historic cuts in corporate and personal income tax rates in 2013. They have also made North Carolina’s unemployment insurance rates among the lowest in the nation.

But the Forbes article also cites North Carolina’s traditional commitment to education, particularly higher education as a vital force in economic development.

This, of course, has been the Democratic argument: that businesses are looking at more than tax cuts.

As the GOP-controlled legislature has pushed through large tax cuts, education funding has lagged – although the decline began during the recession when Democrats were still in control.

According to data on state spending from the Higher Education Works Foundation:

  • Per-student funding for the University of North Carolina system fell from $17,084 in 2007-08 to $13,502 in 2014-15 (in constant 2014-15 dollars).
  • Per-pupil funding for the community colleges fell from $5,499 in 2006-07 to $4,608 in 2014-15 (again, in constant 2014-15 dollars).
  • Per-pupil spending for kindergarten through 12th grade fell from $6,021 in 2000 to $5,724 in 2016 (in constant 2016 dollars).

In looking at the economic climate of each state, CNBC looked at 60 measures of competitiveness. North Carolina placed high, finishing behind Washington, Georgia, Minnesota and Texas.

North Carolina was in the top 10 in workforce, cost of doing business, technology and innovation, and access to capital. But it was 28th in quality of life and 32nd in education.

Executives looking to locate or expand business in North Carolina may be looking at taxes and financial incentives, but they are also looking for a trained work force and a nice place to live, and one with modern sensibilities.

Threats to North Carolina’s pro-business climate come from both the political left – high taxes, regulation and excessive environmental legislation – and from the political right: from social conservatives pushing intolerant views, from libertarians opposed to incentives that every state uses to attract industry, and from fiscal conservatives unwilling to finance education.

The high rankings as a pro-business state don’t tell the whole story. North Carolina has bled jobs in recent decades as traditional industries such as textiles and furniture have fled the country for cheap overseas labor.

It is a major reason why North Carolina had a higher unemployment rate (4.3 percent) than the national average (4.1 percent) and higher than most of our neighbors as of November.

That is also a major reason why nearly half the counties are struggling economically, and why many workers in small towns are not feeling the effect of the pro-business climate.

Rob Christensen can be reached at robc@newsobserver.com or at 919-829-4532.

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