Gov. Pat McCrory and Senate leader Phil Berger shared a stage Wednesday on the grounds of the state Capitol. The occasion was a rally for agriculture, with tractors and dignitaries dotting the lawn, but only a few smiles to go around.
The latest tension between the two resulted from a ruling in a court case, McCrory v. Berger. McCrory had won a closely watched decision about the power of appointments. The Senate soon acted to freeze many new appointments. Then, Berger’s Senate took a much different path on a jobs plan that has already cleared the House and on which McCrory wanted quick action.
Combined, the issues pushed McCrory and Berger into political hostilities that promise to shape the rest of the legislative session. McCrory may have only won a round.
“The question becomes: Who will garner the upper hand in this boxing match?” said Michael Bitzer, a professor of politics and history at Catawba College.
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He suggested Berger will – at least legislatively in a state where lawmakers have considerable power over the budget and state policies.
“It seems to me that the state Senate has no real loss if the fight continues,” he said, “since their members come from very safe seats and they even picked up a seat in last year’s election. For the governor, it’s more about dealing with a statewide electorate that will be much more competitive than the typical state Senate district. So both are looking at their respective re-election bids and seeing very different political dynamics.”
The Senate can hold McCrory’s agenda hostage, Bitzer said.
McCrory isn’t showing concern.
The governor celebrated after winning the verdict of a three-judge panel, which decided in his favor a question about control of state appointments.
“I’m proud to stand up for our constitution and the citizens of North Carolina,” McCrory said.
Berger and House Speaker Tim Moore believe they, too, are following the constitution. They appealed to the state Supreme Court, while halting action on some key pending appointments.
“The trial court’s new interpretation of the constitution represents a dramatic shift in the historical constitutional balance between the three branches of government, with implications reaching far beyond the three independent boards named in the lawsuit,” Berger and Moore said in a statement.
When Berger proposed a vastly different plan on incentives and jobs at midweek, McCrory struck, saying it would “divide” the state and “break the bank.”
That hit Berger on fiscal conservatism, something he cares deeply about. Berger’s plan would drop the corporate tax rate to 3 percent from the current 5 percent. That would mean about $500 million less revenue to the state, officials say.
Berger shot back: “I’m trying to comprehend how the governor wants to spend $1 billion on new incentives, but considers it ‘breaking the bank’ to allow North Carolina taxpayers and job-creators to keep about $500 million of their own money. The math does not add up.”
Berger’s Finance Committee chairman, Harry Brown, went further. The state needs more incentive money now, he said, because of McCrory’s open hand, especially in the Raleigh, Durham and Charlotte areas. McCrory is from Charlotte.
Brown said McCrory “needs to accept responsibility for rapidly draining his jobs incentive fund and directing close to 90 percent of the state’s incentive money to its richest three counties, including his own.”
On Wednesday, McCrory and Berger passed each other in the jumble of people at the agriculture rally. But they didn’t linger enough to shake hands. There was no chit-chat.
They did share the stage for the program. The seating arrangement placed the House speaker and Agriculture Commissioner Steve Troxler between them. Up on the stage, McCrory and Berger looked far apart.
Competing jobs plans
The state House and Senate have proposed different jobs plans in an effort to resolve one of the major goals of the legislative session: stimulate job growth. Gov. Pat McCrory backs the House version, which passed in bipartisan votes. The Senate did not take it up, instead outlining its own plan last week. Here are the key pieces at a glance.
Incentives: Limit Wake, Mecklenburg and Durham counties to no more than about half of the state’s incentives money in an effort to shift more to rural areas. The main incentive program, Job Development Investment Grants, would be able to offer up to $15 million a year. Additional incentives would be available for a “high yield project,” such as an auto manufacturer, and the terms would be more generous than what’s currently offered. A separate bill would give the program a short-term infusion of $5 million.
Taxes: Lower the state’s corporate income tax to 4 percent in 2016 and 3 percent in 2017 – eliminating an existing requirement that revenue targets must be reached before further cuts kick in. The state’s current rate is 5 percent. The reduction would mean a loss in revenue to the state of about $500 million.
Sales factor: Shifts to a corporate income taxing method known as single sales factor apportionment. It would calculate companies’ tax liability based entirely on sales – instead of also factoring in their payroll and property value. It’s effectively an additional corporate tax cut that favors companies with extensive property and payroll taxes in the state. Berger’s office said it would save companies $75 million.
Incentives: Double the money available in JDIG without mandating which counties get the money or changing the program’s structure. JDIG would get an additional $22.5 million to offer companies in 2015. The plan also includes $20 million for an infrastructure grant program that helps companies build new industrial sites.
Taxes: The House wouldn’t affect the current corporate tax cut plan, which allows for a drop to 3 percent but only if certain state revenue goals are met. And it would extend tax credits for jet fuel and technology data centers. The jet fuel credit only applies to American Airlines and costs the state about $10 million a year.
Sales factor: Allows the single sales factor to be used for an employer investing more than $1 billion, likely an automaker or aviation firm.