The economy was center stage in Raleigh Monday, as Governor-elect Beverly Perdue announced the appointment of what she called her economic team and addressed state business leaders at the annual Economic Forecast Forum held by the North Carolina Chamber and the North Carolina Bankers Association.

Perdue's remarks come as statistics from the court system show that there were 53,995 foreclosure filings in the state 2008, up from 2007's all time high of 49,695.  Perdue told the crowd that she was lobbying hard for the state's share of a federal stimulus package and said the $700 million worth of building projects the Council of State will approve Tuesday morning will create 23,000 jobs.

She promised to "root out redundancy" as she tries to balance the state budget that faces a shortfall of $3 billion next year. Conspicuously absent from her remarks were any specifics about how she plans to do that, though she did pledge to consider targeted tax breaks for business.

That won't help the shortfall and goes further in the wrong direction than her earlier statements that seemed to rule out any tax increase, meaning she apparently supports cutting state spending as much as 15 percent at a time when more people need state services to survive.

Perdue wants to transform state government into a "well-tuned machine." It is the year of change after all, though you wouldn't know it by her cabinet appointments, many of whom are long-time Raleigh insiders.

One bright spot was Perdue's announcement that she would sign an executive order Monday to begin to transform the State Board of Transportation into an advisory board instead of one that makes decisions about highway projects.  Board seats have traditionally been awarded to political donors and fundraisers, leading to inevitable scandals and ethical lapses.

Perdue appointed Gene Conti as the new DOT Secretary. Conti has worked at the department and the U.S. Department of Transportation and his appointment marks a welcome change in the background of DOT Chiefs. Most have been major political donors and fundraisers and Perdue picked Conti over prominent Democratic money man Lanny Wilson, who was the choice of Senate President Pro Tem Marc Basnight.

The rest of Perdue's economic development team announced Monday is Randolph County textile executive Keith Crisco as Secretary of Commerce, Greensboro businesswoman Linda Carlisle as Secretary of Cultural Resources, and Orange County health care administrator Moses Carey as head of the Employment Security Commission.

Last week Perdue appointed Reuben Young, currently counsel to Governor Mike Easley, as Secretary of Crime Control and Public Safety and Linda Hayes, Chair of the Governor's Crime Commission, as Secretary of Juvenile Justice. She also appointed former assistant attorney general Alvin Keller to run the Department of Correction.

All of the appointees seem qualified but they almost all share something else too, a history in Raleigh, a closeness to the Democratic machine, donating or raising money for campaigns. Until recently Carlisle served on the lottery commission for example, and Hayes was a prominent fundraiser for Easley.

None of that  means the appointees won't do a good job, but collectively they don't seem to represent the dramatic departure from business as usual that Perdue has promised and promised again Monday.

With the exception of her commitment to reduce the power of the DOT board, her transition has yet to match the boldness of her rhetoric about a new day in Raleigh. She has plenty of more chances, and not just in her appointments.

Saturday she will deliver her inaugural address and let's hope for a renewed commitment to a new direction for the state that includes some specifics. She could start by rethinking her apparent aversion to consider new revenue to balance the budget. 

Perdue herself identified a vital part of the budget problem during the campaign in an answer to a questionnaire from the same North Carolina Chamber she addressed Monday. Perdue said much of the state tax structure was "archaic, overly complex, or unfair," and that she was committed to a "massive review and overhaul of the tax system."

Let the overhauling and the real change begin.

Click here to listen.

This is no false alarm. There are some 662,000 North Carolina teachers, state employees, dependents and retirees on the State Health Plan. They count on it. But the plan needs $300 million right away just to keep it going. Beyond that, several hundred million dollars more will have to come in to keep the plan written in black ink. Or, benefits will be affected.

For the immediate future, some payments to vendors have been delayed. That's stopgap.

If the state is to continue to provide a high quality plan, which without question is a draw for workers who otherwise might wind up in the private sector, it's clear a longer-range view is going to be needed. The plan should not be hostage to periodic infusions of cash from the legislature when things get tough, which they certainly are right now.

Instead, it's clear that Gov.-elect Beverly Perdue, a long-time ally of state employees (who pack a political punch), will have to move and move quickly to study ways in which the plan's long-term health can be protected.

When private enterprises get in trouble, they have to come up with new "business plans," or adjust to changing marketplaces or engage in reorganization or all three. It's true that a health plan such as the state provides isn't a private company, and it represents a solemn agreement between the state and its workers. So of course it should not be subject to the same risks facing private industries.(more…)

Some 180,000 North Carolinians are estimated to qualify for an insurance program of last resort established more than a year ago by the General Assembly. The basic idea is that people who have pre-existing conditions that make it virtually impossible for them to buy or afford regular health insurance need an option — even though the N.C. Health Insurance Risk Pool is expensive and has limited benefits. Still, it's considerably better than having no insurance and facing likely bankruptcy in the event of serious illness.

So far, 222 people have been accepted in the program, where the average premium is $554 a month and nearly half of participants have chosen the highest-deductible, lowest-premium option.

This program was a long time coming, and it now will be pressed because of the unemployment problems that are one manifestation of the national economic crisis. Joblessness often means loss of health insurance. Let us hope the risk pool will cover as many people as possible, though it won't cover nearly enough of them.

The truth is, this program is yet another indication of the need for national health care reform that would provide affordable insurance options and lower drug prices — a major factor in health care problems — in this country. (more…)

The 2010 Senate race is heating up.

With Democrats coming off one of their best election cycles ever, U.S. Sen. Richard Burr, a Republican, already has two potential opponents: Attorney General Roy Cooper and U.S. Rep. Heath Shuler (and maybe departing state Treasurer Richard Moore).

To prepare, Burr has stepped up his media efforts in recent weeks.

And last week, his office unveiled a revamped Web site that features a blog, a podcast and video.

The site has been redesigned and streamlined and is, to Dome's eyes, more attractive than the usual Senate Web page.

Meantime, MMI Marketing, a Raleigh public relations firm, has been sending Dome lengthy e-mail messages about Cooper's years-long fight against a lawsuit filed by his 2000 Republican opponent, Dan Boyce.

"It will be interesting to see if N.C. Attorney General Roy Cooper will argue something to the effect that he is above the law in his own lawsuit when it goes to trial on May 18, 2009," reads a typical sentence from one of the messages.

Burr's office has no connection to the Cooper lawsuit, but it is a sign that some Republicans are keenly interested in the state attorney general. (more…)

The incoming Obama administration offers a helpful model for North Carolina

One of the most encouraging signals from the soon-to-be Obama administration is its evident commitment to stability. In keeping with the President-elect's personality and values, it's increasingly clear that the coming inauguration will likely herald a new era of calm and sober realism in the White House. In contrast to his predecessor's inclination to trust "his gut" and the "invisible hand" of the market, Obama and his team seem much more inclined to rely upon a combination of detailed research and analysis and careful deliberation in fashioning their policy prescriptions.

After eight years on an economic, fiscal and foreign policy roller coaster that has exhausted the world, Americans have in essence hired the smartest, most disciplined person available to put them on a new and smoother road. The new road may not have many highs in the short run, but in the long run, the outlook appears much more promising and sustainable.

A model for North Carolina?

This sober and disciplined approach of the new national administration ought to provide a kind of "how to guide" for North Carolina's incoming leadership team - especially when it comes to the single most obvious challenge confronting it: the state revenue shortfall.  

For decades, North Carolina's revenue system has borne a striking resemblance to the national policy roller coaster of recent years. When times were good, revenues were really good. A modest jump in the overall economy could produce a large budget surplus. And, of course, when times were or are bad (like right now) revenues were really bad. Hence the current budget shortfall of 10-15% at a time when overall economic activity is only down a small fraction of that amount.

Of course, some of this roller coaster effect is beyond the control of state elected officials. When capital gains are down, they're down and lower incomes and income tax receipts are inevitable. Moreover, unlike the federal government, state leaders have very little ability to affect the behavior of businesses and consumers because of constitutional bars on deficit spending.

Still, despite these limitations, there is much that can and should be done to chart a smoother and healthier course.  The first and most obvious step is comprehensive tax reform and modernization.

For years, experts, academics and multiple study committees have concluded that North Carolina's 1930's-era tax system needs modernization. The shortcomings are obvious and include:

• The sales tax is still designed as if the state's economy was exclusively goods-based rather service-based.
• Business taxes are rife with loopholes and special breaks that let many large and profitable corporations escape income taxation altogether.
• The personal income tax hits lower income working families at almost the same rate as the super rich.

All of these flaws contribute to the system's nagging inadequacy and current, painfully obvious volatility. Even before the current shortfall that's afflicting the state, revenues were not keeping up with inflation and population growth - much less the dire need for improved public services in everything from education to mental health to criminal justice. Now, of course, the situation is at a crisis point with lawmakers confronting a shortfall of as much as $3 billion if they hope to keep services merely at present levels in 2009-'10.

A new and smoother road

Happily, the solution to all of this does not involve rocket science. It lies in the adoption of a more modern, broadly applicable tax system. To put it simply, North Carolina must cast its revenue net in a wider and fairer pattern. Instead of just taxing the same things and constantly raising rates merely to stay even (as we've been doing when it comes to things like the general sales tax rate and tobacco and alcohol taxes) North Carolina must tax more transactions that currently escape taxation altogether. Cast the net widely enough and the state will actually be able to lower the sales tax rate while bringing in a comparable (and more predictable) pot of money.

The same is true when it comes to corporate income taxes. If we do away with the morass of tax breaks and exclusions and costly and unproven corporate "incentives," North Carolina can actually lower the overall corporate profits tax rate while collecting more revenue in a fairer and more predictable way.       

A similar approach will work with the personal income tax where the state's essentially flat rate structure (along with federal deductions and other breaks) currently allow the wealthy to pay a much lower share of their incomes in total state and local taxes than is paid by the middle class and the poor. To cast the net in a wider, fairer and more predictably reliable fashion, the state ought to adopt a larger number of income tax brackets. As with the sales and corporate income taxes, this would permit the actual lowering of rates on people in the middle and the bottom while creating an overall pot that stays much more in sync with the general economy. 

Mustering the political courage

As noted, the real challenge in effecting such a transformation of the state revenue system is not a matter of "how." State leaders have known for years of the merits of modernization and reform and have pussyfooted around the issue on multiple occasions.  The problem of course is in the politics. How does one muster the political "umph" to take on and overcome the daunting roadblock posed by numerous special interest lobbies - the lawyers, the architects, the entertainment industry - in tandem with the market fundamentalist, anti-government crowd who hope to use the current crisis to completely disable and de-fund our system of public structures?

The answer, it seems, must come from an emulation of the approach taken by the incoming national administration in three obvious areas:

1. Win over the business community. Sure, corporate executives hate change and hate taxes, but most of them hate instability and a crumbling public infrastructure even more. If North Carolina's new leaders really work together in a concerted and thoughtful way, it is likely that they can win over enough of the business establishment to make a political difference.
2. Kill them with facts. As in most areas of life, there's no substitute for being the smartest, best prepared person in the room. Like the new team in Washington, North Carolina's new administration can win a lot of policy battles and new adherents by soberly and methodically marshalling and disseminating the facts and analyses that support the case for real reform.
3. Level with the public. For too long, North Carolina leaders of both parties have made pandering to voters' worst instincts (especially on things like taxes) their default political strategy. While many will continue to adhere to this practice, it seems worth a try for the Perdue administration to try something new. It may be a hard sell, but with the Obama administration poised to make real headway via such a "high road" approach that features an open call for people to pull together in short-term sacrifice, it would be tremendous waste not to follow suit in North Carolina.

In short, it's essential that North Carolina's new leaders follow the Obama team's obvious intention to live and sell stability. Just like the majority of their fellow Americans, North Carolinians long for a sustained break from the roller coaster. Yes, people want growth and progress but mostly they want to know that there is a safe, predictable and hopeful future.

Cast in such light, all kinds of challenging but fact-based policy proposals - even something as difficult as comprehensive tax reform and modernization - can have real political viability. Now, in this period of crisis, is the obvious time to try.