RALEIGH -- The way some North Carolina politicians are doing their jobs poses a direct conflict with the state constitution and principles of republican government. The problem is the separation of powers, the major culprit is longtime State Senate leader Marc Basnight, and the likely penalty is ... unclear.
As revealed in a lengthy and detailed cover story in the February 2004 edition of Carolina Journal, the case of the biotech start-up company CropTech illustrated the extent to which Basnight and political operatives associated with him have inserted themselves into the workings of the North Carolina Department of Commerce. CJ writer Paul Chesser and editor Richard Wagner are to be commended for trying to boil a complex and wide-ranging story about incentives, bureaucratic in-fighting, biotechnology hype, and economic-development policy down to its essential elements -- and even these took thousands of words to describe.
In brief, the CropTech Corporation sought to locate its operations in Northeastern North Carolina. After dealing with local and regional economic developers as well as the state Department of Commerce and Basnight's aides and associates, CropTech says it could not reach an agreement on incentives, including cash grants, and could not sort out all the competing governmental players. The company eventually decided to go to South Carolina, where it received generous incenties but later folded.
In interviews with Carolina Journal, CropTech executives blamed the failure on having spend down its capital waiting for approval in North Carolina. Part of the allegations involved the Northeast Partnership, a regional economic-development entity created and funded by the state legislature and headed up by Rick Watson, a close associate of Basnight. Chesser's accounts of Watson demanding equity in the enterprise and at one point denying that he could deal truthfully with CropTech because he was "a salesman" are both revealing and embarrassing. Carolina Journal has explored this territory before in a series of stories about an ethanol project and a natural-gas pipeline in the northeast. The level of misbehavior and misuse of taxpayer resources in these cases merits serious consequences.
Another explanation for CropTech's failure, however, is that the company simply didn't have a coherent or workable business plan, and that its unwillingness to assent to conditions suggested by Commerce Secretary Jim Fain, among others, reflected its fundamental weakness. Fain's defenders, in other words, could argue that he saved North Carolina embarrassment and possibly money by heading off an incentives package offered by Basnight's faction.
Read the pieces and judge for yourself. What strikes me as undeniable, regardless of the truth about CropTech's failure, is that North Carolina economic-development policy is fraught with serious conflicts. Private entities are angling for taxpayer dollars. Publicly funded and supervised organizations are making inappropriate side deals. And through it all, there is a conflict between the executive branch and the legislative branch about who should work with industrial prospects and identify possible state offerings in infrastructure, land, or incentives.
There is no legitimate conflict. While I would likely question cash grants, tax giveaways, and other incentive offerings whatever their source in government, the state constitution leaves no doubt that the General Assembly and its officers should make laws, including budgets, and the governor should administer those laws and budgets. When it comes to the state dealing directly with a single company or individual, legislative leaders have no business getting involved. Indeed, the perils of such a course are demonstrated by our longtime prohibitions of such practices as private bills (legislation aiding a single private entity) and bills of attainder (legislation designed to punish a single person or entity). Recent incentives bills have attempted to skirt the constitution by using weasel words to pretend that specific companies, such as Boeing back in November, were not being given direct benefits through legislation. But the legislative history -- including specific mentions of recipient companies in public debate -- clearly dispels this pretense.
I think these and other stories demonstrate that Basnight has been in frequent and serious violation of the letter and spirit of the state constitution's separation of powers. Executive-branch agencies as well as titularly nonprofit but functionally public institutions are acting as though the Senate leader is their supervisor. I have nothing against Basnight personally, and am not always sure that he is in the wrong in conflicts with the Easley administration and others over particular cases or matters of policy. But he and his aides have no business entering into negotiations on behalf of the state with private firms or individuals. That's an executive-branch function (assuming, for the sake of argument, it's worth doing in the first place).
The problem is, what can be done? Legal action may be able to address specific abuses or cases, but in general this issue is something that the legislative process and the voters will have to sort out. The first step is to bring more sunshine, more scrutiny to the way North Carolina's economic-development policies really operate. Carolina Journal and other media should continue to do so.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.