RALEIGH – I am looking forward to seeing how Gov. Beverly Perdue dances.
No, I have not been invited to an upcoming soiree at the Governor’s Mansion. And no, I’m not taking this opportunity to report on the widespread rumor around the capital city that Perdue has been signed for the Fall 2010 season of Dancing With The Stars, though my guess is that she is more than capable of performing a lovely waltz and a mean paso doble.
Instead, I’m responding to a telling turn of phrase from Charles Hayes, head of the state-funded Research Triangle Regional Partnership. One of seven business-recruitment nonprofits set up by the legislature back in the 1990s, RTRP has been lobbying furiously against a provision in Gov. Perdue’s 2010-11 budget plan that would have nearly halved the state appropriation to the nonprofits – down to $2.6 million from $5 million in the current fiscal year.
In the version of the state budget passed by the North Carolina Senate last week, the partnerships’ funding was restored to $5 million. But Hayes told the Triangle Business Journal that he wasn’t sure the issue had been resolved. “I’m budgeting the same as this year, and we’ll have to see how that is,” he said. “The governor’s dance was the first step in a long dance.”
I know that $2.4 million is only a tiny fraction of the state budget. I know that the governor is unlikely to engage in strenuous terpsichorean undertakings for the sake of this one budget-savings idea. But if Perdue is seeking to challenge the legislature on fiscal policy – a sound strategy both on the policy and the politics – I think that at the very least she should make defunding private nonprofits a key part of her repertoire.
That’s not to say that state funding should never flow to private organizations. Sometimes a contract or even a direct grant to a nonprofit is a more effective expenditure of taxpayer dollars than creating new government programs or hiring more public employees. But that makes sense only when the underlying function is legitimately a state function.
If a private nonprofit can do a better job reducing the recidivism rate for felons than a government-run program, let’s fund it. If a private school can do a better job educating a special-needs child than the local public school, let’s give parents that option. In the case of business recruitment, however, there is no good case for taxpayer funding in the first place. Whether housed in private firms, trade associations, or some other kind of nonprofit, business-recruitment programs ought to be funded entirely by voluntary contributions.
Some private companies, such as electric utilities, banks, and real-estate firms, have strong financial incentives to invest in local business recruitment. If other firms want to contribute to such efforts, as well, expecting to make more money in the long run if there are more employers and better-paying employees in their communities, that may also be reasonable. But not all taxpaying companies and families in a given community see business recruitment as a priority.
The best economic-development policy for government, then, is not to focus on individual recruitment prospects but rather to improve the overall business climate for all firms – large and small, incumbent or prospective.
Rather than sprinkle a few million dollars worth of recruitment subsidies here, a few million dollars worth of tax credits there, state policymakers need to take North Carolina’s competitiveness problems more seriously. One major initiative that would pay major dividends without worsening the state’s fiscal problems would be to enact comprehensive reforms of North Carolina’s regulatory system. Senseless government rulemaking costs our state far more jobs and economic opportunities than business recruiters, no matter how talented or generously funded, will ever be able to generate.
Here’s another way to put it, from this former tap dancer: if you can’t do the footwork, nothing else matters. Regardless of how wildly and energetically you wave your arms, your dance routine is doomed. Hoofers and governors, please take note.
Hood is president of the John Locke Foundation.