Keynote Address for Rural Economic Development Center Forum
October 30, 2002; Raleigh Convention Center
Governor Mike Easley
This Center shows how we can all pull together - public and private, state and local, rural and urban areas. The list of your good works and accomplishments goes on so long that I am not even going to attempt to talk about them, but suffice it to say that so many people will benefit and never know that you had anything to do with it. But you will know, and that is what matters.
2002 has been an exciting and challenging year, as was 2001. And maybe 2003 will be too.
The budget is one of the things that people talk about, and sometimes it seems that it's the only thing that they talk about. The shortfalls sort of dominated the last legislative session, while a national recession brought a lot of hardship and job losses into North Carolina.
We are going to continue to face challenges, but we are going to continue to beat them just like we have in the past. We are going to continue to have the out-migration of textile, manufacturing and agricultural jobs will take a toll on our economy beyond what will happen in the rest of the country.
So your conference theme this year, "The Rural/Urban Connection: Shared Prosperity in the 21st Century" mirrors my One North Carolina agenda. I agree it's never been more important for our rural and urban areas to understand one another's needs, to discover the common challenges that we all face, and to unite to put this state and its economy in forward motion and in high gear.
I am not disheartened or disillusioned, and I do not want you to be either. Because I believe that in many ways the confluence of so many adversities at one time has a silver lining. A recession, a budget deficit, global pressures working against our economy, and - less we forget - we are the only state with a drought while we are still paying for a flood.
But all of these challenges force us to regroup and rethink in the larger sense, much the way Max Gardner had to do in 1929. Sometimes it takes a bad report card to make you study harder, to make you look at what you are doing and reflect upon it.
Governor Gardner tried to patch the budget his first year, and he patched it his second year. In his third year, he gave up. He said, "I'm calling some people here, some great minds." He called in the Brookings Institute of Massachusetts.
Well, fortunately we do not have to go outside of North Carolina for great minds anymore. The brain drain is over. Those great minds are here today. They are in our universities, our community colleges, our businesses, and many of them are here in this room tonight.
I have already set in motion a government efficiency commission and a tax modernization commission and they are working hard to analyze what changes need to be made in this state. They are focusing on state government's core mission so that we can determine how we structure revenue in such a way that it is not so volatile and is much more predictable as we go forward. We are examining everything, including our relationships with the local governments.
In short, the budget surplus politics of the nineties is over. Those days are gone. We need to decide exactly what role we want government to play and exactly how much we have to spend on it.
But at the end of the day, whether we are successful or not does not depend on whether we balance the budget. People expect us to do that. That is our job. If their budgets get out of balance, they balance those. Whether we are successful or not is whether we make progress in North Carolina, rural as well as urban, in every corner of every county in every community in this state at the same time that we deal with our adversities. And I am telling you we have a team in place that has an angle and a bead on that effort. I guarantee you progress is being made, and more progress is going to be made in North Carolina this year and next, and you are going to be proud of the leadership that you see not only at our Cabinet level, but also in the General Assembly.
They say, "If you don't know where you are going, that any road will take you." Or, as Yogi Berra said, "When you get to a fork in the road, take it."
Sometimes I find myself working on different pieces of the puzzle without giving the whole picture to everybody. But I want you to know that every step of the way for the past 22 months - every single step - has been calculated and has been very deliberate by all of those involved in the leadership of this state.
I think that tonight is an opportunity for me to share the big picture with you and articulate the state's strategy of where we are headed.
We are not trying to tax our way out of this recession. We are not trying to cut our way out of this recession; you have to grow your way out of a national recession this big. I know we share a lot of the same goals, and I think we share a lot of the same strategy. But my strategy is not that complicated.
First, my strategy is to bring North Carolina out of this economic downturn much stronger than we went into it, and we can do that if we just make up our mind to be aggressive and be bold and take advantage of the many challenges and opportunities that present themselves to us during this downturn. We are not going to get there by being timid or being cautious. But we can get there by being aggressive and being bold.
That means first and foremost that we accept reality - that we recognize where we are. Recognize the fact that things are changing, and embrace change as our friend. We cannot win by continuing to fight that that is inevitable. We do not want to be one of those states that puts $100,000 in this industry, and over at that industry, and this one to try and keep the doors open for another two to three months. We have to come in touch with reality.
The strategy is always simple; it is the implementation that is hard. It takes real discipline, it takes real focus, and it takes an awful lot of compromise on everybody's part.
We have to recognize a few facts. One is that cheap labor is gone, not only in North Carolina, but in the nation. We are not going to be able to compete with Mexico and China on cheap labor jobs. We have to recognize that capital investment follows labor, and the capital investment on cheap labor is going to follow that cheap labor out of the country - always has, always will.
But capital investment also will follow skilled labor. And we can compete with Mexico, and China, and any other country in the world on skilled labor.
That is why it's so important that we recognize now that new industry will be looking to those states with a skilled work force when this economy turns around. And we do not wait until then to make our investments, we are making our investments now.
That means investments in our community colleges and our universities cannot be cut - especially not now. This is a time we must invest more in education, not less. We have enrollment increases in higher education at an all-time high. Now that is a problem. It's an expensive problem, but it's a great problem to have because it means that you are creating a knowledge worker, a skilled workforce.
Business also looks into the future. If I invest $250 million in capital investment in North Carolina today, what kind of workforce am I going to have in 2014? What is coming out of the public school system?
Well I will tell you this: last year we led the southeast in math scores in North Carolina. They know that in the boardrooms.
They also know that we have an achievement gap in North Carolina. Our achievement gap is not just among the races. Our achievement gap is among the counties and the regions in this state. And we know that there is one sure way to solve it. Recognized by the Tennessee Star Program, the RAND Institute, and so many other studies and that is pre-K for at-risk 4 year-olds and reducing class size in the early grades, kindergarten through grade 3.
We have done that in North Carolina. Both of those were in our budget this year. They were in our budget last year. They will effectively eliminate the achievement gap both along racial lines and along county lines. But we have to finish the job - we have to make sure it's in the budget next year and the year after and the year after. It means we are going to need more revenue. I want to say this about the legislators, many who are here tonight. It takes a lot of discipline, and a lot of focus, and a lot of compromise to get the revenue you need. Last year they did not want to vote for a tax increase, and there were so many of them who would rather do anything than vote for a sales tax, and then there were so many of them who would rather do anything than vote for an income tax. But they compromised to put the state ahead of their own political aspirations and ahead of their own personal misgivings. There are so many of them that have misgivings about lotteries, and I still say that I do not care where the money comes from, but at least finish the sentence. If you tell me you are against an education lottery, that is fine but tell me what you are for because next year we are going to have 100,000 5 year-olds show up for kindergarten and they are going to need and deserve more than an overcrowded classroom and an overworked and underpaid teacher.
And we cut - oh did we cut. We cut the state-operating budget for the first time in 33 years, and still invested more in education - pre-K through college.
Now I want you to contrast that with surrounding states, our neighboring states, those with whom we compete, states that cut 15-20 percent out of their education budgets. Contrast that with the 23 states that cut their K-12 budget and the 29 states that cut their higher education budget.
Let me quote a governor and a good friend from a neighboring state who last week said, "Prepare for larger classes, fewer courses, lower teacher pay, and fewer university professors."
He has to cut 15 percent out of colleges and universities across the board and he is only halfway done.
When I see and hear about this action, I like North Carolina's position as we go out to attract industry to a skilled labor and a skilled workforce when this economy turns.
We are different from other states in this respect. We stepped up a year earlier. We are the only state in the United States of America that raised revenue in 2001 and cut over $1 billion out of the budget that year. That put us ahead of the curve and got us in a manageable position so that when we look down the line at shortfalls that are looming in the future, we know that we can handle it. It's something that is manageable. We are not looking at $3.8 or $4 billion like so many other states are. There is one state that has a shortfall bigger than our entire budget. But we planned ahead, we made the right decision, and we made the tough calls. Our legislators stood up, and I remembered. I had to go on statewide television and tell them I wanted a tax increase. I wore a real pretty tie because I knew that I would see at least 30 seconds of that again in 2004. And I do not know what the political cost is, but I do know that we have got 75,000 more students in colleges, universities, and k-12 that year than we otherwise would have had if we did not get the tax increase in place.
But never underestimate how hard it is for your Legislature. And I mean that very sincerely. How hard it is for them when they are used to the surplus politics. When they are used to balancing budgets based on seven percent growth and getting 11 and 12 percent growth. And all the sudden instead of a surplus they have a deficit. It's tough because it takes a whole change in attitude when you are used to a surplus, a deficit is hard to handle. It wasn't hard for me; it's all I know. I declared an emergency on my eight day. I did not want to freeze anything until I got at least Cabinet in place. But we are all working together. The strategy I say is simple, the implementation is hard. It's hard to stay focused among the myriad of no tax pledges that they have to face, among the demagoguery they have to hear and among all of the interest groups that are working on misinformation. So I want to say to you tonight for those legislators who stood up and put their state first I am very, very proud of them and we owe them a lot. Some of them are tonight. Let's give them a hand.
It would have been much easier just to do what we have always done in this state that is, when you hit that ten year cycle that you have a bad year, you stop, you put on the brakes you maintain the status quo you hunker down, you wait for the economy to get better. But we did not do that this year. We did not do it last year. We are not going to do it next year. Our strategy is about progress and progress now while other states are waiting.
Last year, this year and next year, we are committed to fight through the recession and gaining on those states that are making while we are making progress and they're standing still. Some of them even backsliding. And we have been very deliberate and very calculating in each budget item that we looked at on those items that we cut and did not cut especially in rural North Carolina.
First, health care. There is no rural economic development without rural health care. The strategy has been and continues to be no cuts that affect access to health care in rural counties. That means holding Medicaid reimbursements at a reasonable level so physicians can stay in our rural counties and provide for our rural citizens. That is why we passed the toughest patients bill of rights in America. To make sure that nobody gets between you and your doctor.
Second, it means protecting the environment. That is so much of our economy. We did that with our clean smokestacks legislation. It's become a national model and it means nearly doubling the Clean Water Trust fund in tough budget times.
Third, it means developing roads and infrastructure. Secretary Tippet and Secretary Ross of DENR are knocking down barriers so that they can bring those smaller projects that typically affect rural areas and get them on the front burners. Right now many of those are 25 years out and they are going to be done in '03 and '04. Those of you in rural North Carolina are going to see so many of those orange cones on the side of the road you are going to think you are back in drivers' training.
And, do not forget the fight we won this year. To hold on to those $276 million in flood money that will be used for infrastructure homes, for schools, for bridges, for roads in the East-the area that is still trying to recover from that disaster.
And lastly, let me just touch on this. I applaud those who worked hard to pass the Bill Lee Act. It was a good piece of legislation in its time, but it lacks the flexibility we need in the current economic environment. That is why I put in place the Golden Leaf Foundation that Lawrence Davenport chairs, so that we would have more flexibility outside the legislative process.
So many times in the past I have had industry come in and say, what can you do for us-we are being lured into another state, we'd like to come in to North Carolina, can you match or get close to what they're doing? And we have had to say well, Legislature will be back in town in three or four months, can we talk then? But we need to know something by Friday. Well, they can meet in an hour by telephone.
And along with that, we got the One North Carolina fund. $15 million we can use to help level the playing field. We do not have to buy industry in North Carolina; we just have to level the playing field. If we do that, we always win.
And this year, a new incentives package, the Job Creations Act that I will sign into law tomorrow. Site Selection magazine just named North Carolina number one again because of our ability to be flexible and nimble in this rapidly changing economy. We have the tools to act and I think we have the expertise to do it wisely.
So all of these things are important. The items that I just articulated to you that we have invested in and worked so hard on education, health care, environment, road and infrastructure and incentives. They are all important, but they all demand discipline, focus and compromise in order to make sure we get all of them funded and all of them in place. They are the right things to do, but we have to maintain the discipline and focus and that is where it is really critical that we get your help.
We need your help to keep the legislature focused. We need your help to keep all of us focused. We need your help to tell the legislature that we support them. We need you help to encourage them. We need you let them know how much you appreciate them and understand the courage that they have displayed.
I am excited about North Carolina and I want you to be excited about it too. I want you to walk around and hold your head high. Not only when you are in this state, but especially when you are in another state. You let them know where you are from. And yes, we are a state in transition. You can find all of that out from the website for the rural center so I do not need to give you that information. But let me just give you a couple little stats that you can consider.
When I graduated from Rocky Mount High School 30 years ago, 42% of the people in that town had a high school diploma. Today, 74% have one.
About 9% of the adults had a college degree. Today, almost 25% do.
So our story in North Carolina is overall a successful one. But let us never forget that nearly 1 million people in this state wake up every morning in poverty and nearly a third of them are children, and most are rural. And you and I are committed to changing that. And we cannot wait for a convenient economy to do that. We have to make our investments now.
We have to have a good strategy and we must continue to fight every day, every day. You cannot let up one minute of one hour of any day. You have to fight every day. And I firmly believe that if you articulate a good strategy and a way to carry it out then others will follow us. They followed us this year, they followed us last year, and we need you to help them follow us next year.
I want us to be bold and aggressive. North Carolina has to be the best. We can accept nothing less. You can accept nothing less.
That is why we have a patients' bill of rights that is a national model. That is why we have a clean smoke stacks bill that other states are trying to follow. That is why we have for the first time a non-partisan judiciary top to bottom.
And in these times, what states initiated pre-k programs for the poorest four-year olds in the state? Just North Carolina.
And what states lowered class sizes K through three? Just North Carolina.
And North Carolina created a prescription drug plan for our seniors in the state. North Carolina fully funded child health care, our CHIPS program, for our weakest children. And North Carolina protected medical care for our most vulnerable citizens, and North Carolina raised teacher pay this year and last year in this economy, and North Carolina increased enrollment funding for public schools, universities and community colleges by over 400 million dollars.
When the economy turns and the smoke clears, North Carolina will be one of the most attractive states for new business. That is our strategy, we are implementing it, and it's going to work.
So let me close by saying from a Governor's perch, I see one more year of shortfalls, even as we balance the budget based on zero growth projections. But we have fought too hard and accomplished too much to slow down now. I need your help, North Carolina needs your help, you are leaders in your communities, you are leaders in your profession. You have demonstrated by your presence tonight that you care. We need you to push this agenda of progress for one more year.
It will be a challenge. You are going to be criticized for it. One of the state's most conservative pundits said last week and I quote, "To balance the budget, you must be willing to make cuts to core programs, such as education, Medicaid and corrections." Well, let me say to that, that in this knowledge-based economy, if you cut the classroom, that is the surest way to guarantee that Medicaid and correction budgets skyrocket. And if you invest in education, you will cut Medicaid and corrections.
You can expect a fight, but somehow or another, I kind of think you will like that. You will sleep well at night knowing that you've done the right thing. You will know that regardless of personal or political popularity that may seek on occasion when you make a tough decision that a lot of people out there are counting on you. A lot of people out there do not know this organization exists. They do not even know we are in a recession. They do not know what the tax rate is, they do not know we got a budget shortfall; they just know they need some help. And they know that somewhere there are some people like yourselves that recognize that we can be great. We have all the resources to be great in North Carolina. We have wonderful people, tremendous leadership-like you- and a state brimming with natural beauty.
We have all the resources we just need to show that we have the resolve. God bless you and thank you for what you do.
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