Subsidy Debate Heats up in North Carolina

After losing to South Carolina in the competition for a new Volvo auto plant, North Carolina is trying to figure out what went wrong.  Some blame the legislature’s gridlock over reauthorizing the state’s biggest subsidy program, the Jobs Development Incentive Grant (JDIG).  Others say incentives had a minimal impact on Volvo’s decision and that North Carolina would never have been able to outbid South Carolina anyway. 

The debate over what the state could have done to lure Volvo is feeding into ongoing soul searching over funding incentive programs and big deals, questions on which the legislature has long been split.  This session has seen Republican Governor Pat McCrory criticized by members of his own party for seeking to increase subsidy funding.

This ambivalence over incentives is reflected in the $22.2 billion budget recently passed by the House and heralded as a bipartisan win.  Funding for some incentive programs was maintained or boosted while others were cut.  The House budget represents a 6.3% spending increase and is generating significant push-back from the more fiscally conservative Senate. 

“I would imagine [Senate leader Phil] Berger, and the leadership of many of our senators, want to maintain what we have accomplished with tax reform, and actually move it in the direction of less credits, less deductions and exemptions, and continue lowering the rates,” said Sen. Bob Rucho, R-Mecklenburg, co-chairman of the Senate Finance Committee, as quoted by the Carolina Journal.

The Senate has just begun examining the budget and is expected to pare it down before its scheduled June 11 vote.