North Carolina’s Conservative Reforms and Business

This commentary by Becki Gray, vice president for outreach at the John Locke Foundation, was published in the July 2014 edition of Carolina Journal.

By Becki Gray

Before an entrepreneur considers whether to expand his business or move to a new location, he typically goes through a checklist that includes most, if not all, of these items:

• Cost of living and quality of life

• Tax burden

• Reasonable regulations, preferably including right-to-work laws

• Skilled local work force

• Well-maintained roads and bridges, reasonable traffic congestion

• Natural beauty, perhaps with easy access to mountains or beaches

• Easy access to urban hubs and cultural amenities

• Low energy costs

Fortunately, any business looking at North Carolina can check them all, for now.

Recent policy decisions have brought our business tax climate from 44th in the nation to 17th, based on the Tax Foundation’s rankings. A fourth consecutive year of regulatory reforms has built on the momentum of the first three, reducing burdensome regulations that stifle economic growth.

Changes to the transportation funding formula have shifted scarce transportation dollars to roads, bridges, and congestion relief. School choice, and a focus on career technical training and coordination with community college and university degree programs, improve the skill sets of and employment prospects for North Carolina workers.

Low energy costs are critical to all kinds of businesses. Whether the company is an automobile parts manufacturing plant, a tire distribution site, a high-tech data center, or a brewery, high electricity costs eat into profits and limit investments.

According to the U.S. Energy Information Administration, North Carolina ranks 44th in energy expenditures per capita, the lowest of our surrounding states. Recent legislative decisions could enhance access to and reliability of energy sources, while reducing costs. For North Carolina to maintain a competitive edge in business recruitment and economic growth, smart energy policy decisions will be critical. Natural gas development is occurring in 32 states. With the potential for rich gas deposits in at least 10 counties, North Carolina needs to become one of those states. Hydraulic fracturing and natural gas exploration measures advanced during the short session.

Under Session Law 2014-4, the moratorium on fracking was lifted, the deadline for fracking rules is Jan. 1, 2015, permits can be issued soon after all rules are in place, and a new Oil and Gas Commission will adopt rules and oversee the development of any oil and gas resources that are uncovered. The new fracking regulations protect the environment, the industry, and property owners, and ensure the health and safety of citizens.

Extracting natural gas can have a significant impact on state and local economies with job creation, capital investments, and tax revenues. Just as 31 other states have done, North Carolina has established a severance tax to ensure that costs of natural gas extraction are paid for by the industry and that taxpayers receive benefits from production. Many states are seeing game-changing boosts to their economies. Perhaps most significant is that natural gas development can reduce energy costs.

A little-reported provision in the fracking bill could have long-term and significant impacts on energy costs in North Carolina. Section 27 orders the State Energy Office to study and make recommendations on comprehensive long-range energy policy, looking at not only environmental impacts but also the economic effects of different sources of energy. The study will revisit a 2007 requirement mandating that 12.5 percent of our energy come from efficiency measures and renewable energy sources — a requirement that is proving impractical and expensive. Too often the costs associated with energy and the economic impact on consumers and businesses are overlooked.

The cost of energy matters. When the cost of electricity goes up, the cost of everything goes up. North Carolina’s leaders understand this and are putting reforms in place to fix past decisions driving up the cost of electricity, paving the way for energy exploration and development, and encouraging new ideas and innovations. 

The John Locke Foundation is the Georgia Public Policy Foundation’s sister think tank in North Carolina.

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