Sell — Then Make a Political Sale (Video Poker and ABC Privitization) (Carolina Journal)
RALEIGH – Gov. Beverly Perdue remains one of the most unpopular governors in recent North Carolina history. But lately she’s been toying publicly with some ideas that could help boost her political bottom line a bit – while also boosting the state’s fiscal position.
As the Associated Press reported over the weekend, Perdue made two interesting statements while signing some 2010 legislation into law. After affixing her signature to the General Assembly’s latest, ill-advised attempt to prohibit video gambling, the governor indicated that she might be willing to rethink the idea of legalizing it during a future legislative session.
And after signing a bill promising to clean up corruption around North Carolina’s system of government-owned liquor stores, Perdue said that she was willing to consider the next step: privatizing all or part of the ABC system.
I’m not crazy about most proposals for legalizing video gambling, since they assume that the state would impose heavy taxes and intrusive regulations on private casinos – and perhaps even that the state lottery commission would run them. Yikes!
But I do think that a reasonable argument in favor of legalization is that some counties and municipalities would welcome viable, taxpaying businesses on real estate that would otherwise stay vacant, run-down, and a net cost to the jurisdiction. Video-gambling enterprises ought to pay the same state and local taxes as other businesses do, which may itself help some wobbly governments get through another recessionary year.
Far more interesting, from a fiscal-policy standpoint, would be the prospect of privatizing North Carolina’s liquor stores. Based on the experience of other states, it is likely that proceeds from a sale would be in the hundreds of millions of dollars. It is possible that the inventory, stores, and real estate could be worth even more. We’ll never know unless we take bids in the marketplace.
These asset-sale proceeds could be shared among the state and local governments, giving them one-time revenue to use to offset one-time expenditures, pay down debt, or complete capital projects without drawing on general taxes. Furthermore, converting government-owned property into viable, taxpaying businesses has long-term revenue implications – at least partially and probably fully offsetting the lost of annual revenues that localities have lobbied so furiously for so long to prevent.
As is now widely recognized, North Carolina state and local governments have a large structural deficit. Our politicians have promised much more in government spending for health care, education, transportation, and other services than can be financed at currently scheduled tax rates. At the state level, the gap is in the billions of dollars. Add in the local level and the number swells by several hundred million dollars, at least.
The current leaders of the North Carolina legislature, state government, and many localities plan to address the structural deficit in 2011 with another round of costly tax increases. The retail sales tax is their favorite one to raise, though the plan may encompass other state and local levies, as well.
Does Gov. Perdue agree with this plan? Perhaps ideologically. But surely she has sense enough to know that any governor signing a multi-billion-dollar tax increase months before beginning her reelection campaign is a governor unlikely to succeed in her reelection campaign.
Any organization facing the kind of chronic deficits North Carolina state government faces should be searching its balance sheet for low-performing assets to sell off. Households do it all the time. So do businesses and nonprofits.
In the case of our state government, obvious candidates for asset sales would include land, office space, and state-owned enterprises such as liquor stores. Yes, some voters might be queasy about North Carolina opening up the liquor business to private vendors. But these voters are unlikely to support Perdue for reelection in any event.
On the other hand, swing voters who focus mostly on economic issues might well reward a governor who finds an innovative way to balance government budgets without raising taxes. Perdue ought to consider taking that job.
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Hood is president of the John Locke Foundation and publisher of CarolinaJournal.com.
By John Hood
July 30, 2010
