Bloomberg News

Power Shift Has Government Opponent Running N.C. Budget

January 17, 2013

Power Shift Has Government Foe Running North Carolina’s Budget

Gov. Pat McCrory leaves the meeting with Senate Democratic Caucus on Jan. 9, 2013, the first day of the General Assembly's 2013-2014 session, in Raleigh, North Carolina. Photographer: Takaaki Iwabu/The News & Observer via AP Photo

For more than two decades, North Carolina businessman Art Pope advocated free markets and limited government. Now he’s in a position to turn his views into reality.

Pope, 56, chairman of Variety Wholesalers Inc., an operator of discount retail stores, was appointed as budget director by new Governor Pat McCrory. Pope, a long-time Republican donor, took office this month after elections in which his party took control of the governorship and legislature for the first time in more than a century.

Friends and foes said Pope’s appointment suggests McCrory, a former Charlotte mayor, will turn the state in a new direction by embracing cuts in the income tax and budget (STONC1:US), moves long advocated by Pope and research groups he created and funds.

“It really sent a signal,” said Dallas Woodhouse, state director of the North Carolina chapter of Americans for Prosperity, the Arlington, Virginia-based organization formed by the billionaire brothers Charles and David Koch, which favors spending and regulatory restraint. Pope was a founding national board member.

“We’re going to see a major overhaul of state government, a major overhaul of the tax code,” Woodhouse said. “The corporate income tax will disappear. The personal income tax will be cut at least in half.”

Tax Repeal

A proposal circulating among lawmakers would repeal the state’s income tax and replace it with an expanded sales tax. North Carolina, whose budget this fiscal year is $20.2 billion, is rated AAA by Standard & Poor’s.

Chris Kromm, executive director of the Institute for Southern Studies in Durham, and Chris Fitzsimon, executive director of NC Policy Watch in Raleigh, describe Pope as an anti-government zealot who was appointed as payback. The groups advocate environmental, labor and consumer protections.

They say Pope’s history of Republican activism gives him more clout than the governor. Fitzsimon dubbed the new regime the Pope Administration.

“It’s unprecedented to have the largest funder of campaign ads as the state budget director and it’s clearly because he wanted the job,” Fitzsimon said.

Pope dismissed the criticism in an interview in his Raleigh office, where the state seal behind his desk was the sole decoration. Round-faced, bespectacled and wearing a tie with images of the scales of justice, Pope said he will write a budget in consultation with McCrory.

‘Honest Broker’

“I look at myself as an honest broker,” said Pope, who served four terms in the state House of Representatives. “I am not taking an ideological ax to the state budget. I am simply taking a fresh look.”

Pope said the job isn’t a reward, and that he initially turned it down. “My wife didn’t like my being attacked all the time,” he said.

Pope has been the target of criticism, including reports on his campaign spending by Kromm’s organization in 2010 that argued he exerted unfair influence over elections.

“Who are my critics?” Pope asked, unsmiling, pulling highlighted print-outs from a folder on his conference table. One is a copy of an anonymous blog post suggesting his assassination. Another advertises an anti-Republican rally that includes Fitzsimon and Kromm. “They have waged partisan, personal, extremist campaigns against me.”

On the day McCrory announced his appointment, “We were all worried about Mr. Fitzsimon,” he said, grinning. “We thought he might have a stroke.”

State’s Future

Pope’s new role raises concern about North Carolina’s future, said Andrew Perrin, a sociology professor at the University of North Carolina at Chapel Hill. The state’s university system helped build Research Triangle Park near Raleigh, he said. The campus is home to more than 170 technology and research firms, including GlaxoSmithKline Plc (GSK), International Business Machines Corp. (IBM:US) and Cisco Systems Inc. (CSCO:US)

“Pope has been pretty outspoken that in his opinion, public investment in general is not wise,” Perrin said. “Public investment is part of what has set North Carolina apart from our neighbors in the South.”

Pope’s father, John W. Pope, built the family fortune. Closely held Variety Wholesalers, based in Henderson, runs discount stores in seven Southern states, and competes with publicly traded Dollar General Corp. (DG:US), its website says. Pope wouldn’t disclose his worth.

Pope’s views began with his parents. The Republican Party’s state headquarters is named after them. Pope calls himself “a conservative in the classical liberal tradition of John Locke, Dave Hume, John Stuart Mill and such. In regard to politics, I am a Reagan Republican.”

‘Policy Wonk’

McCrory, who declined to be interviewed, said in an e- mailed statement that Pope “knows the inner workings of our state’s budget better than almost anyone.”

In a memoir, Richard T. Morgan, a Republican former House speaker, described Pope as “by nature and inclination” an “old fashioned policy wonk,” who walked the legislature in rumpled suits with his “shirt tail half out.” Pope “could spend hours glued to a computer or wading through mounds of state budget documents or archaic regulations and when he was done there wasn’t a bone buried in the budget Art hadn’t dug up and chewed on,” Morgan wrote.

Morgan defied Pope during a 2003 leadership battle, sharing the speakership of the evenly divided chamber with a Democrat. Pope retaliated by funding primary opponents running against Morgan and his allies, three of whom lost, Morgan wrote. Morgan survived and was shunned by colleagues afraid of angering Pope, who had “just proved that he’d spend a half a million dollars to defeat my friends,” he wrote. Two years later, Morgan lost to a Pope-funded primary opponent.

Collegial Side

If he wasn’t your enemy, Pope was collegial, said former Democratic House Speaker Dan Blue, now a state senator.

Former state Supreme Court Chief Justice Burley Mitchell, a Democrat, said he found Pope “very reasonable, as long as you had your facts together. If you didn’t, he would pick you apart.”

Pope said he started his research and analysis groups to correct an imbalance in policy ideas created by Democratic dominance. “I found a model that I liked, which was the Heritage Foundation,” he said.

The organizations favor tax repeal, privatizing Medicaid, the health program for the poor, and cutting the state workforce.

Regularly Quoted

The name of John Hood, president of Pope’s John Locke Foundation, has appeared more than 500 times in state newspapers in the past decade. The foundation produces the Carolina Journal, which has published exposes, including one detailing conflicts of interest in a state-funded commission that helped develop a music venue in Roanoke Rapids for Dolly Parton’s brother, Randy.

Pope, his family and their foundation supplied $35 million to six Pope-created research and analysis groups between 2001 and 2010, accounting for 85 percent of their budgets, according to Democracy North Carolina, a Durham-based group that monitors political fundraising. Pope said the analysis is accurate.

Pope, his family and his company donated $2.8 million to Republican state candidates and to groups that ran issue ads favoring them from 2001 through 2010, according to the group. More than $550,000 of the advertising money came in 2010, when Republicans took control of both houses of the legislature.

Mac McCorkle, a former Democratic consultant, said Pope’s money increased the margin of Republican victories that year. Corruption scandals and the Democratic Party’s long reign caused them to lose their hold on government, he said.

McCorkle, who said educators and the poor have the most to fear from a Pope-influenced budget, also sees a bright side.

“My bet is he won’t try to mask budget problems,” McCorkle said. “If Art is writing the budget, the budget will be serious.”

To contact the reporter on this story: Margaret Newkirk in Atlanta at mnewkirk@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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