- [Narrator] This is a production of PBS Charlotte.

- Tonight on "Unspun," we cut through the politics and get to the price tag.

Right now, North Carolina is the only state in the country without a passed budget.

You heard right, in the country, no balance sheet, no clear roadmap, and a lot of decisions being made on autopilot.

So tonight we ask the question that too few people are talking about, what really happens when a state runs without a budget?

And who pays the price for the delay?

In today's America, welcome to the spin game.

Believe me, I know.

I'm Pat McCrory.

When I was governor and mayor, I played the spin game.

I was played by the spin game.

But aren't we all done being spun?

Let's take the spin out of the world we're in here on "Unspun."

Good evening, I'm Pat McCrory and welcome to "Unspun," the show that tells you what politicians are thinking, but not saying.

A budget stalemate has real consequences for taxpayers, state employees, local governments, and for a state that prides itself on fiscal discipline.

Our guest tonight is Dale Folwell, former North Carolina State Treasurer and one of the state's most vocal advocates for transparency, balanced books, and long-term financial health, as treasury oversaw billions in state assets, managed pensions and debt, and was often the first to warn when political gridlock started to create real financial risk.

Please welcome via phone due to some technical difficulties, former State Treasurer Dale Folwell.

Dale, it's great to have you on "Unspun" again.

- [Dale] Well, it's great to be with you on this show.

I'm sorry I couldn't be there in person.

And it looks like the budget process at the federal and the state level is as broken as our technology skills are this morning.

- Well, let's talk about the budget impasse at the state level.

we're the only state, North Carolina, without a budget at this point in time.

Based upon your experience as a House member and as treasurer, who do you think holds the leverage right now in this stalled negotiations?

- [Dale] Well, too often in our world these days, Governor, things don't matter to people until they matter to people.

And obviously there's something that Senator Berger and Speaker of the House disagree on that's keeping the budget from being passed.

And it started to have an impact on folks, especially when you correctly stated that we're the only state in the country that does not have a budget that's passed.

The financial condition in North Carolina, nothing compares to that in terms of the, you know, over the last eight years, we retired over 60-some percent of the state debt and things are going well from a growth standpoint, but at some point the rating agencies are going to start to notice the fact that we are the only state that doesn't have a budget that's passed.

- Well, let's talk about that.

You have a lot of experience with the rating agencies, being treasurer.

What is- - Yeah, the rating agencies, and, you know, for your viewers, to simplify this, a rating agency to the state is the same thing as a credit score would be to you or- - It's a good analysis.

- A sanitation grade would be to a restaurant.

It's a sign of quality.

But, you know, in this environment where North Carolina's not issuing any new debt, we're actually paying off debt, it's not as important as it always has been.

But, you know, at the end of the day, there seems to be a lot of concern about what's gonna happen not just this year but next year and the year after in terms of the budget and the growth that's going on in the budget.

And I think that's where the sticking point is in this particular instance.

- Well, let's go roll back to the rating agencies.

We're a AAA bond-rated state, which helps us get lower interest bonds when we borrow money.

Do you think that's at risk at this point in time?

- [Dale] I don't think it's a risk.

Obviously the rating agencies are aware of it, but you do not typically go out to get a rating unless you're actually issuing new debt.

And the state of North Carolina, at the state level at least, is continuing to pay off debt.

You know, the people who are issuing debt, as your viewers know, are cities and counties who are issuing record amounts of debt for all kinds of things.

So the rating agency thing is not such a big deal right now.

But once again, you don't want the distinction of being the only state that does not have a budget.

And as I was thinking about anticipating our time today, Governor, as I was wearing the lapel pin earlier celebrating the 250th anniversary of the country, it's just remarkable.

I think if my facts are correct, the United States of America has not had a balanced budget this century.

So this is not just a state problem, I think it's a federal problem obviously.

But at the state level, the state does not have the ability to live beyond its means like the federal government does.

- So what other impacts will this budget process not being decided have on- - I think- - For example, state employees- - Uncertainty- - And benefits and services.

- [Dale] There are some things in that, you know, 30-some billion dollars budget that were just there for one or two years.

And, you know, people who were expecting funding from the state of North Carolina for one or two years, they would like to see that become a recurring item or like to see that, you know, freshened up for another two years.

So issues like that.

And unfortunately in this day and time where it reminds me back in the sixties, and Governor, you were living back then like I was, you know, people were just screaming past each other.

Nobody's really interested in the facts.

And too often, even though the state legislature, which is controlled by Republicans, even though the state legislature is at a budget impasse, there are lots of things that get blamed on that which may have nothing to do with it at all.

And that's sort of the environment that we're in right now.

People just screaming past each other, and facts and expertise don't really matter.

- Well, let's talk about the politics of this.

Again, you've been a member of the House.

You worked for my administration as, a great job as head of Unemployment.

You know the politics.

This is between two Republican bodies, the House and the Senate.

We've got election year coming up where all of them are up for reelection, primaries in March.

Explain the hardball politics when it's within the same party.

- [Dale] It comes back to something else, Governor, that I've always said that people sometimes blame things on politics, but it's just people.

It's the people regardless of what political party they're a member of that put us in this situation.

And I think that the Republican Party is facing, is, has been facing a very big inflection point in terms of counterfeit conservatism.

And this is, what I mean is is that the root word of conservative is to conserve.

It just means to save.

I've always associated it with saving lives and minds, M-I-N-D-S, and money.

- Well, so wait a minute.

- But it could be applied to everything and- - Dale.

Let me interrupt you real quick.

- I think all people want no matter what their opinion is about the political parties, and no matter what level of government they think the state of North Carolina should have, what they want is a state government that works for them.

- Dale, real quick.

Some would argue, I've heard this argument, "Well, if they don't pass a budget, they're spending what the last year's budget was, therefore we're gonna conserve money."

But that comes with ramifications.

What do you think?

- [Dale] Well, that's exactly right, but that's kind of mathematically, very quickly, mathematically, it creates a problem because of the growth in our state, and the fact that we're not the same state that we were two years ago in terms of the number of people that are here that need services.

So everybody has their fingers crossed that this will be dealt with, but there doesn't seem to be any light at the end of the tunnel from what I can see that these issues are gonna be dealt with before the primary.

- So that's, so you don't think it'll be solved with before March?

- [Dale] I've seen no indication that it's gonna be solved before March.

And, you know, with North Carolina having the highest healthcare cost in the United States on top of being the only state that doesn't have a budget that's passed, a lot of these things that are gonna have big budgetary impacts, a lot of these problems continue to get worse.

And they'll be getting worse this month, next month, and until these problems are actually resolved.

- So in Raleigh, or at least throughout the rest of the state, no one's hearing about it.

We're bringing it up here on "Unspun" because we wanna let viewers know we have no state budget.

Why is no one talking about it, or we hear very little about it at this point in time?

- [Dale] Well, no one's talking about it because as I said in the beginning of my interview, things don't matter to people till it matters to them.

And they're not seeing the real impacts of these budgetary impasses like they did when the, you know, our federal government was shut down.

But just wanna remind your viewers that, you know, their federal government, their federal government has not had a budget probably this century and not had a balanced budget since the last century.

And at the end of the day, you cannot continue to spend money that you don't have.

- Well, one thing that you've always said as treasurer and you said as a member of my administration, you talked about unfunded liability.

So we've always bragged, every governor's always bragged we have a balanced budget.

But in fact, you remind all of us, you reminded me many times as governor, but we have a lot of unfunded liabilities, especially in the area of our healthcare for state employees and the pension program and the billions of dollars- - [Dale] Well, you're exactly right.

And, you know, we had an unfunded liability that you helped me and our state employees solve and taxpayers with the $2.5 billion of unemployment debt, which now is turned into a multi-billion dollar surplus.

And so that's just an example.

When you actually are clear minded and have things in the right sequence, you can actually solve these problems.

But our unfunded healthcare and pension liability is larger than the state budget.

I'll say that again.

The unfunded pension and healthcare liability just for the state of North Carolina- - That's, and most people- - Is larger- - Have no idea- - Than the state budget.

So this continues to be a serious problem.

- You're talking about 30, 40, 50, even more billion dollars.

- [Dale] That's exactly right.

And, you know, at the end of the day, some legislators don't even think that this is really a unfunded liability.

But I can tell you the rating agencies think it's an unfunded liability.

The Generally Accepted Accounting Principles think it's an unfunded liability.

And when I first started as state treasurer, our unfunded liability per capita was right below the state of Illinois, the same Illinois that your viewers hear about all the time.

- And if the economy- - That's how significant this is.

- And if the economy takes a downturn, Dale- - [Dale] When you think about pointing fingers, the fingers for this liability should be pointed at Republicans and Democrats who have not dealt with this for decades.

- So if you were in charge right now, if you were in the governor's office, what would you be saying and what would you be doing right now?

We have a democratic governor, Republican legislature.

Regardless of party, what would you be saying to the public and what would you be saying to the legislature that maybe is not being said right now?

- [Dale] What I'd be saying is what Popeye said when you and I were growing up that, you know, we can't stands it 'cause we can't stands it no more.

You cannot continue to have most of a person's income going toward a product called healthcare where they do not know the value and the cost of it, even after they've consumed it.

They're not really consuming it, it's consuming them.

So there's several really simple things that could be accomplished.

Number one is to repeal the certificate of need, law of the state.

And the short for that is CON, which it is a con on the people of North Carolina.

- All right, we could take all day to- - Abide by President Trump- - Real quick, real quick.

- Dale, Dale, hold on.

- President Biden's previous executive orders to tell people what things cost in healthcare.

And lastly, stop breaking people's kneecaps for not paying their bills for a product no one told 'em what it would cost.

- Amen to that.

And certificates of participation, most people don't realize what that is.

You've got about 30 seconds to describe what that means.

- [Dale] Well, it's a market restriction that keeps the supply of a product down, which keeps the price up.

- And this is regarding healthcare?

- Correct.

- And emergency room, I mean surgical rooms, which increase the cost of our healthcare.

- [Dale] All the above.

I am optimistic that the president has taken the lead on something that I started five years ago about healthcare cost.

And as you know, I've said it four years ago, why should people in North Carolina pay $1,300 for the Wegovy weight loss drugs when people in Europe pay $100 for it?

And, you know, the president has taken the lead on that particular issue and lowering costs.

So there are ways to actually fix these problems, which is all your viewers really want at the end of the day.

- Well, healthcare is about 25%, maybe more of our budget and our economy at this point in time.

So we better do something.

In 30 seconds, Dale, the long-term implications of nothing being done.

- [Dale] Well, the long-term implications is that this, people, back in the day, people had a fear of going to the doctor, 'cause there weren't enough doctors.

And now people have a fear of the healthcare bill.

So the fear of seeking healthcare in this state is making people sicker in my opinion and making the problem even worse.

So as I said earlier- - That's, Dale.

- These problems are solvable, but what it takes is people to sit down in a room who operate above the dignity of their offices, above, not below.

- Dale.

- And are willing to challenge assumptions.

And if you do those two things- - Dale, we gotta wrap this up.

- [Dale] You can solve the problem.

- Dale, I appreciate you.

You're the first guy to ever quote Popeye on "Unspun."

And I really appreciate you coming on and telling the truth as you see it.

Thank you very much.

- [Dale] Thank you.

And happy new Year.

- Happy New Year.

(exciting music) All right, we got time for the top five budget games politicians play.

Number five.

Number five, leadership earmarks.

Leadership earmarks.

This is where the leaders of the House and Senate kind of play this game, well, I'll make a deal if my district gets a little extra road money.

That's called an earmark.

It's called quid pro quo.

Number four, balanced budget spin.

This is where the governor and state legislators always brag about, "We have a balanced budget."

Well, the fact of the matter is, they don't count billions of dollars in unfunded liabilities.

Number three, policy sneak-in.

This is another deal maker where a state legislator who might be the swing vote on a budget will go, "Well, I'll vote for this budget, but you've gotta put a little policy in which will change, say, for example, how we get to vote or how political districts are drawn."

Nothing to do with the budget, but they wanna throw a little policy in to have more influence.

By the way, you're not supposed to do it, but they do it anyway.

And number two, the old tax label games.

This is where both republics and Democrats play this game where during the budget they go, "We need to give a tax break to the middle class."

But they never define the middle class.

Or they need to say, often they go, "We need to tax the rich more."

But they never define who is the rich.

And number one, the fact of the matter is most legislators don't read the budget.

It's that thick.

They're usually given about 24 hours.

They're winging it.

(exciting music) Time now for one-on-one.

Joining me is Anna Beavon Gravely.

You might have seen her on "NC Spin," and she is also the founder of Restless Politico and co-host of the YouTube podcast "Sat Chats," a podcast for Bitcoin beginners.

Welcome, Anna.

This is our first person on our one-on-one from a podcast.

- I'm so happy to be here first.

- [Pat] It's an honor to have you, coming all the way from Raleigh.

- Yes, sir.

Happy to be here.

So I wanna dive in with some questions from the perspective of a voter.

- Okay.

- So voters are in the position to judge leaders based on their results, not their rhetoric.

It's a really unique position that we get to take part in through the electoral process.

And so over the next few months, what concrete actions should North Carolinians watch for to know whether or not this budget stalemate is about policy or about preserving power?

- I think they gotta watch for, first of all, how much longer is it gonna take?

Will they have a budget in which the governor also agrees with and doesn't veto?

And also how many deals will be made to make the budget?

And will the deals include maybe some side policy deals that they sneak into the budget, like I mentioned on my top five?

Or will they be certain things like giving away road money, which goes against the policy that I pass as governor, or other type of money being passed out across the state to get a deal made?

That will make the difference.

Are they doing a budget for the right reasons, or is it pure politics?

- So what are some, like, telltale signs that they're doing it for the right reasons?

'Cause every, we're getting closer and closer to election day.

We are now in 2026.

So the election's basically tomorrow.

- Right.

- If you were to ask anybody that's gonna get mail in their mailbox.

What are some things that you can look for as a voter who wants to sort of cut through the chatter?

- Yeah, I think you've just answered your own question.

And that is, if you start getting things in the mailbox about attacking the other side about the budget, it was all about the next election, not about the next generation.

And you know how they get these, you get these mailouts, both the Republicans and Democrats do it, they send out these threefold mailouts that cost a lot of money and a lot of people are making money sending out those mailouts.

If it's all about attacking the other person on the budget, it was probably all to set up anyway for the next election.

And it could be a primary election too.

- We are looking forward to a primary election.

There is one primary election in particular that we're looking forward to, and you've mentioned it before in your show.

And so the primary between President Pro Tem Phil Berger and Sheriff Sam Page, what is that, what kind of impact is that having on the budget, do you think?

- I don't know if it's having an impact on the budget as much as having an impact on the future power of North Carolina.

As you know, Phil Berger, the head of the Senate, has been holding power for 14 to 15 years now.

I mean, that's a long time to hold onto power.

And usually what happens when people try to hold onto power too long, they lose track of what the people back home in their own district are thinking, in Rockingham County and parts of Guilford County for Phil Berger.

And all of a sudden the sheriff there went, "Enough, enough of, that's enough.

We only see you in Raleigh.

You never come back home because you're more interested in power."

This has happened in DC and it's happened in Raleigh before where if you overstay your welcome, there's pushback from the people back home.

And maybe that is the reason why Phil Berger is not passing the budget right now, is holding onto it.

Maybe he's trying to do one big announcement, or maybe he doesn't want to get stuck with something that could be used against him in the primary coming up in March.

- So in previous budget conversations, which North Carolina has had a very interesting relationship with our budget.

Ever since 2019, which coincides with how long Republicans have been in power, the longer they've been in power and in control, it's taken them longer and longer and longer to pass a budget.

Is there a connection there to you, or is that just me?

- No, it's not just you, I guarantee you.

It happened when I was governor and we had two Republican leaders in the House and Senate controlled totally, super majority.

They were having turf power fights between the speaker of the House and the head of the Senate, Phil Berger, and it was all about power.

It was all about power.

And they couldn't come to a conclusion.

But at that time, because we had a Republican governor, it was me, I got 'em in a room, and their other legislative leaders locked the door, brought bologna sandwiches and said, "We're not leaving this room until there's a budget and until we have the tax relief that we all promised."

It was really power over the tax bill at the time.

Who gets the tax cuts and who doesn't?

And it was a power struggle amongst some lobbyists.

Some lobbyists have more power in the Senate, and other lobbyists and other interests have more power in the House, and they were coming under conflict.

You especially see that in healthcare with hospital power and the hospital lobbyists.

For profit versus non-profit.

- Absolutely.

And I am thankful that you went for the bologna.

I think that's probably what solved it.

If it was a turkey or ham situation, there would've been too many choices on the table.

- It was on hoagie rolls, and we finally did get a deal.

But I'll tell you, it took a long time.

But now with the Democratic governor, there's no incentive for the House and Senate to figure out this power struggle.

In fact, what they even, most people thought the power struggle was between me and the House and Senate.

No, it was all between the House and Senate, people of the same party.

This is what happens when you have one party dominating one branch.

They tend to fight over power more than policy.

It happens to both the Democrats, happened to Democrats in the eighties and nineties, and now it's happened to the Republicans.

- So do you think that the dynamic that exists between former Speaker Tim Moore and President Pro Tem Phil Berger was different and more helpful toward reaching a conclusion than the dynamic between Speaker Destin Hall and Senator Phil Berger?

- Absolutely.

One thing, Destin Hall is more of a detail guy.

He has an accounting background.

He's reading the budget.

He's not willing to make deals or let things be slid in.

That's my understanding of what's happening in Raleigh right now.

The power struggles now is different with the person who's on the House side looking at the details.

We're out of time, but man, you, we gotta have you back.

- This flew by.

- We gotta have you back.

- Yes.

- This podcast questioning is very, very strong.

- Yes.

- Thanks again.

- Thank you.

- For being on one-on-one.

(exciting music) Before a single dollar is spent in the state budget, a much bigger fight takes place behind closed doors.

North Carolina has a long history of the governor presenting a budget to an always powerful legislature.

And regardless of the party, the legislature then largely ignores those recommendations.

Legislators start from scratch, and that's when the real politics begin, behind closed doors.

The budget chairpersons of the House and Senate along with their bosses, the speaker of the House and the president of the Senate, take center stage.

And the obvious question is, who's really pulling the strings?

Well, powerful lobbyists, committee chairs, state employee unions, education leaders, industry groups, even the governor with the veto pen, and plenty of others.

This is where hardball politics and negotiations truly start.

So where's the real battle?

Well, to my surprise, when I was governor, and it's still true today, the fight isn't really partisan.

It's primarily about power, specifically power between the House and Senate leadership.

Each side is trying to prove their members, prove to their members that their lobbyists and even the governor, that they hold the power card in North Carolina.

Why?

Because power attracts donations.

Donations create more power.

That power strengthens leaders with their members, the same members who vote for them as leaders.

And with that money, leaders help fund those members' reelection campaigns.

It's a vicious cycle.

And in the long run, it's not good for the state, but it is good for those who benefit from the existing power structure, at least for a while.

Because eventually in politics, those in power overplay their hand.

New leadership takes over, and as the saying goes, meet the new boss, same as the old boss.

And just like that, the cycle starts again.

Well, that's the truth as I see it.

Goodnight, folks.

(bright music) - [Narrator] A production of PBS Charlotte.