WHQR's Sunday Edition is a free weekly newsletter delivered every Sunday morning. You can sign up for Sunday Edition here.
Despite being technically out of session, North Carolina Republicans have been busy this week.
On Tuesday, State Senator Michael Lee and other Republican members of the Cape Fear delegation held a press conference to announce an additional $31 million in one-time funding for the state’s troubled film-grant program. The money, promised but not yet actually appropriated, will be ‘prioritized’ for Wilmington-area projects.
The following day, Republicans called the General Assembly to a one-day session to pass a temporary suspension of the state’s gas tax, using the state’s Stabilization and Inflation Reserve fund to backstop the loss of revenue to the North Carolina Department of Transportation. The move also includes specific measures to lower fuel costs for farmers, who have been hit extremely hard by rising diesel costs (it’s not clear how much Trump’s surprising and controversial diesel deal with Russian President Vladimir Putin will move the needle).
Both moves were generally popular, with some caveats, though Democrats responded ambivalently, many broadly supportive of the ideas but critical of the timing (notably, Lee's opponent in this year's election, Democrat Jessica Bichler, criticized both). More to the point, in both cases Democrats accused the Republicans of effectively trying to bribe voters — shades of the $5,000 Trump Dividend, conditionally promised if Republicans hold the U.S. House and Senate.
So, were these stunts, or principled policy moves?
Pumping the brakes on the gas tax
When it comes to the gas tax, and pain at the pump, Republicans are in an awkward position because the call is coming from inside the house.
While fuel pricing is a complex system, there’s no avoiding that Trump’s war of choice in Iran — and the reasonably foreseeable closure of the Strait of Hormuz — has driven up gas prices. And, while there are folks on both sides of the aisle who might cosign military action against Iran — to prevent the regime from obtaining a nuclear weapon, to quell its proxy terrorist campaigns, or to support Israel — the Trump administration’s choice of bluster over strategy has frustrated even Trump’s own party.
So what are Republicans, especially those running for office at the state and local level, to do? Most would prefer not to be tied to Trump, at least not in terms of his most unpopular policies, and want to focus on their own campaign issues. But with gas staying over $4 a gallon, it’s hard to ignore.
The primary criticism of this week’s gas tax pause is that it’s so conspicuously close to the election. The speed with which it was passed — seemingly just a half-day in Raleigh, though obviously leaders had some conversations earlier — makes it hard to argue there ‘wasn’t time’ earlier during the active session, say in April or May.
But, at that time, Senate Leader Phil Berger dismissed the idea, saying in mid-May, “It strikes me that that's more of a feel-good kind of thing than something that actually would make a whole lot of difference with reference to individuals.”
This week, Berger said he’d changed his mind, arguing that gas prices weren’t as high in May. The News & Observer’s capital bureau chief, Dawn B. Vaughn, reportedly fact-checked Berger on the spot — the average gas price was actually higher when Berger made those comments in May than it is now. Not long afterward, veteran PolitiFact reporter Paul Specht rated Berger’s position as a “full flop.”
Another criticism is the financial mechanism being used here. The state’s 41-cent gas tax generates north of $2.5 billion in annual revenue for NCDOT; pausing it through the end of November is expected to cost somewhere around $360 million — about $7 million a day. Republicans are filling that funding hole with the state’s Stabilization and Inflation Reserve account, which reportedly has $580 million or so in available funding. As North Carolina Tribune editor Ray Gronberg noted on Monday, “legislators and budget watchdogs generally frown on using one-time money to cover ongoing costs.”
And, of course, there’s no guarantee that gas stations will cut prices by the full 41 cents – in fact, evidence from past federal and other state pauses indicates they won’t. House Leader Destin Hall predicted a 30-to-35 cent drop in per-gallon prices, which would still be welcome at the pump by most, I suspect. (An unscientific study of two gas stations near me showed prices were down 40 cents between Wednesday and Sunday at one location, and barely reduced at another; we’ll see how that shakes out.)
Consider the Republican position in late spring: charitably, there was reason to believe Trump’s military actions against Iran would not drag on through Election Day. Surely Trump would get bored or distracted — and, really, how long could a heavily bombarded Iranian regime hold on? Repealing the gas tax at that point, I think you could argue, would be both fiscally and politically irresponsible, burning away an important reserve fund to ease short-term pain and also handing Democrats a cudgel to beat the GOP with, since they’d be tacitly acknowledging the unpleasant economic impacts of Trump’s military missteps.
Coming back to the present moment, Democrats in Raleigh clearly understood either the political optics or the real benefits — or both — of the gas tax bill, because all but one (House Representative Pricey Harrison) ultimately voted for it.
And, while you can see why Democrats would argue that Republicans should have paused the gas tax sooner, at $7 million a day, the state would struggle to afford pausing the tax for six or seven months. So, in an alternate timeline where Berger and Hall made this move in May, they might now be faced with ending the reprieve less than a month before the election.
So, was this a stunt? In my editorial opinion, I think yes. Numerically, I’d say it was 80/20, stunt to policy. It’s a real response to a real issue, but it’s limited relief for a limited period of time, against the backdrop of much more serious economic issues.
A win for film, and sharing the spoils
When it comes to the film grant funding, I think there’s a bit more nuance to explore.
First, it’s worth noting that the announcement was met with genuine gratitude and relief from film industry folks — not just at the podium during the presser, but those I spoke with off the record after the event. They remain cautious with their optimism mostly because the grant program still feels like a political football; they’d like more stability and consistency. And some, who also work in Charlotte and western N.C., wondered about the precedent of selectively supporting one part of the state, since the $31 million will prioritize Wilmington-area projects. You can feel a little bit of that in Friday’s statement from the Motion Picture Association, which applauded Lee’s work and noted that the MPA “looks forward to working with legislative and state leadership to ensure North Carolina’s film industry and grant program have a strong and sustainable future statewide [emphasis added].”
Then, there’s the timeline. The film grant program only really seemed to launch into crisis after the budget was released.
And here, there’s some muddy water.
Prior to 2014, North Carolina's film incentives were an uncapped tax rebate program. That system was allowed to sunset by Republicans in Raleigh and was eventually replaced by the current grant program, which is more limited. Some Democrats, including Bichler, have argued the state should go back to the old incentives, though film industry folks have been relatively pleased with the current system, provided it remains stable.
And therein lies the rub, because the program is hardly stable right now.
The short version is, state officials at the Department of Commerce who run the program claim this year’s budget contained language that restricted how they’d been doing business, which is essentially making grants that would come due years down the line — because they’re paid out after the often lengthy post-production process. Lee and GOP leadership dispute that, saying the budget contains no substantive changes and Commerce was never supposed to be doing that. I’ve read all 600-plus pages of the budget, and I honestly can’t tell who is right – although it may be somewhat of a moot point, given that everyone now seems to be on the same page, if begrudgingly.
As I’ve written elsewhere, the annual grant spending is a public record, and it was very clear the program was dramatically overspending its $31-million annual budget. This was possible because it had a reserve fund from the three or so years when it spent significantly less than it was appropriated. (I actually found a pre-production company that referred, erroneously but perhaps understandably, to the state’s grant program as “functionally uncapped.”)
In the 2022-2023 fiscal year, the program spent $92.6 million. This was touted as a success in the film industry — and it’s hard to imagine that no one in the General Assembly saw that number and didn’t notice it was nearly three times the annual appropriation. If the film grant program was acting contrary to statute, no one publicly complained, for years.
This year, as we reported in July, the grant program exhausted its reserve fund, and all of a sudden, the mismatch between annual funding and annual grantmaking became a serious problem. The Department of Commerce effectively told people it was out of the film grant business for the next few years, and productions started packing up and eyeing South Carolina, Georgia, or other locations. Lee was clearly frustrated with the Commerce Department, and argued the program was still actively supporting film — which it was, with ongoing grants for the next couple of years — but the industry, especially in Wilmington, was demonstrably in freefall.
Lee helped get another $15 million in the budget corrections, but it wasn’t enough.
It’s hard to see how this situation surprised anyone involved. You can do the back-of-the-napkin math: on one side of the ledger, the $31 million in recurring funds; on the other, the total grants made. Commerce Department officials knew they were going to run out of money — and legislators, if they paid attention, knew as well. I fully admit that, while I haven’t covered the film industry very closely, it’s certainly in my bailiwick and I also completely missed this predictable inflection point.
It’s plausible the grant program didn’t raise any alarms in the hopes that the General Assembly would simply step up and bail them out — which is, more or less, what is ultimately happening. It’s also possible that legislators let Commerce get over its skis so they could force the issue of reforming the film grant. And, I concede, it’s possible that the film grant simply wasn’t on Raleigh’s radar, with leadership occupied with hammering out the state’s comically delayed budget. I think it’s fair to criticize everyone involved for essentially driving towards a very visible cliff without really discussing it.
But what’s done is done, and now we have the present crisis, which started in July and has snowballed since.
On that timeline, I think the criticism of timing is also fair. Film industry folks, even a Republican or two from our region, have said the additional funding should have come sooner. I also understand the concern that this money has not been appropriated yet — and the vote to authorize the funding is planned for mid-November. As a colleague of mine in Raleigh texted me on Tuesday afternoon, “holding a press conference to announce money that will be coming after the election when they are literally going to be in session tomorrow is A LOOK.”
I think some will chalk that up to corner-office politics. You have to imagine Michael Lee spent more than a little political capital getting leadership on board. After all, the grant does little for Republicans running outside of the Cape Fear region — and might actually aggravate them, especially if they were already apathetic or sour about subsidizing the film industry.
Lee might be Berger’s heir apparent, but he’s not Senate Leader yet. Taken cynically, even if this was a deal to help ensure continuity in GOP leadership, it probably wasn’t an easy negotiation. And, as I’ve said elsewhere, making sausage takes time, especially pork barrel sausage.
The proof is in the eating, as the saying goes. Some Democrats are skeptical and wonder if the funding will depend on the election. If Lee wins his race against Bichler, which isn’t a sure thing, failing to make good on the promise would be a tough political pill to swallow, and the fallout could haunt Republican leadership into 2028. But if he loses, would GOP leadership still be willing to appropriate considerable funding to a lame duck district? I’m not questioning Lee’s integrity here; I believe he earnestly wants this funding for Wilmington film. But the political situation could change underneath him in a month; as my first boss in journalism told me, “there are checks and there are promises and only one buys groceries.”
Some of the criticism I’ve seen seems unwarranted, especially misinformed claims that Lee helped kill the original film incentive, an uncapped tax credit program. That decision was already in the works in July of 2013, and Lee wasn’t appointed until over a year later, replacing Thom Goolsby; in 2014, Lee told WHQR he supported the film incentive. It’s also hard to give much credence to the conspiracy theories claiming this has all been a multi-year plot to allow Lee to claim a major win on the eve of the election.
Some Democrats have tried to tie Lee to the evangelical and free-market groups that did very much want to kill film industry subsidies back in 2013, but Lee’s record disputes that. He pushed to increase the grant program’s annual funding from $10 million to a recurring $31 million. In 2021, he filed a bill to provide $34 million in one-time funding, although the legislation died in committee. And he’s since suggested he’d like to see more annual spending. If Lee is trying to kill film, he’s playing an extremely long and very strange game at it.
All of this to say, I think there’s a good case to be made that Lee did the right thing for the right reason when it comes to this week’s film grant announcement.
Still, there’s no sense letting a crisis go to waste — cue Tuesday’s choreographed press conference. This was an exclusively Republican affair, and clearly designed to mix the business of film with the business of campaigning (as I wrote earlier this week, Democrats had their own dog and pony show last month, minus a funding announcement). Lee shared the spotlight, giving outgoing Representative Ted Davis, Jr. his flowers, while also highlighting the “behind-the-scenes” work of Dane Scalise, the current vice-chair of the New Hanover County Board of Commissioners who is running for Davis’ seat (with Davis’ blessing). Representative Charlie Miller was also there, but didn’t make any remarks.
If you’re familiar with professional wrestling (and to understand today’s politics, it helps to brush up), you could say Davis and Lee put Scalise over — sharing, even deferring, credit to a rising star in Republican politics.
This isn’t to say Scalise didn’t do the work — talking to state reps and film industry folks, I was told several times that Scalise was “blowing up people’s phones” for two months, trying to cut through the noise in Raleigh, where there are plenty of other competing special interests elbowing for face time with leadership. That’s not easy.
So, was this a stunt? I have to say no. In my opinion, it was maybe 90/10, policy to stunt.
Just because the local Republican delegation made political hay out of it doesn’t mean it wasn’t an earnest policy decision. And, if you want to criticize Republicans for turning a policy win into a campaign stop, that’s fair, but you’d have to level equal opprobrium on every Democrat doing a victory lap on their own issues.
Back to work
In the end, I don’t know many people who will be mad to pay four or five bucks less for a tank of gas over the next two months. And I know a lot of people who are relieved, even overjoyed, to see film sticking around here in Wilmington. But in both cases, there’s a lot of work left to do.
For film grants, there’s the constant need to make the case for incentives to people who wonder why we should pay this particular industry — or any industry — to stick around. I think both political parties appreciate the value proposition of film grants, but that doesn’t make it frictionless. And there’s also, I think it’s fair to say, a need to shore up the system. Davis told me on Tuesday that it needs to be more transparent and accountable – and if that helps it stay more consistent and reliable, I think the film industry would very much be on board.
That work, Lee said, will be done in the long session next year. Davis won’t be there, Scalise and Lee might, or might not. The industry might feel confident they’ll get the funding in November, but I don’t think they can be as sure about what happens after that.
As for the price of gas, we’re slated to go back to our regular prices in December. Whether we’ll still be at war — or some other state of quasi-conflict — is unknown. And really, a break at the pump is a token offering. It’s helpful, sure, but the issue of affordability runs so much deeper: childcare, health insurance, lagging wages, inflation, housing costs — these won’t be fixed by a brief brake-tap on the gas tax.
One takeaway from this week’s hurry-up offense on the gas tax and film grant funding is that, it turns out, people like when the government works for them. They’re happy when the government takes decisive and timely action to help them, either in their industry, their local economy, or their personal financial situation. If people are suspicious of politicians who do objectively good and popular things right before an election, it is because they’re not seen as doing that the rest of the year.
