Tweet This
The fate of North Carolina’s controversial HB2 hangs in the balance of Tuesday’s election. The ‘Bathroom Bill’ is the colloquial, if crude, name for the state’s law that has cost the state at least $630 million in lost business since March, according to FORBES’ estimates. And that number could go even higher.
The law requires citizens to use the public facility that corresponds with their ‘biological’ gender. This edict aligns with the idea that gender is a binary construct, inherently marginalizing transgender people. The Justice Department has sued the state to overturn the law.
Fans of HB2 are few, yet its defenders are staunch. Governor Pat McCrory has doubled and even tripled down on the embattled legislation while it remains a topic of jest for late night comedians and a source of pain for NC business.
Executives, economists and residents (and relocated Tar Heels like myself) are eager to see if North Carolina will retain incumbent McCrory or if Attorney General Roy Cooper will take office and set the state on a more progressive and inclusive path. Cooper says he would work with the legislature to repeal HB2--an action many have rallied for. The state's Commerce Secretary doesn't think he'd be able to overturn it with a majority Republican legislature.
President Obama visited the state yesterday and told rally attendees "the fate of the republic rests on your shoulders."
Cross-Industry Carnage
The bathroom bill meanwhile is sending businesses across industries outside the state’s borders.
In May, the NBA moved its All-Star game from the state to New Orleans. That move cost the state $106 million in revenue. At the same time, Michael Jordan threatened to take his Charlotte Hornets out of state (he didn’t).
College sports are also taking a timeout from the state. The NCAA and ACC pulled their championships, costing the state $51 million and $40 million, respectively.
Financial services firms are also paying attention. PayPal and Deutsche Bank froze expansion plans in April that would have added 650 jobs and an annual payroll of $42 million. The local paper put a price tag of $109.2 million on the PayPal loss, including new economic activity stemming from the jobs.
Major entertainers who often have sell-out shows are also giving the state the cold shoulder. Bruce Springsteen, Pearl Jam and Ringo Starr all cancelled shows.
Google Ventures placed a moratorium on NC investments despite many life-science companies in the Research Triangle being ripe for venture capital. The venture capital arm of Alphabet invested an average of $4.7 million in each of its initiatives in 2014 and it has never invested in an NC-based company. Now, it never will, unless HB2 is repealed. GV declined to comment.
“You can’t be pro-business and pro-discrimination at the same time,” says Shabab Mirza, who co-authored a Center for American Progress report on the law.
While the exact damage is tough to quantify, FORBES estimates that North Carolina has lost some $630 million in revenue. That's based on local news reports, policy research and interviews. (This figure doesn’t include legal expenditures associated with defending the law or the billions at risk in federal funding.)
As McCrory's opponent Cooper says, "this is only the tip of the iceberg." He adds, “Economic recruiters tell us that many companies are taking NC off their list because of HB2, so we really don’t know the extent of the damage.”
Nearly 70 companies signed a ‘friend of the court’ document against the discriminatory law, 11 of which are on FORBES’ Most Valuable Brands list. Investment managers have also taken up against the law.
Meanwhile, the state’s Republican Party and Chamber of Commerce don’t think the law has adverse effects and both point to the current state of business in the state. North Carolina's GDP is about $510 billion, so a $630 million loss can be painted as negligible on a macro level.
"Even as recent as September, North Carolina shows to consistently be outperforming the U.S. in wages and economic growth,” Kami Mueller, a spokeswoman for the North Carolina GOP, said in an e-mail. Governor McCrory’s office forwarded requests for comment to North Carolina’s Commerce department.
“This is a political animal and will not exist after [the election]" says John Skvarla, North Carolina’s Secretary of Commerce. "Fake right, look left. This whole thing is a diversion of attention from our economic performance," says Skvarla, pointing out that Deutsche Bank’s exit has more to do with its recent troubles.
“Interestingly enough, right at the time when their stock was plummeting and they’re talking about having a bailout from the German government, because they are about to go under.”
Skvarla says the state has gained 5,000 new jobs and approximately $600 million of new investment with state economic development programs since March. The state ranked #2 on Forbes Best States For Business last year and continues to make headlines for its thriving business climate despite HB2.
Flushing The Law
Repealing HB2 will take cross-aisle collaboration. Cooper thinks he’s the man for the job, having built bipartisan consensus on topics including teacher pay and worker’s compensation as Senate Democratic majority leader (when the legislature was majority Republican.)
“I’ve had a number of Republican business leaders tell me that this is no longer a red or blue issue, this is a green issue,” says Cooper. “It is costing us money and we have to fix it.”
Cooper is committed to purging the law, no matter the party makeup of the state’s legislature.
“I do believe that there will be enough forward-thinking legislators elected that if I vetoed the bad legislation, that veto would be sustained,” he says. “We don’t expect that either legislative body will flip to Democrat, but you never know, this is a strange election.”
Secretary Skvarla doesn't think Cooper will be successful in overturning the law if elected Governor.
“Roy Cooper intends to repeal the law with a Republican majority, which could have overridden Pat McCrory’s veto of the bill in 20 seconds or less. There’s no possibility that the Democrats are going to take over the General Assembly. So Roy Cooper’s saying he intends to repeal the law is absolutely preposterous and impossible. It can’t happen,” says Skvarla.
About 52% of voters think HB2 is hurting the state overall and 49% think it’s adversely affecting the economy, according to Public Policy Polling.
‘Hollywood of the East’ no more
North Carolina’s once-booming film industry is being flanked on two sides: by HB2 and by the expiration of film tax incentives which were replaced by a less competitive grant program.
Georgia and South Carolina, with similar topography and more robust film tax incentives, are winning projects North Carolina would have once vied for.
“Now we don’t have any films being produced in the state and those jobs have essentially disappeared,” says Dr. Robert Handfield, professor of supply chain management at North Carolina State University. “The impact of the dreadful HB2 is scaring away entertainment.”
From 2007 to 2012, the film and television industry brought $1.02 billion to the state. Handfield said he would be surprised to see even a quarter of that figure spent in the next five-year interval, ending in 2017.
“It is difficult to separate the additional impact HB2 has had on the film industry,” says North Carolina Senator Terry Van Duyn.
Lionsgate abandoned $3 million plans to film a Hulu comedy pilot in Charlotte, citing the law.
The movie studio’s first installment of the The Hunger Games added $60 million to North Carolina’s economy in 2011. These are the kind of big, one-off successes that are integral to the state’s entertainment economy and that disappear with HB2.
A&E Networks and Turner Broadcasting are both wrapping up current North Carolina projects, totaling $57 million. Neither plans to return until HB2 is repealed.
Less Damaging Dissent
Not all dissidents are pulling out of the state in protest. Dixie Chicks, the notoriously left-leaning cowgirl trio, played their summer show but distributed anti-HB2 hats to its audience.
“Come to North Carolina, do business here and help us fight HB2,” says Cooper.
Some companies are optimistic. Braeburn Pharmaceuticals, which makes medicines for opioid addicts, is moving forward with plans to open a facility in Durham--but only after its CEO met with Cooper. Had the company departed, it would have taken $27 million with it.
Moving its job creation plans would “unfairly penalize a community that shares Braeburn’s commitment to equality,” wrote CEO Behshad Sheldon. Instead, Durham will enjoy 52 new jobs and the “spillover” effect from recruited employees purchasing local goods and services.
Internet marketing company Red Ventures is still deciding if it will yank its $15 million Charlotte expansion. Its CEO gave employees an extra 3 hours off to vote.
It is voters like these, whose economic fates are tied to North Carolina’s prosperity, who will decide which candidate will wind up in the Governor's mansion in 2017.
This story has been updated from its original version.
