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Charlotte Observer: Governor and legislature making things worse

The Charlotte Observer’s [1] editorial board calls decisions by Governor Pat McCrory and the Republican-controlled legislature to reject billions in federal money counterproductive and simply wrong-headed.

Here’s the column that appears in Wednesday’s paper:

‘The legislature’s effort to save the state money is starting to cost the state a boatload of money.observer editorial

The N.C. Senate passed a bill Tuesday that overhauls the state’s system for paying benefits to unemployed workers. That needed tackling, but the way the legislature did it unnecessarily costs the state $780 million from the federal government. Lawmakers could have made all the changes they did and still receive the $780 million by delaying them for just six months.

Gov. Pat McCrory, meanwhile, said Tuesday that he does not want the federal government to pay 100 percent of health insurance costs for 500,000 poor North Carolinians. The House could vote as soon as Wednesday to pass a bill that turns down $2 billion in federal money per year for three years, and billions more in the years after that.

Um, ladies and gentlemen of the House and Senate, could you stop “saving” us so much money?

A wrong-headed fix

If McCrory signs the unemployment bill, as expected, it takes effect July 1. Republican senators defeated an amendment on party lines that would have pushed the effective date to Jan. 1. That triggers a federal law that cuts off federal benefits to 170,000 North Carolinians worth $780 million. That’s money they’d have spent on groceries, the rent or mortgage, and other basic needs. Pulling that much money out of the state’s economy can only hurt consumer spending and job creation.

To be sure, at $2.5 billion, North Carolina has the third-largest debt to the federal government for unemployment benefits. The current system is unsustainable. The problem came about because the state cut taxes on employers and ramped up benefits in the good times. Those changes couldn’t withstand the recession.

The fix, then, should be balanced. But about two-thirds of the savings in this bill come from cutting benefits, the legislature’s fiscal experts say. The unemployed are shouldering the burden by a two-to-one margin.

Perhaps most notable: Once the debt is repaid within three years, employers’ taxes drop back down to today’s levels, but the benefit cuts remain.

All of that makes this solution flawed. And turning down $780 million from outside the state is senseless.

Saving money with Medicaid

McCrory said Tuesday “it would be unfair to the taxpayers” to expand Medicaid when the state’s system is plagued with administrative problems. But the expansion he and the legislature reject would be funded 100 percent by the federal government for three years before phasing down to 90 percent after that.

The state would be better off if McCrory would go about fixing the problems in Medicaid administration while also accepting the many billions to cover low-income residents starting Jan. 1, 2014. Without that federal money, those residents will go to the emergency room or forego care altogether – both of which will cost the state in the short and long run.

The state has serious financial challenges. So far, McCrory and Republicans in the legislature are making them worse.’