Commentary, NC Budget and Tax Center

Special update: Legislature’s initial COVID-19 response sets up need for additional sustained action

By Leila Pedersen, Suzy Khachaturyan, Alexandra Sirota and Patrick McHugh of the N.C. Budget & Tax Center

North Carolina’s General Assembly is poised to finalize its first legislative proposal this week, as Congress did in early March. The Senate has signaled it will return in three weeks to take up other matters, while the House has also suggested that it will meet in working groups beginning as early as next week. Given how limited in scope the current House and Senate proposals both are, we need quick, robust action to support families and communities struggling to cope with the COVID-19 outbreak. 

The Senate approved its first legislative action on COVID-19 last night before sending the bill to the House, which has developed several measures after weeks of working groups meetings. The House appears poised to combine those bills into its own omnibus legislation in today’s session. Its likely the differences between the House and Senate proposals will be worked out in conference committee, possibly as soon as this afternoon. 

There are distinct differences between the House and Senate proposals, but its fair to point out the two chambers’ proposals have more in common than what separates them. After weeks of conversations between leadership in the General Assembly and the Cooper administration, the legislation moving through both chambers represents a modest consensus “first response” to the COVID-19 pandemic.

The differences between the two bills could make the final legislation better or worse, but its also clear that leadership in Raleigh will have lots of work left in order to fully address the devastating health and economic consequences of the COVID-19 outbreak. 

Key similarities between the House and Senate proposals

Both proposals address some urgent needs. They include important investments and deploy critical federal funds to the agencies that are serving people and communities, while incurring new costs associated with COVID-19.

The proposals won’t go far enough to address the health and economic consequences of COVID-19. The language in both the House and Senate bills suggests that limitations of federal funding make it difficult to meet all the needs in this first effort. Yet available federal dollars could be used for priorities, such as providing essential, low-wage workers with pay that acknowledges their increased risk of exposure.

It could also be used for outreach on the federal Economic Impact Payments to maximize receipts by eligible families, as well as establish a state-level emergency cash assistance program for those excluded. The Senate and House have differed on their willingness to direct specific uses of the funds, creating challenges in ensuring state agencies make priority investments.

Missing the opportunity to strengthen the public infrastructure at a critical time – Both bills could do more to direct state dollars to agencies with uncertain revenue or receipts, and that are faced with unprecedented demand and capacity needs. The measures should shore up the institutions that will be on the front lines in building a stronger, more equitable recovery.

Key differences between the House and Senate proposals

The fine print of the Senate omnibus bill and several House bills expected to be combined today vary in many ways, but a few significant differences deserve particular attention, both in policy substance and the level of democratic transparency that was involved in developing these proposals. 

Total level of investment: Taken in total, the House proposals would allocate $1.7 billion in state and federal funds to address the COVID-19 pandemic, compared with the Senate’s smaller outlay of $1.3 billion. There are a several areas in which the Senate proposes devoting more funding to a priority than the House. Nevertheless, the House proposals represent collectively a more extensive financial response to the COVID-19 outbreak.

Aid to local governments: Like state governments, local governments are experiencing new and increased costs as a result of COVID-19. Both the House and the Senate create a Local Government Reserve with CARES Act funds only, missing the opportunity to help local governments as they develop their next fiscal year budgets to feel secure in funding that can address revenue shortfalls.

There are several key differences between the House and Senate in this area:

  • The House appears to appropriate a total of $350 million for local governments while the Senate only appears to provide for $300 million.
  • While both House and Senate proposals would distribute based on population, the House establishes a minimum allocation for each county eligible under this provision of $500,000 while the Senate minimum is $100,000.

Small business support: Both bills would make available short-term loans with an initial interest rate of 4%, later increasing to 5%, with a preference for businesses with fewer than 100 employees. Each individual loan is capped at $50,000. These loans are designed to be a bridge to the federal program and businesses that struggle to access federal small business programs – business owners of color and those without access to mainstream financial services – and are thus unlikely to fully meet the need for small business support.

The key differences between the House and Senate versions include:

  • The Senate appropriates $125 million to the program and the House $75 million.
  • Both provisions require the Golden LEAF Foundation to match state appropriations with non-state fund. But the House calls for a larger match of $15 per $75 in state funds compared to the Senate’s requirement of $15 per $125 in state funds.
  • The Senate bill expresses the legislature’s intent that an equitable share of loans go to Historically Underutilized Businesses, but the language contains no enforceable requirement. The House bill does not appear to provide this statement of intent.

Health: Distributing funds to local health departments and safety-net clinics is a feature in both bills, as well as funds to support food banks, the child welfare system, behavioral health and crisis services, nutrition assistance for students who would normally receive school lunch and breakfast, and rural and underserved communities.

Here are some of the key differences between the House and Senate versions:

  • The House omnibus bill appropriates approximately $480 million to support research efforts and expand the capacity of the state Department of Health and Human Services to carry out services or distribute funds as described in the bill. The Senate bill has some differences in how health expenditures are allocated but, overall, spends substantially less than the House.
  • Both the House and Senate proposed bills would provide Medicaid coverage for COVID-19 testing to certain uninsured individuals, as described in federal law, paid entirely by the federal government. The House bill would also provide limited Medicaid coverage for testing and treatment of COVID-19 for people up to 200% of the Federal Poverty Level, if approved by the federal Centers for Medicare and Medicaid Services.
  • Both the House and Senate versions would send dollars to local public health departments, which carry out much of the work related to COVID-19 contact tracing and surveillance. The bill language combines this funding with money for rural health care providers, the state lab, and mental health and crisis services. The House omnibus bill would appropriate $25 million to this line item while the Senate proposes spending $20 million.

Education: There are key differences in how the House and Senate proposals support public schools as they adapt to online learning and provide ongoing health supports to students. Provisions that allow for local flexibility will have a substantial impact, particularly for students that have disproportionately experienced lower levels of investments in their educational success. One difference is the level of increased capacity for online learning by investing in supplies and infrastructure to minimize learning loss and inequities.

Public Participation: The House Select Committee on COVID-19 and its working groups met for weeks prior to the start of session to hear from state agencies about what was needed to meet the growing demand for public services. Although current House bills do not address every legislative ask that was brought to the Select Committee, at least there was a public process. The process taken by the House is in stark contrast to the approach taken by the Senate, which developed its bills behind closed doors without ample opportunities for public participation and deliberation among members.

Both chambers should commit to filling the gaps left by this first phase of legislation. The need to move quickly should be balanced with the need for real and meaningful opportunities for all members, agencies, and the general public to provide input and ensure that the needs of communities most impacted by the pandemic are prioritized.

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