COVID-19, NC Budget and Tax Center

NC General Assembly allocated some federal dollars; more are available and urgently needed

Yesterday, Gov. Cooper signed into law the first two pieces of legislation agreed upon by state lawmakers following five days of committee and chamber meetings that were held virtually in Raleigh. Unfortunately, while this first step will address some of the urgent needs arising from the COVID-19 pandemic, it leaves most of the response work undone. As a result, lawmakers will need to move quickly to use billions of dollars in available federal and state funds to combat the immediate effects of the crisis and prepare for recovery work.

The package approved by the Governor yesterday spends $1.58 billion for fiscal relief for transportation, supports for nonprofits and hospitals in meeting the needs of the rural and marginalized communities, “non-transportation” state agencies and local governments, funding to support remote K-12 education, local government supports and more.

What’s clear, however, is that much more needs to be done to meet growing needs in light of COVID-19, and federal funds are available to meet many of them. The $1.58 billion allocated from the Coronavirus Relief Fund (the major funding stream included in the federal CARES Act) amounts to just 44% of the $3.5 billion made available to North Carolina by the federal government thus far.

State leaders should not delay in making additional investments needed in local communities and state agencies for public health, education, unemployment insurance and other critical public services.

Unfortunately, instead of allocating sufficient funds for agencies to plan and continue operations for the remainder of the calendar year, as was intended by the feds, the General Assembly took a piecemeal approach. Lawmakers allocated smaller amounts that will likely only be sufficient until the end of the fiscal year ending in June. This will hinder a robust state response to the crisis.

Rather than receiving dollars through piecemeal responses, state agencies need dollars quickly so that they can make rapid investments in supplies, technology and administration necessary to meet demand after years of under-investments that led to cuts in these areas.

Some of the limitations on how federal funds can be used are rooted in decisions made by the Trump Administration. Guidance from the U.S. Treasury placed restrictions on the use of dollars in the Coronavirus Relief Fund — including that the money cannot be used in place of revenue shortfalls. This limitation means that these dollars must be used to meet the needs that arise due to COVID-19 not previously accounted for in the budget.

However, there are ample and urgent opportunities to use funds within this guidance, introducing hazard pay for essential workers, and a multitude of other funding options to mitigate the harm of this crisis and make meaningful improvements in people’s well-being.

The General Assembly and some state agencies have suggested that the guidance from Treasury limits their ability to commit to certain critical needs. That is not the case. Other funding streams outlined here, and detailed in the bills passed, can and should be used for specific areas by agencies with the authority to use the funds in ways that prioritize equity, build resilient systems and lift up public institutions.

In addition to federal funding availability, lawmakers should make use of the state’s modest Rainy Day Fund — totaling $1.17 billion — to meet additional needs if necessary, particularly for allocations that would not be permitted under the Coronavirus Relief Fund. North Carolina legislators have put in place structural barriers to accessing these funds and are often reluctant to use them; however, the unprecedented hardship caused by this public health and economic crisis makes this the exact time to use the savings available.

After all, this crisis has been made more challenging by poor policy choices that have depleted the state’s public infrastructure and instead diverted dollars into the pockets of the wealthy and corporations. To mitigate the harm, lawmakers must act quickly to send more dollars to state agencies, nonprofit, and community-based organizations to deliver much-needed services in response to the COVID-19 crisis in ways that prioritize people’s well-being and take seriously the urgency and the breadth of people’s needs.

Suzy Khachaturyan is a policy analyst at the N.C. Budget & Tax Center, a project of the North Carolina Justice Center.

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