Commentary, NC Budget and Tax Center

Governor’s budget proposal represents an important step toward recovery

Gov. Roy Cooper released his proposal yesterday for how North Carolina can allocate public dollars to meet emerging needs from COVID-19 and make progress toward the long-term investments that are critical to sustain an inclusive recovery that reaches every community in the state.

While not quite a comprehensive budget for the remainder of the 2020-2021 state fiscal year, the proposal lays out in detail how the governor intends to allocate the remaining $552 million from the state’s share of the Coronavirus Relief Fund and ensure funds previously appropriated to uses deemed impermissible by the feds are directed to aid people and communities.

The timely investment of federal dollars to meet needs will not only serve to support households facing daily hardships from COVID-19 but will reduce long-term costs and support a quicker, more inclusive recovery.

Stopping job and income losses, making sure families can meet basic needs and stay in their homes, and providing for access to health care are essential to boosting well-being and should be the fundamental goals of a pro-economy policy agenda. After all, we the people are the economy, and when we are suffering, the economy will struggle to be productive, to create and sustain jobs, and to connect people to opportunities.

It should be clear by now that the scale of this crisis is unprecedented. More than a million families are at risk of eviction in the state. Households are struggling to cover child care costs and support online learning. Too many workers are going to their jobs in often unsafe conditions and for too little pay. And one in three children doesn’t have enough food or lives in a household that is behind on rent. As indicated in the chart below, the proposed increase in overall state General Fund appropriations year over year is minuscule in comparison to job losses over the year.

Public investments can minimize the harm of economic downturn, but must match the scale of need

The governor’s proposal to use additional General Fund dollars is essential to get closer to addressing the need, but it is a conservative proposal constrained by uncertainty around revenue losses at the state level and federal inaction.

For example, the governor is proposing roughly $200 million in additional General Fund appropriations this year, but only $500,000 of that represents recurring commitments. Even with the expansion in General Fund appropriations, North Carolina remains far below historic levels of spending since changes this fiscal year are built on a budget that was primarily built two years ago. This is because legislative leaders opted to simply continue spending at prior levels and enact piecemeal budgets rather than reflect on and respond to community priorities last year.

Importantly, the governor proposes two bonds to get at long-standing community infrastructure needs, including public health care facilities, broadband, public school capital projects, water and sewer infrastructure improvements, and affordable housing. These investments, one of which would require a vote of the people, would provide the much-needed foundation to support resilient and thriving communities after the pandemic.

Moreover, the Governor proposes deploying the substantial Unemployment Insurance Trust Fund at the state level to stabilize households affected by job losses by fixing our state unemployment insurance to better replace wages instead of setting an arbitrarily low cap on benefit amounts and extending the duration of weeks available.  These first steps are in important as Unemployment Insurance is a critical tool in minimizing the harm and length of the downturn but more changes will be needed like changes to the formula that disadvantages workers who lost wages before they lost jobs and to ensure those working part-time who have lost hours can still get support for lost wages.

For North Carolina families to survive COVID-19 and for post-pandemic communities to thrive, our leaders at the state and federal level need to be willing to match community needs with public investments at scale and in ways that consider the range of fiscal tools available to them. Arbitrary constraints on investments — or worse, a turn to austerity — will only delay our progress.

That means a federal package with significant aid to states and individuals is urgently needed in the next month, and over the next year, it will be essential to consider how our own state tax policies can provide for adequate and equitable public investments.

Many have suggested that next week will be the last time that legislators return to Raleigh this fall. It is critical that legislative leaders act boldly to meet the needs in communities and that legislators be willing to return to Raleigh to respond and continue to invest in a strong, inclusive recovery.

Alexandra Sirota is the Director of the N.C. Budget & Tax Center.

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