NC Budget and Tax Center, TANF 20 Years Later

Welfare reform doesn’t reflect our best ideas about addressing poverty

This blog is the 4th post in a series that will detail how lawmakers have weakened Temporary Assistance for Needy Families (TANF) over the past 20 years, explain why TANF is a cautionary tale rather than a model for other work and income support programs, and map out a better way forward.

As North Carolina and the country continue to contend with elevated poverty levels despite seven years of an economic recovery, many have suggested that the principles of the 1996 reform of welfare (then AFDC, now Temporary Assistance for Needy Families or TANF) should serve as a model for addressing poverty in our state and nation.

The changes, made 20 years ago this week, to the way in which we ensure that people living in poverty can meet their most basic needs and have a pathway out of poverty were based on three core ideas:  that work was the pathway out of poverty, that states would know best how to meet the needs of their communities, and that services—from training to marriage counseling—could effectively replace cash assistance. While these ideas may not have been inherently wrong, they resulted in concrete policy directions:  time limits, work requirements, block granting and funding for services to agencies over direct payments to poor people.

A review of the evidence suggests that the guiding ideas behind welfare reform fail to deliver better economic outcomes across the board and have in fact increased the number of people living in deep poverty,  fallen short in times of economic distress and generated a whole host of unintended and negative consequences because poor households continue to lack income to meet basic needs.

It is these same ideas that have been suggested for every program that seeks to deliver support to low-income households, from food assistance to Medicaid.

Here are the problems with these specific ideas about poverty and the policy choices that stem from them: Read more

NC Budget and Tax Center

Recovery held back by fiscal austerity

To hear it told this election season, North Carolina’s recovery is something to behold.  Nevermind the evidence that employment levels remain depressed and hardship high. Researchers from the Economic Policy Institute released a study this weekend that suggests that were it not for the policy choices North Carolina policymakers have made (and their Congressional counterparts), North Carolina would have experienced a far more robust a recovery.

The analysis looks at various measures of the strength of the economic recovery to demonstrate the relatively slow performance compared to prior economic expansions nationally.  Josh Bivens, author and economist with the Economic Policy Institute, then turns to an analysis of public spending, which in a downturn serves an important role in filling in the gap between where employment and output should be and where it is.

And yet, the graph below from the analysis shows that cutting spending was the actual response post-2010, slowing the pace of recovery.  From Bivens:

[The graph] shows the growth in per capita spending by federal, state, and local governments following the troughs of the four recessions. Astoundingly, per capita government spending in the first quarter of 2016—27 quarters into the recovery—was nearly 3.5 percent lower than it was at the trough of the Great Recession. By contrast, 27 quarters into the early 1990s recovery, per capita government spending was 3 percent higher than at the trough, 23 quarters following the early 2000s recession (a shorter recovery) it was 10 percent higher, and 27 quarters into the early 1980s recovery it was 17 percent higher.

 

Bivens concludes that: “If government spending following the Great Recession’s end tracked spending that followed the recession of the early 1980s for the first 27 quarters, governments in 2015 would have been spending an additional trillion dollars in that year alone, translating into several years of full employment.”

The full piece is worth a read here.

NC Budget and Tax Center

Charlotte increases minimum pay for city workers, anticipates reaching $15/ hour by 2020

Like local governments across North Carolina, the City of Charlotte passed its budget a few weeks ago in time for the start of a new fiscal year last Friday.  Like a growing number of City leaders across the state, the City Council and Mayor approved a budget that sets the minimum pay for a city worker higher than the state and federal minimum wage standard of $7.25.  That is good news for workers and their families and good news for the local economy in Charlotte:  when workers earn what it takes to make ends meet they are able to spend locally on the basics and thus support their families and boost economic activity.

The new minimum pay schedule for City of Charlotte employees starts at $13.58 which is now among the highest in the state for City workers.  It still, however, falls far short of what it takes to make ends meet in that City where rising housing, child care, and transportation costs are squeezing workers in public and private sector jobs.   The Budget & Tax Center produces a Living Income Standard for each of North Carolina’s 100 counties.  For a single worker with one child, the hourly wage it takes to just break even on the basics without public assistance is at a minimum $17.16.  MIT’s Cost of Living Calculator sets that figure at the higher rate of $22.06.

The move to $13.58 is thus an important step and one that should be taken by more cities across the state.  But it must also be the first on a road to ensuring that workers earn what it takes to make ends meet and contribute to a thriving community. Read more

2017 Fiscal Year State Budget, NC Budget and Tax Center

Statement of Final Budget Passage from Alexandra Sirota, Budget and Tax Center Director

A budget is the set of choices our policymakers make to lay a foundation for North Carolina’s future.  Will it stand future tests of economic challenges and opportunities? Will it extend to every corner and household of our state? The answer for this budget is that it will not.

For those who say this is as good as we can get, the reality is we can do better. Our leaders have chosen to limit our sights.

There is no great mystery about what has happened in this year’s budget debate. Policymakers have set a low bar based on a rigid formula and ignored the realities of our growing state and the families who strive to do well. They have continued to allow tax cuts to phase in that benefit the wealthy and profitable corporations, and they even pursued more poorly targeted tax cuts that will fail to effectively address the increase in sales taxes that North Carolinians will pay.

To those satisfied with baby steps, this final budget may be okay. As those who seek leadership that charts a stable path into the future and embraces the challenges of our changing state, we are disappointed.

2017 Fiscal Year State Budget, NC Budget and Tax Center

More evidence that limiting our Constitution puts NC’s coveted AAA bond rating at risk

The Bond Buyer, an insider investment industry publication, has taken note of North Carolina Senators’ passage of a proposed change to the state’s Constitution that would limit the income tax rate to the low and arbitrary level of 5.5 percent.

In a recent article on the risk to the state’s “gilt-edged credit rating,” the reporter quotes a Moody’s analyst who provided general comments about the challenges with the direction that Senators seek to take North Carolina in. From the article:

“A majority of state budgets rely on a combination of income and sales tax revenues, according to Nick Samuels, vice president and senior public finance credit officer with Moody’s Investors Service. … Whatever the source, state budgets are sensitive to volatility in revenue, depending on how spending plans are structured, said Samuels. He declined to comment directly on North Carolina’s bill because it hasn’t passed. …

“Illinois has a flat income tax rate mandated by the state’s constitution that can be difficult to change, he pointed out.

“Moody’s rates Illinois’s senior debt Baa2 with a negative outlook as the state nears its second fiscal year without an adopted budget due to a political stalemate over spending issues between parties.

“In North Carolina, Moody’s rates the state’s general obligation bonds AAA because of its strong fiscal management and economic growth, which benefits tax collections, the agency said in a report in February. …

“Samuels said state ratings tend to be high because budget leaders have flexible governing strength.”

Read the full article here.