NC Budget and Tax Center

Statement from Alexandra Sirota on tentative approval of HB3 in Senate

House Bill 3 represents a deep confusion about the role of Constitutions in our lives. Constitutions are overall frameworks for governing, not the place for public policy choices to bind future generations. That’s why we elect leaders: to debate and decide what makes sense to do today to make our communities work better and our economy work for everyone. 

This latest move to amend our Constitution with a low and arbitrary income tax cap and limits on accessing the state’s savings in emergencies reflects the current gerrymandered General Assembly’s fear that their ideas are time-limited in their value. By placing these changes into our Constitution, they are not seeking to bring greater democracy to the budget process, but instead to lock in their choices and limit the choices of North Carolinians tomorrow, 10 years, and 100 years from now.  

This unnecessary step is one taken out of fear, not responsibility for the common good. The results will be costly for us all and our state.

NC Budget and Tax Center

HB3’s Rainy Day Fund provisions aren’t going to save NC from fiscal challenges

Among the various changes to the state Constitution proposed in House Bill 3 are a series of Rainy Day Fund provisions that reflect unnecessary and counterproductive limits to the ability of lawmakers to use these savings to protect North Carolina communities and families from the brunt of a natural disaster or an economic downturn.

The Rainy Day Fund is the state’s savings account that is built up in good times so that, in downturns or disasters, policymakers can meet unanticipated needs or smooth unanticipated drops in revenue.  Through aggressive action in the past few years, the state Rainy Day Fund has reached a balance of $1.1 billion, as lawmakers have stashed away approximately $150 million each year on average since 2011 despite persistent unmet needs across the state.

Under budget proposals for the upcoming fiscal year, the Rainy Day Fund balance would grow to at least $1.4 billion, or around 7 percent of the state’s General Fund appropriations.

The proposed changes to the management of the Rainy Day Fund represent another example of enshrining in the state Constitution something that can already happen while forcing the negative effects on North Carolina communities and future generations. Read more

NC Budget and Tax Center

Changes to the state Constitution headed to the Senate floor

The Senate Rules Committee gave approval Friday to a suite of constitutional changes that would undercut our state’s economy permanently by setting a low, arbitrary income tax rate and limiting access to the state’s savings in times of emergency.

It is an entirely unnecessary move that seeks to permanently limit future budget choices to the ones that our current leaders prioritize above all else.  It is not only an insult to the wisdom of the framers of our state Constitution, but also to future North Carolinians and legislators whose priorities may differ from their own.

To recap just why such a move is completely unnecessary, let’s review how policymakers have already pursued these approaches to budgeting through public policy.

First, policymakers have already set a low, arbitrary income tax rate for individuals and profitable corporations, which will drop to 5.499 percent for individuals in January 2017 and eventually to 3 percent for businesses.  These changes began in 2013 and will continue to phase in, ultimately reducing the dollars available to invest in schools, parks and public health by at least $2.5 billion each year. More than two-thirds of the tax cut from the low individual income rate has benefited the top 20 percent of taxpayers. Policymakers continue to pursue a shift to the sales tax to make up for the revenue loss, which means the tax load has shifted to middle- and low-income taxpayers. Read more

NC Budget and Tax Center

North Carolina’s unemployment insurance system is the envy of no one

Last week the Center for American Progress and National Employment Law Project released a review of unemployment insurance as a federal and state partnership and the choices in recent years that have made it less effective at reaching jobless workers.

North Carolina policymakers, of course, aggressively pursued the worst changes in unemployment insurance. The result is a system that ranks among the least effective at providing temporary wage replacement for jobless workers while they search for work and delivering a stabilizing force in local communities and the economy overall.

The challenges they outline in the report face North Carolina acutely:  too few unemployed workers have access to tools for successful re-employment, first employment and/ or training; American workers are more vulnerable than ever to involuntary unemployment, yet fewer are protected by unemployment insurance; and finally, the unemployment insurance system is unprepared for the next recession.

The report authors provide a set of policy recommendations that would address these challenges and go a long way to not just protecting workers and communities from the shock of unemployment but would actually prepare for jobs loss by investing in the re-employment, training and other measures that retain jobs and support smoother transitions to new ones.  Here are some their recommendations: Read more

NC Budget and Tax Center

WARNing: Mass layoffs threaten local economies when state pulls back

Freightliner will lay off an additional 800 jobs in June which is the latest in a series of announcements this year of significant mass layoffs at one company. More than 7,000 mass layoffs have already been announced in 2016 and will take place over the course of the year. Whether temporary or permanent, they will ripple through communities as workers seek new jobs and try to meet basic needs while looking for work.

As you can see in the map below, the communities affected by the 2016 announcements to date span the state. The losses of small towns and cities represent a greater share of their workforce, even if the total numbers are less than major metropolitan areas.

warn map
For these communities, it will be important to support jobless workers so that the broader community can stabilize and pursue new or expand existing employment opportunities. North Carolina has a history of dealing with these mass layoffs and particularly the loss of employers and entire industries: unemployment insurance has always been one of the most critical tools for communities to be able to connect jobless workers to.

Yet state policymakers have so reduced the reach and effectiveness of the unemployment insurance that many communities will struggle to ensure a mass layoff doesn’t derail a community’s local economy and social fabric.

Here are a few key ways in which unemployment insurance, as it is currently operating, won’t be as effective in the face of mass layoffs. Read more