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.

NC unemployment benefits have plummeted 71%; immediate action is needed

More than 500,000 unemployed North Carolina workers and their families have lost badly-needed emergency income because President Trump and the U.S. Senate majority refused to extend the extra $600 in weekly unemployment payments that ended the week of July 25.

In March, Congress enacted the $600 supplement, known as Pandemic Unemployment Compensation (PUC), to help people who lost their jobs through no fault of their own. With COVID-19 still not under control in many parts of the country, this is no time to pull the rug out from under the millions of jobless workers who still cannot safely go back to work or who have no job to go back to.

The bottom-line is that the public health crisis must be contained for a robust recovery to begin. In the meantime, supporting those who have lost jobs is the first step to building a pathway for us all to rebuild and recover from the economic downturn. While workers across industries have been impacted by the pandemic and its economic ripple effects, it has been part-time workers, workers in service and caring sectors, and workers of color and women who have borne the brunt of losses.

It should be clear to policymakers that it is no longer an option to allow any worker – and especially those already excluded in good times from good pay, paid sick days, health care, and stable work – to be excluded from a system meant to sustain workers during the worst of times.

Unemployment insurance can keep families and the economy afloat but its federal-state connection has left too many workers—mostly those working in southern states—with too little wage replacement when jobs go away through no fault of their own. When Senate Republicans left Washington without reauthorizing the PUC relief package – already approved by the House of Representatives early in July – and allowed the program to expire, they doomed North Carolina workers to a system wholly inadequate to the task of sustaining the labor market and our collective recovery. What’s more, the partial, temporary and all-around convoluted replacement plan hastily concocted by the Trump administration is not a viable substitute.

Restarting our economy requires restarting federal and state level efforts on both sides of the aisle to fix our unemployment insurance system so that it aids jobless workers in these unprecedented times. Simply put, a policymaker can’t be “pro-economy” if they’re not “pro-worker” during a moment like the present. After all, workers are the economy—the people who produce goods and deliver services, who pay bills and buy at businesses, and who innovate and design new ways of doing jobs. When they are struggling so too will their employers, local businesses and the broader prospects for sustained growth. Read more

Four steps the General Assembly must take to improve unemployment insurance in NC

The failure of the U.S. Senate to extend federal unemployment insurance programs that expired at the end of July means jobless workers have will soon have lost a month of income.

Economists suggest that the cumulative effect of that lost income could create a reduction in economic growth similar to that experienced during the Great Recession. Concerns are already mounting that consumer spending is slowing.

And with the latest data released by the Department of Labor on Thursday showing an increase in initial claims week over week, more than 600,000 North Carolinians are receiving or waiting to receive unemployment insurance benefits.

For jobless workers, their families, landlords, and neighbors, the loss of the federal $600/week boost will lead to real and immediate impacts on housing stability, access to food, and poverty rates, as well as the associated threats to health — both in the near and long-term.

The White House’s Executive Order is no substitute for congressional action. The inadequate proposal from the Trump Administration will push costs to states and create administrative challenges in implementation, all while using unsustainable sources of funds and failing to commit to keep supports in place through a secured recovery.

As legislative leaders and Governor Cooper have noted, North Carolina can take action to improve the rules governing our own unemployment insurance system—a system with the dubious distinction of being the worst in the nation after changes made by lawmakers in 2013.

The importance of a state fix, now and for the long-term, should be clear as we see the barriers to access that jobless workers have experienced during the COVID-19 pandemic and the broad-based ripple effects of job loss throughout our communities.

Here are four steps the North Carolina General Assembly can take to ensure our state unemployment insurance system can support an inclusive economic recovery: Read more

The next federal package must recognize that N.C. and our economy need healthy people

The news Thursday that the country experienced the most significant single-quarter contraction on record may be a shock to some, but it reveals the fundamental truth of our economic life some policymakers wish they could ignore — a healthy economy requires healthy people.

The U.S. Senate Republicans have put forward a COVID-19 package that not only rejects this fundamental truth but would undermine any hopes that states and localities seeking to do better could do so.

In new analysis from the Economic Policy Institute, the scope of the harm of proposals, or lack thereof, to North Carolina in the proposed Senate version of the next federal package is made clear. The loss of the $600/week boost in Unemployment Insurance would cost North Carolina 95,000 jobs.  That’s because it would reduce the income by $400 each week for those hundreds of thousands North Carolinians out of work, forcing impossible choices between basic needs.

The failure to keep food on the table of North Carolinians by boosting SNAP is another missed opportunity that would bolster the well-being of families and the economy at the same time.  Again, food assistance provides families struggling with a key support to meeting a basic need and spending locally.

The next to nothing support to states to ensure the provision of affordable health care through Medicaid during a public health crisis is yet another missed opportunity.  So is the lack of rental assistance that would stabilize housing — supporting not only family well-being and security but public health goals for containing the virus.

Unnecessary hardship for families is not only cruel but bad economics.

It will be compounded by the failure of Senate leaders to include federal aid to state and local governments.  Such aid would shore up state and local budgets experiencing revenue losses due to the economic downturn at the same time that new and changing investments are needed to respond to the public health crisis and its ripple effects through public institutions and community life.

North Carolina has already lost nearly 40,000 state and local jobs since February 2020, a seasonally adjusted figure that shows beginning signs of a potential impact on public sector staffing.  Leading into COVID-19, this staffing was already below the levels of public sector employment as a share of the population before the Great Recession.  The impact of fewer public sector workers has a double effect on the recovery: reducing spending in local economies and reducing the capacity for government to deliver effective, efficient services.

Also, the risk of job loss in the public sector will disproportionately affect veterans (40,000 veterans work in state and local governments in NC), workers of color, and women.

A robust public response to this public health and economic crisis will require a public infrastructure at the state and local level that can sustain public services, adapt to the pandemic context, and ensure people are supported through and beyond the recovery.

A federal package will delay the recovery and be too uneven to be sustainable if it doesn’t drive investments to people and the things that advance the well-being of those people. In its current form, its only purpose seems to be advancing the political and economic interests of the very few while making a show of caring about the harms to the many. If our leaders actually care about the harm to all people, they need to do better and fix the response to those harms. And to do that, they’ll have to fully recognize that a healthy economy requires healthy people.

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

Federal aid to state and local governments is essential to sustain our recovery

The U.S. Senate is finalizing its proposal for what is likely to be the final federal response to COVID-19 before the November elections. Senate leaders are currently appearing to disregard calls to address the urgent issue facing state and local governments: responding to the need for increased public services and adapting for delivery of quality public services in the COVID-19 context even as state and local revenues collapse.

Leaders from industry, advocates for the well-being of children and families and government officials charged with stewarding public dollars towards collective impact are calling for the next federal package to include at least $500 billion in aid to state and local governments. These dollars, as estimates from the Center on Budget & Policy Priorities suggest, would go some way toward covering anticipated shortfalls in revenue brought on by COVID-19.

The reality though is that the duration and severity of the public health and economic crises will depend on the policy and investment choices made by Congress in this next package. With a bold commitment to well-being and supporting people through the economic harm of COVID-19, Congress can ensure our recovery arrives quickly and that it secures greater well-being for Black, brown and white North Carolinians.

Federal aid to state and local governments has been a critical component of relief packages during times of recession, providing stabilization to budgets that must be balanced each fiscal year and containing the damage of harmful cuts to programs and services that people and communities need to be well and thrive.

While some may view issues related to federal aid to state and local governments as the domain of finance officers and budget wonks, the simple truth is that, without such assistance, our state and local governments will not be able to effectively and equitably respond to the challenges people face in this pandemic.

Without more federal aid to North Carolina and its local governments, experience tells us that many of the people-first policies that we know must be part of the response are at risk of being cut short. It is therefore essential that such aid be a component of the next package alongside addressing the housing, health, hunger and unemployment issues facing Americans.

Here are four ways in which federal aid now can make sure North Carolina contains further harm to people. Read more