Three Questions About the MetLife Deal That Need Answers

March 8, 2013 at 4:34 pmCategory:NC Budget and Tax Center

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The big news on the jobs front the past couple days has been the announcement by Governor Pat McCrory that insurance giant MetLife has agreed to make a new $126 million investment in two North Carolina locations, resulting in the creation of 2,600 jobs.

While the news of any job creation is good news when the state’s unemployment rate is over 9 percent, the price tag attached to these jobs is causing a bit of sticker shock. The deal involves providing $87 million in Job Development Investment Grant (JDIG) incentives to MetLife over the next 12 years—the largest discretionary incentive package North Carolina has ever offered from this program.

Given North Carolina’s tight state budget and persistently high unemployment, the public needs to know as much as possible about the real costs and benefits of the deal—and whether it’s really worth $87 million in taxpayer dollars, or about $33,000 per job.

To that end, here are three questions about the MetLife deal that need answers:

Question #1—How many jobs will go to North Carolina residents? While MetLife has promised to create 2,600 jobs, how many of these employment opportunities will be open to people already living in North Carolina, and how many will be filled by moving the company’s current employees from other locations in California and New England? At a cost of $33,000 per job, it’s hard to understand the justification behind simply providing taxpayer subsidies to cover the relocation expenses of out-of-state residents, unless the overwhelming majority of these new jobs can be filled with North Carolina residents.

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Shooting at the wrong target: sequestration cuts part of budget least responsible for deficits

March 7, 2013 at 8:00 amCategory:NC Budget and Tax Center

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Last week, Congress failed to repeal the $85.3 billion in automatic, across the board spending cuts known as “sequestration,” and as a result, these spending cuts have begun to take effect.   Sequestration is the wrong way to go about reducing our nation’s budget deficit—it will hurt North Carolina’s economy, weaken the fiscal position of the state budget, and damage key public investments like K-12 education, job training, and food safety. 

And despite inflicting all this damage, sequestration targets the portion of the federal budget that contributes the least to national deficits, making it the wrong tool for achieving meaningful deficit reduction. Instead, Congress should take a balanced approach to deficit reduction that replaces the sequestration cuts for 2013 with equal amounts of new revenue and smart spending cuts.

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Prosperity Watch: The Earned Income Tax Credit Benefits Working Families Across North Carolina

February 27, 2013 at 1:32 pmCategory:NC Budget and Tax Center

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As tax filing season rolls around, many North Carolina families and communities across the state will benefit from the Earned Income Tax Credit (EITC), an important tax break designed to reward work and offset federal payroll and income taxes paid by low-wage workers.  But as the latest issue of Prosperity Watch explains, some communities rely on this credit more than other communities, since some are more economically distressed than others.  As a result, there are significant differences across the state’s counties in terms of the percentage of tax filers in each county that claim this credit, and many of the counties with the highest percentage of filers are clustered in one of the state’s poorest regions. See Prosperity Watch for details.

Protecting the state budget: Yet another reason to include new federal revenues in a sequestration fix

February 22, 2013 at 10:00 amCategory:NC Budget and Tax Center

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The looming federal sequestration cuts have been all over the news recently, as the clock ticks down to the March 1 deadline imposed by the fiscal cliff deal.  While most media accounts have focused on the negative consequences these across-the-board spending cuts will have on defense programs and military communities, the cuts to federal non-defense domestic programs will also have profoundly damaging—if often underreported—impacts on the North Carolina state budget. In light of these impacts, Congress needs to repeal sequestration and replace these indiscriminant, automatic spending cuts with a balanced approach that includes at least one dollar in new revenues for every dollar of smart spending reductions and that protects the state budget.

Enacted in the Budget Control Act of 2011, these sequestration spending cuts were intended to automatically reduce funding for national defense and domestic programs like K-12 education, job training, Head Start, food inspects, and research and development by $1.2 trillion over the next decade if Congress could not find another way to reduce the federal budget deficit before December 31, 2013. Congress postponed that New Year’s deadline to March 1, and if Congress does not resolve this issue in time, North Carolina will experience $85.3 billion in sequestration cuts in 2013 alone.

According to a wide range of analysis conducted over the past two years, sequestration is expected to inflict significant damage on North Carolina’s economy and state budget. On the defense side, the cuts to Pentagon spending are estimated to cost North Carolina at least $1.5 billion in defense contracts and as much as 12,000 in job losses.  At the same time, the non-defense cuts are also expected to harm the state’s economy by reducing North Carolina’s Gross State Product by as much as $2 billion and contributing to more than 17,000 in job losses.

In a new twist on an old problem, the economic impact of these federal cuts would be magnified by the negative fiscal impacts on the state budget.  Specifically, the non-defense cuts will reduce the state’s Department of Health and Human Services budget by $35 million and education spending by $84 million—reductions that come on top of the steep cuts to state funding already enacted by the General Assembly in state FY 2011-13.

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Prosperity Watch: Too many workers, too few jobs, big implications for UI reform

February 13, 2013 at 3:57 pmCategory:NC Budget and Tax Center

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As the latest issue of Prosperity Watch explains, the fundamental challenge facing the state’s labor market is the absence of enough available job openings to make a meaningful dent in the state’s jobs deficit and to bring down the state’s persistently high unemployment rate. This reality has tremendous implications for the state’s unemployed workers if the benefits cuts contained in the recently-passed unemployment insurance reform bill are enacted.  See the latest issue of Prosperity Watch for details.