NC’s response to the COVID-19 crises: Hindered by the “The Big Lie”

Failure to allocate billions in available dollars while North Carolinians suffer is beyond the pale

For decades, community leaders have pleaded with General Assembly members for expanded access to health care, housing supports, and educational opportunities. When COVID-19 and economic recession began to ravage communities and small businesses, state agencies joined the chorus of advocates asking for more public resources to help respond to the pandemic.

Today, additional state dollars are needed to address ongoing threats to our public health, economy, and democracy. Yet, continued cries for help are met with one response: “We can’t afford it.”

In North Carolina, that is a Big Lie.

According to the Office of the State Controller, North Carolina currently has more than $4 billion in unreserved public funds available today. That’s above and beyond the more than $1 billion in the state Savings Reserve, commonly known as the Rainy Day Fund. This unprecedented amount of cash on hand is the result of a delayed tax deadline in 2020, revenue collections that came in ahead of predictions, failure to pass a comprehensive budget, and tax cuts for the few combined with chronic underinvestment over time.

This cash-rich reality has failed to change the “we can’t afford it” approach of lawmakers who will reconvene in Raleigh to start the legislative session in earnest on January 27.

When asked about their priorities for the session, leaders of the General Assembly focused on COVID-19 relief, expediting the vaccine rollout, and constraining the Governor’s powers. If Senate and House leadership truly cared about expanding COVID-19 relief, they would not have restricted 2020 appropriations to federal dollars when they knew North Carolina had an abundance of money sitting in a bank account ready to be deployed.

The Big Lie is not exclusively a Republican problem. Democrats perpetuate the lie when they fail to propose, support, and fund transformative policy changes that have the power to raise people out of poverty, boost economic growth, and undo discriminatory policies and practices that exacerbate inequities.

The only antidote to a Big Lie is a Big Truth.

The Big Truth is that in 2021, North Carolina can afford to provide health care for all, pay people a living wage, ensure everyone is safely housed, and make good on our constitutional obligation to adequately educate every child. The truth is we can’t afford not to.

By committing to truth, we can create the vibrant economy, resilient communities, and just society that we deserve while healing racial divisions, recognizing the contributions of immigrants, and protecting all people from the threat of poverty and discrimination. This future is only possible if we have leaders who are willing to propose and support the elimination of loopholes that allow profitable corporations to pay fewer taxes than working families do and if we have voters who are willing to support these changes.

Leila Pedersen is a policy analyst at the N.C. Budget & Tax Center.

NC General Assembly can afford to go all-in to address COVID-19 harm

Leila Pedersen and Suzy Khachaturyan contributed to this post.

As legislators return to Raleigh this week, the state’s latest Cash Watch data for the week of Jan. 11, 2021, shows that North Carolina has $4.4 billion in unreserved funds —  leftover after meeting current appropriations and available to meet current needs.

State lawmakers should appropriate these dollars immediately to meet the rising hardships facing families, the challenges in containment of the coronavirus and roll-out of the vaccine, and the financial pressures on local governments and public institutions that need to expand services to protect the common good.

North Carolina can afford to put people first and respond robustly to COVID-19 while putting communities on sounder footing for the future.  These dollars show that North Carolina need not solely rely on the restrictive and time-limited aid, like what the federal government delivered at the end of December.

North Carolina’s state leaders can invest in a plan for the long-term that strengthens our collective well-being. As one economist recently suggested, failing to do so would be like “pouring fuel on a raging dumpster fire.”

The irony of course, is that the state has these dollars, in part because of years of chronic under-investment fueled by an ideology that privileges the few at the expense of us all. The very institutions that are now charged with the frontline response — the Division of Employment Security, the state’s local public health offices, school districts, and the early childhood system to name a few — are hampered by the resulting loss of staff and resources that diminishes the ability to adapt to the changing conditions.

  • For the past decade, North Carolina General Fund spending has remained below the 45-year average of 6% of total state personal income (the total amount of income received by people within the state in a given year).
  • In fiscal year 2019, the state spent just 4.9%of state personal income in state appropriations.
  • North Carolina would have needed to spend an additional $5.3 billion last fiscal year to get back to the 45-year average of spending as a percentage of state personal income.

Unreserved funds are partially a reflection of the General Assembly’s failure to pass a comprehensive budget for the past two years and a longer-term refusal to meet the demands of families and communities struggling to make ends meet. Investing these funds in our public institutions today could set a different trajectory for our state — one that improves health care access, keeps people in their homes, expands educational opportunities, and fuels our economy.

The other factors driving the unreserved balance — an economy that is consolidating benefits for the wealthy and profitable corporations —  underline the need for such a robust public response and supports that will push against these economic trends that threaten to deliver an unequal and uneven recovery.

A deeper look at the November 2020 Monthly Report on the General Fund shows that tax collections are running ahead of where they were in the prior year despite the pandemic. Total tax collections are up 17%, or about $1.6 billion, from this time last year. This is largely due to the combined impacts of stabilization from federal and state relief policies and the economy continuing to deliver record profits and income growth to the privileged few.

The federal stimulus in 2020, which included taxable Unemployment Insurance payments to hundreds of thousands in North Carolina who lost their job, stabilized income collections, and the Payroll Protection Program kept many workers employed. The now well-documented quick recovery for the wealthiest in our country and state also meant income losses weren’t as deep in the aggregate, even as many workers earning low wages continue to struggle to return to pre-pandemic income levels.

As the graph below shows, high-wage earnings in North Carolina as of Oct. 15, 2020, increased by 4.2% while employment for low wage work is still 20% below pre-pandemic levels.

Finally, corporate profits are notably up in the state. Seventeen of the top 25 most profitable corporations nationally were expected to rake in $85 billion more in profits during 2020 than what they averaged in the four years before the pandemic.  That means that even as the income tax rate remains the lowest in the country at 2.5%, corporate income tax collections are higher than the prior year. If North Carolina’s corporate income tax rate were 6%, the Institute on Taxation and Economic Policy estimates that the state would collect about a billion more dollars a year.

North Carolina’s legislative leaders have an opportunity to go all-in now on COVID-19 relief and make clear their long-term commitment to a just recovery. The stability of the state’s public response is likely to hasten the recovery and, if designed with people’s well-being at the center, can ensure that it is a just recovery  that puts us all on sounder ground for the future.

Alexandra Sirota is the Director of the Budget & Tax Center, a project of the NC Justice Center. Leila Pedersen and Suzy Khachaturyan are policy analysts with the Budget & Tax Center.

For many in NC, the economic picture remains bleak

As the COVID-19 pandemic rages on, North Carolina families continue to face difficulty making ends meet. The U.S. Census Household Pulse Survey provides insight into how different groups of people are faring.
The data show that millions of North Carolinians are finding it difficult to pay for usual household expenses during the coronavirus pandemic. Black people and multiracial people reported the greatest level of difficulty, with 27 percent and 25 percent respectively finding it very difficult to afford the basics. Asian people reported the least difficulty, as only 4 percent reported that it was very difficult to pay for usual expenses.

White and Latinx people reported similar levels of extreme difficulty , but nearly twice the percentage of Latinx people reported it was somewhat difficult to pay for household expenses as their white counterparts.

Women, 36 percent of whom reported it was either somewhat or very difficult to make ends meet, are facing more hardship than men, 22 percent of whom fell into the same category.

This data suggests that the economic inequality that existed before the pandemic will likely continue to widen unless swift and robust action is taken to address persistent disparities. People of every gender, race, and ethnicity deserve the dignity and quality of life that is only possible when we achieve economic security for all.

Leila Pedersen is a policy analyst with the N.C. Budget & Tax Center.

NC “Extra Credit Grants” program leaves out families with the greatest need

As North Carolina works to recover from the COVID-19 recession and rebuild our economy, direct cash assistance can provide critical financial support, boost aggregate consumer demand, and improve the well-being of families and communities. To be effective, cash assistance programs should target families with the greatest need and leverage the existing public infrastructure. Unfortunately, flaws in the design of North Carolina’s Extra Credit Grants program are preventing thousands of families with children who are living in poverty from receiving the financial support they need now.

The Extra Credit Grants program was created in September with federal Coronavirus Relief Funds — nearly all of the CRF dollars that remained — to help parents with the cost of virtual learning and child care. According to the new law, each eligible household with a qualifying child should receive a $335 grant. Up to $5 million was allowed to be used for administration of the program.


Eligibility

To automatically receive the grant, households must have filed a 2019 state income tax return, lived in North Carolina for all of 2019, and reported at least one qualifying child on their taxes.

Legislative sponsors indicated on the floor of the General Assembly that grants should be phased out for people who filed single with more than $200,000 in annual income and people who filed jointly with more than $400,000 in annual income. Even if grants were phased out in accordance with the federal child tax credit, about 25 percent of the total grants expected to be distributed would go to households with annual incomes of $100,000 or more.

Administration

Because the state chose the North Carolina Department of Revenue (NCDOR) as the state agency to administer the program, people who were not required to file state income taxes because they did not make enough money in 2019 had to apply separately to receive the grant. NCDOR made online and paper applications available from Sept. 17 to Oct. 15, 2020, but despite some advertising about the program, only a small fraction of eligible families applied for the grant before the deadline.

Result

By estimation, well over 200,000 families were likely eligible for the Extra Credit Grant, but they needed to apply before the Oct. 15 deadline. According to NCDOR, there were 14,910 online applications and 262 paper applications, which means only about 6 percent of the eligible families successfully applied.

The stated purpose of the Extra Credit Grant Program was to provide “economic support to assist with virtual schooling and child care costs during the COVID-19 pandemic” for families with children. Flawed policy design, poor targeting, and arbitrary deadlines have prevented hundreds of thousands of North Carolina families from accessing the financial support they needed most.
Direct cash assistance can be an efficient and effective way to assist families that face barriers to economic security. Getting emergency money to people experiencing a crisis also helps to boost the economy by ensuring that people can pay for the goods and services they need. Filling the holes in our social safety net and ensuring that families with the greatest need can access public services and supports will pave the way toward economic recovery and help North Carolina build back better.

Policy Recommendations

The road to economic recovery requires robust and targeted interventions from federal, state, and local governments. Leveraging existing public infrastructure will help target and place dollars in the hands of people who need it most. The North Carolina Department of Health and Human Services is an ideal home for targeted cash assistance programs because the department already maintains databases and administers programs to help families access anti-poverty support. Bolstering existing programs like the state’s Work First program, also known as Temporary Assistance for Needy Families (TANF), by increasing cash assistance payments and removing barriers for families seeking to access the program would go a long way toward helping families with the most urgent needs.

A refundable state Earned Income Tax Credit would reach a broader group of working families who have been hit hard by COVID-19 and provide cash assistance leading to increased economic security for all.

Leila Pedersen is a policy analyst with the N.C. Budget & Tax Center.

Federal eviction moratorium merely kicks the can down the road

Last week, the Centers for Disease Control and Prevention announced that it would place a “temporary halt in residential evictions to prevent the further spread of COVID-19” through Dec. 31, 2020.

This action, although needed, leaves gaping holes in the Trump administration’s response to the pre-existing and current pandemic-impacted housing crisis.

People need a home to stay at home, but an estimated 30 million to 40 million people in the U.S. were at risk of eviction prior to the moratorium announcement.

The CDC order took effect last Friday, Sept. 4, and might bring much-needed relief to renters. Unfortunately, onerous eligibility requirements are likely to cause many people to fall through the gaps. According to Legal Aid of North Carolina (LANC), tenants will have to submit a signed declaration to their landlord and bring that signed declaration to court if they have an eviction hearing.

In addition, the order does not apply to foreclosures and, importantly, it will merely postpone evictions, not prevent them.

(Note: LANC also advises that tenants can still appeal if they are ordered to be evicted. Tenants with questions about eligibility and in need of assistance should call LANC at 1-866-219-5262. Tenants should also call 211 to see if there is any help available to them with their back rent.)

Without the rental and utility assistance people need to pay their bills, the federal eviction moratorium is merely further delaying the financial cliff renters will face once it expires. Come Jan. 1, 2021, rent will be due, and now additional months of back rent will also be due, as well.

People who have been most impacted by the pandemic are familiar with what happens when poorly designed policies fail to accomplish their objectives. Housing vouchers are a clear example of how well-intended policy can fall short of meeting its objective. Anyone who has ever tried to use a housing voucher will tell you just how difficult it is to find a landlord who will take them.

In short, the CDC’s federal eviction moratorium will not solve the persistent lack of available and affordable housing, especially for people with extremely low incomes. To ensure that people can stay in their homes, policymakers at every level of government must provide more than public statements. Dedicated resources are needed to help people pay rent who do not have adequate income due to the pandemic and administrative capacity must be built to help direct dollars to families that need them most. People also need transparent information and legal support to exercise their rights.

Housing ought to be a human right, especially during a public health and economic crisis. A federal moratorium on evictions is essentially an unfunded mandate that can only be effective if supported with public resources and additional capacity at every level of government. The National Low Income Housing Coalition will host a tweetstorm today at 1pm ET. Follow #GetBackToWork for more information.

Leila Pedersen is a policy analyst at the N.C. Budget & Tax Center.