Commentary, COVID-19, NC Budget and Tax Center

Why the Republicans’ piecemeal relief plan won’t get the job done for NC

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The Republican COVID-19 relief plan unveiled in Washington earlier this week fails to meet the needs of North Carolina families. Nor does it address our unprecedented state fiscal crisis, which means it will make the recession longer and more painful.

This crisis is bigger than any since the Great Depression, but the Republican’s piecemeal proposal falls well short of the breadth and depth of aid desperately needed across a range of issues.

New research released last week by the Center on Budget and Policy Priorities shows the number of people struggling to get enough to eat has increased dramatically and a huge number of people are falling behind on rent — just as the national moratorium on evictions has expired.

In North Carolina, one out of five renters – 422,000 people – are behind on their payments. Nearly 8% of the workforce is unemployed. And one in five adults living with children —522,000 — reported that their children were not eating enough because of the public health crisis and recession has cut into the family income.

Yet the proposal puts forth woefully inadequate solutions to these problems, despite the fact that the federal government is best positioned to provide bold solutions.

There is no increase in SNAP benefits to help people buy food for themselves and their families, no funding for homelessness services or additional rental vouchers, and substantially less money for laid-off workers, even though high numbers of COVID-19 cases could mean that many people are unlikely to return to work soon.

It also doesn’t include nearly enough aid to state and local governments to prevent layoffs of teachers and public workers and cuts to schools, Medicaid or critical public services. Revenue projections released by the General Assembly’s Fiscal Research Division predicted a loss of nearly 7% in the state fiscal year that ended in June and a nearly 10% loss in the current fiscal year.

With a state constitutional requirement to balance the budget, the reality of limited revenue jeopardizes the state’s investments in K-12 and higher education, public health, transportation and numerous other core structures and services.

And while tens of millions of people are facing serious financial hardship, Black, Latinx, Indigenous and immigrant people have been hit the hardest because of structural racism that creates disparities in education, employment, housing and health care.

For example, an estimated 301,000 North Carolinians were excluded from receiving stimulus checks because they live in a household where at least one family member files taxes using an Individual Tax Identification Number (ITIN) instead of a Social Security number. Nonetheless, the latest proposal by Senate Republicans backs additional stimulus checks while continuing to leave out this community that pays taxes and performs essential work we all depend on.

During the negotiations over a final package, Congress must prioritize support for people hard hit by the crisis. Lawmakers should do this by ensuring these people get the help they need and by working to prevent states, cities, and towns from making deep budget cuts that will hurt tens of millions.

It is imperative that Congress act immediately to negotiate a bipartisan agreement that provides a strong safety net:

  • Provides additional federal funding for Medicaid programs and direct grants to states to protect core public services such as education and transportation, in addition to aid for local governments;
  • Continues expanded unemployment benefits, while supporting businesses and the economy by providing people with a modest income during this challenging time;
  • Temporarily increases SNAP benefits and housing assistance;
  • Creates an emergency fund for states to help people who are falling through the cracks and to create subsidized jobs programs when workers can participate safely; and
  • Advances inclusive policies that acknowledge both the contributions of immigrants and the unique challenges many immigrants face through limited access to public benefits and COVID relief.

This unprecedented crisis, drawn out by poor leadership at the highest level, must be met with unprecedented federal policies that prioritize the needs of people. North Carolina’s U.S. Senators Tillis and Burr must put people first by calling on congressional leaders to do more and pass a better relief package, especially for state and local governments and low-income North Carolinians who have been hit the hardest by the pandemic and are facing the greatest financial hurdles.

Suzy Khachaturyan is a Policy Analyst at the NC Budget & Tax Center, a project of the North Carolina Justice Center.

Commentary, COVID-19, NC Budget and Tax Center

Federal funding is essential to saving North Carolina’s public services

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The COVID-19 pandemic and resulting recession are wreaking havoc on North Carolina. The state is facing a massive revenue shortfall that will significantly affect its budget and its ability to provide crucial services.

Federal funding is needed to help North Carolina, along with the local governments within it, in ensuring that health care, education, transportation, first responders and other services continue uninterrupted.

The picture is already bleak; since the pandemic started, the state has lost 61,500 public sector jobs. The economic gravity of the shortfall cannot be stressed enough; without further federal aid to state and local governments, North Carolina is projected to lose 156,500 private and public jobs by the end of 2021. The recent resurgence of the virus only compounds the urgency and should dispel all complacency.

The coronavirus pandemic has greatly harmed North Carolina’s economy:

  • In May, North Carolina had an unemployment rate of 9%, one of the highest rates ever recorded, with roughly 440,000 more state residents out of work compared to February.
  • As of early July, approximately 1,200,000 North Carolinians, representing 5 percent of the state’s February labor force, have filed unemployment insurance claims since the beginning of March. Some estimates are projecting a double-digit unemployment rate well into 2021.

North Carolina’s tax revenues are plummeting — creating a severe funding crisis for schools, health care, and other critical services. The North Carolina state government has projected a budget shortfall of $1.6 billion in FY 2020 and $2.6 billion in FY 2021, representing declines of 7% and 10% respectively.

Cities in North Carolina are facing serious revenue shortfalls as well. Charlotte alone has recently projected a budget shortfall of $22 million, according to local sources. The National League of Cities estimates that cities will experience $360 billion in revenue loss through fiscal year 2022, which will force them to significantly cut spending on crucial services or raise taxes on already recession-battered residents. Studies on the Great Recession have found that forcing states to deal with severe budget constraints through austerity dampens long-term gross domestic product (GDP), prolongs spells of high unemployment, and extends recessions.

Between February and May, 61,500 public sector workers were laid off in North Carolina.

  • The National Education Association has estimated that North Carolina could lose roughly 79,600 education jobs by the end of FY 2022 as a result of the decline in the state general revenues that fund education.

Absent federal action, these job losses could get much worse. A recent analysis conducted by the Economic Policy Institute estimates that without it, North Carolina will lose a combined total of 156,500 public and private jobs by the end of 2021.

Health care in North Carolina is also in jeopardy. The Urban Institute has projected that Medicaid caseloads could increase by as much as 363,000, or 25%, through FY 2021 — a massive and unprecedented spike. North Carolina desperately needs help to cover those who are newly unemployed and expected to enroll in Medicaid and offset extra Medicaid costs related to coronavirus. Without proper funding, the state will be unable to treat at-risk patients, keep families healthy, or provide lifesaving care. Funding Medicaid is critical to ensuring that North Carolina can respond effectively to the coronavirus public health crisis and the current economic recession.

The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which passed the House of Representatives on May 15 with bipartisan support, includes provisions that would help North Carolina avoid additional layoffs and devastating cuts to services. Specifically, it would: Read more

COVID-19, NC Budget and Tax Center

NC General Assembly allocated some federal dollars; more are available and urgently needed

Yesterday, Gov. Cooper signed into law the first two pieces of legislation agreed upon by state lawmakers following five days of committee and chamber meetings that were held virtually in Raleigh. Unfortunately, while this first step will address some of the urgent needs arising from the COVID-19 pandemic, it leaves most of the response work undone. As a result, lawmakers will need to move quickly to use billions of dollars in available federal and state funds to combat the immediate effects of the crisis and prepare for recovery work.

The package approved by the Governor yesterday spends $1.58 billion for fiscal relief for transportation, supports for nonprofits and hospitals in meeting the needs of the rural and marginalized communities, “non-transportation” state agencies and local governments, funding to support remote K-12 education, local government supports and more.

Read more

COVID-19, NC Budget and Tax Center

How does health funding fare in the legislature’s COVID-19 response packages?

Tomorrow, the state House and Senate are expected to come to a compromise on what will be their first piece of legislation in response to the COVID-19 crisis, exactly two months after North Carolina’s first case was detected on March 2.

While life has changed for all North Carolinians, some have been more exposed to the dangers posed by the coronavirus pandemic due to policy choices that have blocked people from accessing health care, depleted the public health infrastructure, weakened the social safety net, and diverted money away from communities.

These choices and others translate into health disparities that are putting some in greater danger due to COVID-19 because their limited employment opportunities put them at higher risk of exposure, they have chronic conditions that make them more susceptible to the severe impacts of the disease, and structural inequities make it less likely that they will receive the care they need. The result is that African Americans are disproportionately contracting and dying from COVID-19 in North Carolina. In other areas around the country, Latinx and American Indian populations are also dying at disproportionately high rates given their relative share of the population.

Now is the time to make the investments in public health infrastructure, supports for communities who have been blocked from accessing care, school nutrition, COVID-19 research, and supports for hospitals so they can continue to serve their communities. Here’s how the House and Senate proposals to date compare:

In addition to the funding, there are other key provisions that differ across the bills. Read more

Commentary, COVID-19, NC Budget and Tax Center

Maximizing federal dollars to meet urgent needs should be the first priority of state leaders

On Friday, Gov. Roy Cooper released his recommended coronavirus response budget, which would invest $1.43 billion through July 1, 2020. The budget proposes allocations for immediate public health and safety operations, education and state government services, and small businesses and local government assistance.

Prioritizing urgent necessities such as testing and other public health services is a crucial first step, but more should be done in the short term to meet the immediate needs of families and communities while also giving state agencies the assurance that they can build capacity and respond to increased public demands well beyond the three-month window proposed in this budget.

Our analysis of the first three pieces of federal legislation passed in response to the COVID-19 crisis suggests that at least $6.5 billion in relief funds have been allocated to North Carolina. To put this figure into perspective, if the state were to invest all of these dollars today, in addition to the piecemeal budgets enacted instead of a comprehensive budget, we still would only be spending at roughly the historic average as a share of the economy, despite the unprecedented economic shock to our communities.

That is to say, these federal dollars deployed for the increased needs of public health, workforce, housing, and education will barely scratch the surface in comparison to the scale of need that people and communities are facing during this pandemic.

Not all federal funds will be received in the state’s General Fund, the primary fund from which state appropriations are made. State agencies that directly receive federal funds should quickly and fully deploy these dollars to address those needs that they are expert at addressing and at the same time, they should provide the public with a way to understand the priorities and allocation formulas used to deploy those dollars.

Notably, the Coronavirus Relief Fund, the largest stream of federal funds thus far and the source from which the governor proposes appropriating dollars, cannot be used for one of the state’s pressing needs — the anticipated steep loss of revenue brought on by COVID-19 and the simultaneous economic crisis. That’s because this week, the U.S. Treasury released guidance for states that outlines the restrictions on allowable uses, including that the funds be used for necessary expenditures incurred “due to” the public health emergency resulting from the COVID-19 pandemic. These limits are another reason why we need a fourth federal relief package that includes flexible aid to state and local governments and an increase in the federal share of Medicaid costs. North Carolina needs more flexible federal aid to ensure that state leaders can access funds to address revenue losses without making cuts to critical public services and to ensure the state can sustain a crisis response beyond the next three months and for the duration of a full economic recovery.

After years of underinvestments and in light of the high demand for services, our state’s public infrastructure needs a rapid investment of dollars for supplies, technology, and – perhaps most importantly – administration. After all, people run our government.

Take the state’s Division of Employment Security (DES), for example. With over 700,000 state unemployment claims filed since the beginning of the crisis — up from about 2,600 claims per month during the period before the crisis – DES identified early on the need for more equipment, IT infrastructure, and staff and subsequently tripled its staff from 500 to 1,600. Still, many applicants are still waiting to receive their unemployment benefits or for their application to be processed due to the backlog.

Identifying needs and responding quickly by mobilizing dollars at the state and local levels will mean that more families will be able to make ends meet during this crisis by accessing the services and benefits they desperately need. North Carolina should maximize the federal dollars it receives and should prioritize smart investments that quickly put those dollars to use and strengthen the public infrastructure necessary to withstand this economic downturn and to rebuild our communities so they are more resilient for the future.

 Suzy Khachaturyan is a policy analyst at the N.C. Budget & Tax Center, a project of the North Carolina Justice Center.