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.

End-of-year COVID relief package is a down payment on what’s needed

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While the $900 billion end-of-year COVID relief package is not as comprehensive as what is required to address the long-term harms of the health and economic crises, it provides substantial relief that our neighbors, communities, and state urgently need to get through these next few months.

All in all, this end-of-year COVID relief package is a down payment and a step in the right direction. What is also clear is that the new Congress and Biden-Harris administration will need to act swiftly in 2021 to provide the additional relief North Carolinians and our economy need.

New research shows that hardship in North Carolina is only increasing. According to a recent analysis by the nonpartisan Center on Budget and Policy Priorities:

  • 12 percent of adults have reported that their household had difficulty getting enough to eat
  • 21 percent of adult renters are behind on rent
  • 36 percent of adults are struggling with usual household expenses

The latest federal relief package will help alleviate some of the hardship by including much-needed rental assistance and extending the eviction moratorium until January 31; increasing SNAP benefits by 15 percent to help families afford enough to eat; extending unemployment benefits for North Carolinians who lost their jobs through no fault of their own; and providing one-time direct payments people can put towards their most urgent expenses, whether it’s utility bills, car payments, medical expenses, or whatever they find most necessary. The package also includes a ‘lookback’ provision that will ensure millions of low-income individuals and families will not lose some of their Earned Income Tax Credit and Child Tax Credit refund — money they are likely counting on to pay bills and support their families — because their 2020 earnings were lower due to the pandemic.

At the same time, this package falls short in several areas. First, it fails to provide desperately needed aid to our state and local governments. Without additional support, North Carolina cities and counties will continue to make cuts to critical services and lay off essential public employees, all playing important roles in our day-to-day lives.

Second, despite the growing needs millions are facing, the relief provided is far too brief. It includes just a one-month extension of the eviction moratorium, only extends jobless benefits through mid-March, and increases SNAP benefits for just six months. And while the deal extends tax credits for businesses that provide paid leave, it fails to extend workers’ right to take that leave when they get sick, have to take care of a loved one, or balance work and caregiving needs when schools are closed as a result of the COVID-19 pandemic.

We must continue to urge our state and federal lawmakers that North Carolinians still need long-lasting relief to ensure families can keep food on their table, a roof over their head, and access to services they need to ensure their health and wellbeing.

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

NC’s overall uninsured rate masks stark differences across racial and ethnic groups

The COVID-19 pandemic has highlighted the long-standing inequities in our society, including disparate access to health care among different racial and ethnic groups in North Carolina. Last month, the Census Bureau released 2019 state-level data on health insurance coverage that inform our understanding of the gaps in health care coverage that existed prior to the pandemic.

The North Carolina uninsured rate remains higher than the national uninsured rate of 9 percent, a longstanding gap that has only widened since the state opted not to expand Medicaid — which would have lowered the uninsured rate — following the implementation of the Affordable Care Act’s major provisions in 2014.

The data show that while 11 percent of North Carolinians lacked health insurance, this figure masks the differences across racial and ethnic groups in the state. Except for Asian American and multiracial North Carolinians, the uninsured rate for all non-white racial and ethnic is greater than the state’s overall uninsured rate. The greatest difference can be seen in the 31 percent uninsured rate for Hispanic and Latinx North Carolinians, who represent approximately 10 percent the state’s population.

The uninsured rate for Hispanic and Latinx North Carolinians is substantially higher than both the state uninsured rate and the national uninsured rate for the same group. The high uninsured rate among this group prior to the pandemic, in addition to the essential work that many of them perform that increases risk of exposure, has likely played a role in the higher incidence of COVID-19, with 33 percent of the state’s cases occurring among Hispanic North Carolinians.

Immigrants, including those in the Hispanic and Latinx community, serve vital roles in the fabric of our communities, and yet in many ways have been systematically excluded or marginalized from state and federal actions prior to and in response to the COVID-19 pandemic, as we have written about elsewhere.

Suzy Khachaturyan is a policy analyst wit the N.C. Budget & Tax Center.

N.C. General Assembly has a half billion dollars to spend on COVID-19 relief; Congress needs to pass more for states

Earlier this month, the North Carolina General Assembly’s Fiscal Research Division released its analysis detailing the approximately $552 million remaining in the state’s share of the federal Coronavirus Relief Fund (CRF). The General Assembly is scheduled to return to Raleigh for a brief session beginning on Sept. 2, at which time they should put to use the remaining funds to address the urgent needs North Carolinians are facing.

The fiscal brief notes that, of the more than $3 billion that has been appropriated by the General Assembly thus far, $351.5 million of those appropriations are not currently allowable under federal guidance, meaning the funds cannot be spent until their intended use is permitted in subsequent guidance or an amendment to the federal legislation that appropriated the funds to the state. Despite

CRF dollars were appropriated to the state as part of the CARES Act passed by Congress in March in the third and largest federal COVID-19 relief package to date. Some localities, including the City of Charlotte and Guilford, Mecklenburg, and Wake counties, received direct aid as well, while smaller localities had to rely upon state appropriations. Since then, Congress has failed to come together to pass any meaningful relief for state and local governments or for individuals and families facing extreme hardship, which we’ve highlighted.

Last week, the U.S. Senate adjourned after putting forward a piecemeal relief plan that fell far short of what is needed in North Carolina and failing to take subsequent action. Prior to the adjournment, President Trump took executive action that experts say would not help people struggling to pay rent, puts public services at risk in a misguided attempt to extend unemployment insurance benefits, and would provide little to no economic boost through payroll tax deferrals.

Congress needs to pass comprehensive COVID-19 relief that targets aid to families in need and provides substantial support for state and local governments so that public services can be sustained and jobs can be protected. Meanwhile, the N.C. General Assembly needs act as quickly as possible to put to use the remaining dollars meant to meet the needs caused by COVID-19.

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