NC legislative committee takes yet another misstep on unemployment insurance

This morning, the Finance Committee of the North Carolina House approved House Bill 107, which, among its largely technical provisions, would make two significant changes to state unemployment insurance policy: 

  • it would reinstate work search requirements for individuals making non-COVID-19-related unemployment insurance claims, and 
  • it would hold the base tax rate for employers at just 1.9%, rather than following the planned increase that currently contained in state law. 

The decision to hold employer tax rates at the current low rate is a mistake. 

Back in 2013, when lawmakers and Gov. McCrory approved House Bill 4 — the bill that imposed significant cuts to worker benefits — they also included a trigger that would have raised the State Unemployment Tax Act (SUTA) base tax rate in order to ensure that employer contributions into the state Unemployment Insurance Trust Fund are sufficient to keep the system solvent — a major priority of legislative leaders.  

At present, North Carolina’s tax rate is the fourth lowest in the country.  

Meanwhile, as national experts, state researchers, and media outlets have repeatedly noted, North Carolina has the least effective unemployment insurance system in the country because it serves too few jobless workers, with too little wage replacement for too short a time. 

A glance at the latest data from the third quarter for southeastern states further demonstrates how our program has fallen behind. North Carolina trails only Florida for the number of people exhausting state unemployment insurance before finding a job, is only barely ahead of Louisiana, Mississippi, and Tennessee in the average weekly benefit amount it pays, and in 2019 was worst in the country in terms of the number of jobless workers who receive unemployment insurance.

Engaging in a “race-to-the-bottom” competition with other southeastern states when it comes to supporting the economy is not the right path for our state. If we have any hope of improving what research shows has been a very unequal recovery, North Carolina policymakers should be focused on driving policy toward achieving more equitable outcomes, and be deeply concerned that their policy choices are driving a wedge between people and critical supports. 

Policymakers should instead follow the expert advice of a wide array of economists to build an unemployment insurance system that: a) minimizes the harm to families caused by job losses, and b) stabilizes the economy by helping to maintains consumer spending. 

At present, North Carolina is failing on both counts by maintaining a system that: 

  • provides 14 fewer weeks than the standard 26 weeks of state benefits, 
  • pays extremely low benefits that, on average provide just 23 cents per dollar of the average worker’s in prior wages (the national standard is at least 50 cents), and 
  • reaches less than 9% of those who are jobless, compared to the standard of reaching at least 50 percent of the unemployed. 

A broken unemployment insurance system increases hardship, worsens health outcomes, reduces lifelong earnings and economic mobility for people, and doesn’t do enough to stabilize consumer spending — a key to supporting demand for goods and services of businesses (i.e. employers) and supporting economic recovery.?The National Employment and Law Project noted that due to its shorter benefit duration alone, a typical North Carolina jobless worker could have received as much as $24,000 less in unemployment insurance benefits over the course of the last recession thanks to the 2013 cuts. 

The bottom line: this legislation ignores the desperate need to repair and improve the system for jobless workers (click here for a list of simple and necessary policy changes that lawmakers should enact in 2021) and, indeed, erects another barrier by reviving administratively costly work search requirements. 

By keeping employer taxes low while refusing?to improve things for workers and their families, lawmakers have signaled that working people will continue to be an afterthought in legislative policymaking and are doubling down on an economic approach that will continue to serve us all poorly. 

Alexandra Sirota is the Director of the N.C. Budget and Tax Center. 


Study: Medicaid expansion would provide relief to North Carolina hospitals strained by COVID-19

With overworked staff, limited inpatient beds and high demand, many hospitals in North Carolina and nationwide have been pushed to capacity as they struggle to accommodate COVID-19 patients. Despite the increased demand, however, many hospitals face unprecedented financial challenges because of the growing number of uninsured individuals .

A recent study published in Health Affairs examines how expanding Medicaid could affect the financial stability of a state’s hospitals during the pandemic. By comparing hospital finances before and after Medicaid expansion (FY 2011-2017), researchers analyzed the impacts of the Affordable Care Act on uncompensated care costs — these occur when a hospital provides care and does not receive any payment from the patient or insurer – as well as Medicaid reimbursements and operating margins.

The study found that hospitals in expansion states reported greater financial stability than hospitals in non-expansion states. Below are several highlights from the study:

  • Hospitals in expansion states saw a large decline in uncompensated care costs while hospitals in non-expansion states saw an increase in uncompensated costs during the study period.
  • Hospitals in states that expanded Medicaid in 2014 reported an average decline of $6.4 million  in uncompensated care costs during the study period, representing a 53% decline relative to FY 2011-2013.
  • Hospitals in expansion states had an increase in Medicaid reimbursements, while hospitals in non-expansion states saw their Medicaid reimbursements stagnate.
  • The early financial gains of hospitals in expansion states were sustained through 2017, suggesting that the fiscal benefits of Medicaid expansion are long-lasting.

While this study did not examine hospital finances during the pandemic, its findings suggests that hospitals in expansion states entered the COVID-19 crisis on stronger footing than hospitals in non-expansion states and are more resilient.

Medicaid expansion would extend relief to all hospitals in North Carolina, but particularly to hospitals in rural parts of the state. Since 2014, six rural hospitals have closed and many more remain vulnerable to closure because of financial challenges. This study supports prior research demonstrating the positive effects of Medicaid expansion on hospital finances and, by extension, rural communities who rely on hospitals for health care and jobs.

During the worst public health crisis in a century, over a million North Carolinians are uninsured. Medicaid expansion would provide coverage for more than 500,000 low-income North Carolinians. Prior to the pandemic, North Carolina had an uninsured rate of 11.3%, well above the national uninsured rate of 9.2%. Research shows that closing the coverage gap would help narrow racial and ethnic health disparities. This is especially important for low-income communities of color that disproportionately have occupations that put them at higher risk of COVID-19 exposure and have higher rates of chronic health conditions.

In addition, new analysis of a congressional proposal for COVID relief shows that North Carolina would stand to benefit from an increase of the existing federal share of Medicaid costs to the tune of $2.4 billion. This provision aims to address a concern often raised by opponents of Medicaid expansion despite findings showing state budget savings in addition to health insurance coverage gains.

The COVID-19 pandemic wears on while the choices of lawmakers to reject Medicaid expansion continues to harm North Carolinians, hospitals, and communities.

Keven White is an MSW intern at the Budget & Tax Center, a project of the North Carolina Justice Center.

NC passes a grim anniversary for the state’s workers

Eight years ago this week, then Governor Pat McCrory signed a bill that overhauled our state’s unemployment insurance system. And so began our state’s fall to the bottom of the national pack when it comes to helping jobless workers and protecting our economy from the spiraling effects that downturns can have on the well-being of families and, in turn, businesses and local economies.

Click here to read a letter from an array of advocates that McCrory ignored at the time.

Today in the face of the economic shock wrought by a global pandemic, North Carolina’s jobless claims remain elevated and people are losing state unemployment insurance benefits at alarming rates and only scraping by for the time being with the help of federal programs.

Tragically, our state system is woefully inadequate to handle the challenge of this moment.

North Carolina is:

  • 45th for the lowest duration in unemployment insurance benefits at 9.6 weeks
  • 47th for the lowest average weekly benefit amount at $215 per week, or less than 23 cents per $1 in prior wages earned
  • 2nd for the share of jobless workers exhausting unemployment insurance benefits

Despite, however, our incredibly stingy benefits, the state’s UI tax rate is the fourth lowest in the country. Employers in North Carolina pay only $143 on average in UI taxes per worker.

The result: North Carolina is falling behind in the work to secure the fastest and most equitable recovery. Make no mistake, these rankings and these policy choices aren’t putting us in a more competitive position or reducing our long-term costs or helping business.

The system put in place in 2013 was designed and continues to be one that does not provide the support that unemployed workers and communities across the state need.

Our legislative leaders can choose to act now to fix the deficiencies in this system that both threaten the health and well-being of us all and continue to delay a full and just recovery.

They can move immediately to raise the duration of time that unemployed workers may collect benefits in the state program to 26 weeks and make sure that both average and maximum weekly benefit amounts are connected to prior wages earned, not arbitrary figures or tied to formulas that no other state uses.

They can recognize that the changing nature of work requires a short-time compensation program and recognize that our system needs updating in order to address the needs of a workforce that is rapidly evolving and in which part-time work plays a bigger and bigger role.

What better time than an anniversary—even a traumatic one—to recommit to the values (like broadly shared economic opportunity and  prosperity and community well-being) that we all share?

With such a commitment we can construct just and lasting recovery. Without it, North Carolina will remain mired near the bottom of he pack.

Alexandra Sirota is the director of the NC Budget & Tax Center.

Carrying the torch: Today’s fight for justice is built on generations of struggle in NC

Horror and heroism often walk side-by-side. For every insurrectionist who attacked the U.S. Capitol last month, many more lifted their voices against racism and police violence in streets across our country. For every leader sowing false doubts about the 2020 results, droves of dedicated election workers tended to an honest vote. Amid every tweet downplaying the ravages of COVID-19, millions of American workers put their lives on the line every day to keep our society afloat.

The past year was hardly the first time the angels and demons of the human spirit have fought for the soul of our country. In this time of trial, it’s all the more vital to take strength from the examples of our forebearers, to remember we are the inheritors of a proud tradition of not taking injustice lying down, and that every right we enjoy emerged from intense struggle.

As we carry on the fight for justice, here are a few reminders of why it matters, and the heroes whose torch we have now in our hands.

The Hamlet Fire and a system of “cheap”

One of the worst workplace disasters in recent North Carolina memory happened in 1991, in the small town of Hamlet, when the Imperial Foods chicken processing plant went up in flames, killing 25 workers who were locked inside. Author Bryant Simon spent years trying to understand how the Hamlet fire happened, and what it reveals what he calls a “system of cheap” — a political and economic system that puts workers’ lives in peril, even in normal times, and becomes even the more deadly during times of crisis like COVID-19.

This conversation reflects on what we can learn from the Hamlet fire, how policy choices have shaped reality during COVID-19, and what we can do to truly value working peoples’ lives going forward.

Read more

State revenue rebound signals need for deeper investment in families left out of federal stimulus 

The consensus revenue forecast released yesterday provides further evidence that North Carolina leaders—Governor and General Assembly alike—can make the transformational and necessary investments to deliver a just recovery. 

In the latest forecast, the Office of State Budget & Management and the Fiscal Research Division concluded in their analysis that federal stimulus and resurging economic activity have resulted in a rosier revenue outlook than previously projected.  

The February 2021 Consensus Revenue Forecast estimates that total revenue collections for fiscal year 2020-21, will exceed the May 2020 revised consensus forecast by $4.1B (17.6%).”  

North Carolina’s state revenue rebound can largely be attributed to a boost in individual income collections (bolstered by federal unemployment insurance benefits and stimulus payments), robust sales tax collections (fueled by requirements to collect sales taxes for online purchases), and soaring corporate profits.  

Many of North Carolina’s wealthiest people never missed a paycheck, and global corporations have enjoyed record profits during the pandemic. These factors contribute to state revenues that can be put to work protecting the people bearing the brunt of this crisis. 

Although North Carolina’s current revenue outlook is better than expected, revenue for FY 2021-22 is projected to decline by 0.9before returning to historic levels of growth.    Read more