Two simple fixes that would dramatically improve North Carolina’s unemployment insurance system

Governor Cooper released a proposal last week to deploy available state dollars to immediate COVID-19 relief and address the hardships facing North Carolinians.

One of the greatest barriers to securing an economic recovery, however, is a state unemployment insurance program that isn’t working as it could to keep jobless workers connected to the labor force, consumers spending at businesses, and dollars circulating in the state’s economy. The added uncertainty over the past year as to whether and how the federal government would act to support this state and federal program also disrupted progress in the labor market.

Last week, jobless claims remained elevated and January claim levels brought the country back to levels not seen since mid-October.

Given the significant role unemployment insurance plays in promoting the well-being of businesses, the economy, and indeed, all North Carolinians, the Governor’s modest proposal should include essential, immediate fixes by the General Assembly, including:

  • Moving the maximum duration to 26 weeks, like most states, rather than having a lower sliding scale, would remove the inequities facing jobless workers who lost work at the start of the pandemic. It would also level the playing field for our state in the effort to secure a strong recovery by ensuring that all jobless workers in North Carolina receive closer to the same level of support as most jobless workers in other states.
  • Establishing a cap on maximum benefit amounts at $500 or 50% of the average weekly wages in North Carolina would ensure people who have lost work receive the level of wage replacement that economists recommend. In doing so, this would position North Carolina’s unemployment insurance system to better stabilize spending and, in turn, the economy.

State action is essential and possible under the current Trust Fund conditions.

First, fixes to duration and maximum benefit amounts must occur at the state level. The federal government is not able to address these in its unemployment insurance policies and North Carolinians cannot afford to wait.

Second, as the Governor’s supplemental recommendation points out, the state’s unemployment insurance system is solvent, with more than $2 billion in the coffers and annual contributions by employers of nearly $1 billion under the current tax structure over two years. The increased benefits that would result from these two changes amount to a maximum cost of $620 million over the next two years.

Most importantly, unemployment insurance is a proven policy that stabilizes the economy and would hasten a recovery. When combined with programs for businesses, like short-time compensation, the system provides a tool for ensuring that layoffs don’t have lasting harm on workers’ well-being and businesses’ long-term productivity and efficiency.

The more effective the program is now, the quicker the economy will move forward—particularly if our state also commits to working to control the pandemic and accelerate vaccinations so that public health and economic well-being goals can be achieved.

The General Assembly should make improvements to our unemployment system a top priority this week.

Legacy of white supremacy continues to create barriers for workers, especially during COVID-19

Black History Month could just as easily be called “American present February.” Nothing in the U.S. is ancient history. Someone who will graduate college this year at age 23 has been alive for nearly 10% of U.S. history, and anyone lucky enough to reach 80 has personally witnessed one-third of the American experience. The presence of the past is particularly plain to see during COVID-19. The mold of the past year was shaped by generations of social and economic policy that layered the burden of COVID-19 most heavily on communities of color.

As a small part of reckoning with our history and celebrating the lives of Black people who have struggled for justice, we’re releasing a few resources over the next few weeks that can be food for thought and reflection.

An overview of what each includes is provided below, but here’s how to skip straight to the resources themselves:

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We need a better state plan to help the people of NC

On Thursday, the General Assembly passed its first piece of legislation allocating funds that provide a down payment to enhance the state’s vaccine rollout, support elementary and secondary schools, and provide much needed rental assistance.

The legislation adjusts deadlines for certain CARES Act-funded initiatives in 2020, reallocates unexpended CARES Act dollars, and allocates federal dollars passed as part of the legislation passed by Congress in December — but after nearly a year of living in the house that COVID-19 built, a bigger, bolder commitment and plan is needed to ensure the needs of every family are met during this ongoing crisis.

On the very same day, the Governor provided his own proposal for supplemental spending to meet immediate COVID-19 needs, which, while quite modest, would tap into the significant unreserved state dollars available today to meet the urgent needs in communities to go beyond the federal dollars made available through the December legislation.

The $5 billion unreserved balance refers to state dollars that have not been appropriated, and it does not include additional money in the Rainy Day Fund or other special funds. The Governor proposes immediately appropriating 16.5 percent, or $698 million, of the unreserved balance.

North Carolinians agree that our state government needs to go all-in to meet the full scope of needs by fully funding people-first policies. Across a range of issues, North Carolina needs to not only adequately invest in a response that will address the harm facing people across a range of public health, economic, and housing threats but will plan for a long-term recovery that is just. The continuity of support requires increased capacity at public agencies and institutions and a longer-term commitment to adapting and shoring up the systems — from early childhood education to public schools to public health departments — that will need support to ensure the recovery from the COVID pandemic takes hold.

The General Assembly should therefore not only move immediately on the Governor’s proposal but go beyond it to fully address the challenges that are facing families, businesses, and communities as COVID-19 nears the one-year markRead more

Earned Income Tax Credit, Child Tax Credit can help N.C. families during COVID-19

The COVID-19 pandemic has shed harsh light on the economic inequality, low wages and decades of inadequate investment in our safety net infrastructure, which are harming North Carolina families and challenging an equitable and speedy recovery from this health and economic crisis. 

Today, on EITC Awareness Day, we highlight the importance of the Earned Income Tax Credit (EITC) to addressing the immediate challenges and systemic issues facing workers who earn low wages. The evidence is clear that tax credits for working families can do more at the federal and state level to help with family economic stability, health and well-being. 

A new report from the Annie E. Casey Foundation recommends Congress expand the popular and effective federal Earned Income Tax and Child Tax Credits to provide increased financial stability to the many families struggling to afford the basics during the protracted recovery from this public health and economic crisis.  

About 1 in 7 North Carolinians entered the COVID-19 pandemic already experiencing poverty. In 2019, 13.6% of North Carolinians lived in poverty — an income of $25,750 or less for a family of four. This means the state entered the pandemic with more than 1.4 million residents already in poverty. The pandemic has only made it more difficult for North Carolina families to afford enough food, a safe and stable home, and health care when they need it. Some 19% of North Carolina adults with children in the household reported sometimes or often not having enough to eat during the pandemic, while 18% reported having slight or no confidence in paying their rent or mortgage on time.  

Poverty rates by age reveal persistently high levels of childhood poverty. In 2019,
1 in 5 North Carolinian
 children lived in poverty. The poverty rate for children under 5 years old was the highest for any age group — at 22%. After peaking at 26% in 2012, child poverty has remained elevated in comparison to the total poverty rate, as both declined slowly.  

Combined, the EITC and CTC help lift more than 5 million children out of poverty annually in the U.S. and provide more than 6 million with additional crucial resources that make it easier for recipient families to afford necessities like housing, food, medical care, as well as safe, quality child care. However, the expansion of these programs is necessary because, due to the policies’ design,
27 million children live in families with incomes so low they do not receive the full benefit of the credit.

Kids whose families claim the EITC and CTC can expect to do better in school, have an increased chance of attending college, and earn more as adultsIn their report Kids, Families, and COVID-19,” the Annie E. Casey Foundation recognizes the EITC and CTC as existing tools whose expansion is a crucial element of an equitable policy response that prioritizes children and families and helps ensure children’s well-being during and after the pandemic recovery.   

Some 20% of eligible filers in North Carolina are missing out on the positive benefits of the EITC and the cash assistance the credit provides to help a family navigate the COVID-19 crisis. Unfortunately, 20% of eligible filers in North Carolina aren’t benefiting from the EITC credit because they do not claim it. In order to maximize the credit’s positive health, educatio, and economic impacts in our state, it is crucial to raise awareness among the more than 200,000 North Carolinians who are eligible but do not claim the credit, and connect them with quality, not-for-profit tax preparation like the IRS VITA program 

Heba Atwa is a Policy Advocate for the Budget & Tax Center, a project of the NC Justice Center.

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.