Commentary, NC Budget and Tax Center

General Assembly chooses politics over people in COVID relief bill

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The North Carolina General Assembly gave final approval to its plan for spending additional Coronavirus Relief Funds yesterday; the bill has been sent to the Governor.  

The proposal is another brick in the wall that legislative leaders are building between the people of this state and the promise of a way out of this immediate crisis and to a better life. That wall of flawed policy choices, misdirected dollars and inadequate responses has been built over a decade and will continue to block our state from a full and just recovery.  

Even the most simple, basic, and obvious funding decisions to help millions of people in North Carolina survive the COVID-19 crisis are ignored in the legislation.

Years of underinvestment left us ill-prepared to respond adequately and in a timely way to the pandemic and the job losses that have followed. It didn’t have to be that way nor did the suffering have to be so acute and so inequitable. 

We would be much better position to weather this current crisis if our state had committed, at any point over the last economic expansion, to affordable rental housing and utilities, a strong unemployment insurance system, the expansion of Medicaid,  a robust safety net to address poverty, workplace protections and living wages.

Instead, legislative leaders chose tax cuts for big companies and the rich. 

Once again, yesterday, they displayed a misunderstanding of the realities that people face. They made clear just how out of touch they are with the hardships families are grappling with today. People don’t need money to have a nice dinner out and a babysitter; they need a quality and affordable childcare option so that they can go to work. They need access to reliable broadband and technology and investments in public schools that educate their children. They need help making their rent, paying utility bills and putting food on the table.   

The state’s response is made worse when there is a lack of input from people directly affected by the policy choices — and no chance for any but a few lawmakers to meaningfully contribute to the legislative outcome. It is made worse when the priorities for our states recovery are decided in less than 48 hours.  

The Extra Credit Program provides a case in point. It would send a total of $440 million in checks to families with children  because there is no political will to deploy these resources toward a systemic response that could sustain support in the long-term.

Such an approach flies in the face of what we know works for securing well-being and an economic recovery for all. While that $440 million is less likely to reach those with very low incomes, those struggling the most in this public health and economic crisis, $124 million will go to taxpayers in the top 20%.

Such a policy design in a pandemic would only be pursued by legislative leaders bent on ignoring the realities of the majority of our state’s population who have incomes that aren’t keeping up with the costs of basics.   

Here is what’s at stake today in North Carolina: More than 1 million North Carolinians are at risk of eviction. Nearly 800,000 North Carolinians lack access to affordable health care in a pandemic. More than 1.8 million North Carolinians are behind on utility payments.  More than 1 million people have filed for unemployment.  Our state is failing to comply with the constitutional obligation to provide a sound, basic education to every one of the 1.5 million children enrolled in public schools. 

The weak and inadequate response in HB 1105 means that so many North Carolinians and their families who are facing tremendous uncertainty and hardship will continue to struggle without the help that our state should be providing. Putting people first in policy making is what lawmakers are elected to do; unfortunately, yesterday, they chose politics over people.  

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

Commentary, NC Budget and Tax Center

$124 million of Extra Credit Grant Program would go to the top 20%

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Senate leader Phil Berger admitted yesterday that $335 isn’t enough to pay off a mortgage but could pay for a babysitter and a dinner out for parents.

His statement failed to recognize the reality of most parents in this state. When parents don’t have enough money to pay for rent, utilities or child care, they definitely don’t have enough money for a babysitter or a dinner out – even with an extra $335.

The proposed Extra Credit Grant Program within House Bill 1105 would use over $440 million of the state’s remaining coronavirus relief funds – most of the $552 million that remains in reserves.

Although direct cash payments are needed to help families make ends meet, this poorly designed program fails to target these grants to people who need them most. The primary mechanism for sending payments will be tax filings and, as North Carolinians learned after the Spring Economic Impact Payment rollout, more than 460,000 North Carolinians do not earn enough to file income taxes, even though they pay taxes in other ways. This means that this grant program would exclude many families who are most in need of cash support.

According to analysis by the Institute on Taxation and Economic Policy, about $124 million of these grants will go to households in the top 20% of income earners. Sending $335 to household that make an average of $240,000 a year is a missed opportunity to invest this money elsewhere. Especially when many students still lack broadband access and parents are struggling to pay for the basics.

As the House convenes this morning, there is an opportunity to recognize that $124 million, or 26%, of the Extra Credit Grant Program would go to wealthy households and would be better invested elsewhere.

During debate on the House floor, legislative sponsors of the bill suggested that Extra Credit payments would phase out for high-income taxpayers, in accordance with the federal child tax credit design. However, the bill language does not reference federal or state statute language on income eligibility to ensure that payments will be phased out for high-income households.

Commentary, NC Budget and Tax Center

N.C. needs a people’s budget that recognizes we are in this recovery together for the long haul

General Assembly leadership admits in HB 1105 that North Carolina families and communities are facing enormous hardship, but makes only token gestures to help people survive the COVID-19 pandemic

North Carolina can and should allocate the remaining federal funds for COVID relief to meet the needs that pre-existing needs that have been exacerbated by the pandemic. The proposed appropriations in HB 1105 fall far short of acknowledging the scale of current need, much less setting the state up for a strong, inclusive recovery. After months of inaction, the General Assembly continues to take half steps toward addressing a range of crises.

  • Families facing utility disconnection and eviction – Over 1 million North Carolina utility customers and renters are at risk of utility disconnection and eviction, but HB 1105 includes no new dollars for rent and utility assistance. Instead, this bill makes explicit that the funding Governor Cooper already dedicated to rental and utility assistance is included within a range of possible uses for funds. These one-time, non-recurring funds will not maintain or create enough safe, connected and affordable housing to meet the current need. The General Assembly still needs to pass HB 1200 or similar funding to ensure that at least $400 million will be directed to people most impacted by the housing crisis.
  • Families struggling to put food on the table – Small investments for nonprofit food assistance organizations is not enough when related applications have increased by 15%. This bill proposes allocations that include $3 million in a food prescription program and $6 million for food banks. Elimination of the ban on the ABAWD (Able Bodied Adult Without Dependents) waiver would provide a long-term tool for addressing food insecurity in North Carolina and would not cost the state additional funds; however, this provision is absent in this bill.
  • A sound basic education and safe learning environments for every child – Privatization measures continue with expansion of so-called Opportunity Scholarship vouchers and failing virtual charter schools. These privatization schemes continue to undermine our traditional inclusive public schools. The provision to hold harmless public schools facing lower enrollment is helpful, but  this bill would worsen the state’s  continued violation of the state’s constitutional requirement to fund a sound, basic education.
  • Safe and affordable childcare for young children, educators and working families – This bill includes a small, $8 million increase in funding for child care assistance for families, and a modest $35 million commitment to stabilize providers. These funds are targeted to remote learning opportunities, which are only available for PreK age children, and so provide no support for parents of children ages 0-3. Assistance to families does not come close to meeting the needs of the 13,400 eligible families currently on the waiting list. Also absent from this bill is bonus pay that early childhood educators — who work for $10.50 per hour on average — need to get by.
  • Affordable health care for those in the coverage gap – While the bill provides appropriations to Community Health Centers and reduces costs for providers who are serving people without health insurance, the reality is that North Carolina is not reaching everyone who was in the coverage gap before and is in the coverage gap now because of the failure to include Medicaid expansion.  Medicaid expansion should be a key pillar in our response to this pandemic and it will draw down federal funds to support health care needs now.
  • Families that are unable to make ends meet – A small, one-time payment of $335 covers less than 8% of what a family of four needs to afford the basics for one month. Limited resources should be spent on cash assistance that is targeted to low-income families facing evictions and utility shut-offs, and must include outreach to families who had such low incomes that they were not required to file a 2019 tax return. As it stands, these dollars won’t go far enough and will miss those most in need.

Years of underinvestment have left us playing catch-up during this public health and economic crisis. The Band-aids in HB 1105 would not be as necessary if we have been truly funding public services for years. It turns out that there are harsh consequences to cutting taxes for the rich and big corporations, including the following.

  • If legislators had chosen to invest in 2012 in building affordable housing by setting aside the $500 million that was used to give a tax break on pass-through income (subsequently repealed due to bipartisan agreement that it was poorly targeted), there would have been more affordable rental options in communities.
  • If legislators had chosen in 2013 to drive dollars back into public school budgets rather than cut taxes for the rich and big corporations, schools would have had technology budgets and infrastructure that could support remote learning in this pandemic, as well as the health and support personnel on staff to support children’s recovery from the trauma of this pandemic.
  • If legislators had chosen in 2013 to raise the minimum wage and boost the wages of every educator from early childhood through to post-secondary education rather than cut taxes for the rich and big corporations, fewer North Carolina families would be living paycheck-to-paycheck.
  • If legislators in 2013 hadn’t reduced access to and the value of unemployment insurance so that employers didn’t have to pay more in taxes to address debt (created because of tax cuts employers had received in good times), state unemployment insurance would provide a greater share of prior wages for workers who have lost their job due to COVID-19 for a longer period of time and would be more accessible to workers.
  • If legislators had expanded Medicaid in 2014, more people would have had access to affordable health care and prevention tools to manage chronic conditions that make some North Carolinians more at risk for COVID-19.  Expansion would have drawn down federal dollars rather than now requiring a patchwork of charitable care to meet the health care needs of the state’s uninsured that are essential to our collective recovery from this pandemic. Because of job losses thus far during the pandemic, there are now an estimated 825,000 North Carolinians who would benefit from Medicaid expansion.

Alexandra Sirota is the Director of the N.C. Budget & Tax Center. Her colleagues Heba Atwa, Logan Harris, Suzy Khachaturyan , Patrick McHugh, Leila Pedersen, Mel Umbarger and Chanae Wilson ll contributed to this post.

Commentary, NC Budget and Tax Center

Governor’s budget proposal represents an important step toward recovery

Gov. Roy Cooper released his proposal yesterday for how North Carolina can allocate public dollars to meet emerging needs from COVID-19 and make progress toward the long-term investments that are critical to sustain an inclusive recovery that reaches every community in the state.

While not quite a comprehensive budget for the remainder of the 2020-2021 state fiscal year, the proposal lays out in detail how the governor intends to allocate the remaining $552 million from the state’s share of the Coronavirus Relief Fund and ensure funds previously appropriated to uses deemed impermissible by the feds are directed to aid people and communities.

The timely investment of federal dollars to meet needs will not only serve to support households facing daily hardships from COVID-19 but will reduce long-term costs and support a quicker, more inclusive recovery.

Stopping job and income losses, making sure families can meet basic needs and stay in their homes, and providing for access to health care are essential to boosting well-being and should be the fundamental goals of a pro-economy policy agenda. After all, we the people are the economy, and when we are suffering, the economy will struggle to be productive, to create and sustain jobs, and to connect people to opportunities.

It should be clear by now that the scale of this crisis is unprecedented. More than a million families are at risk of eviction in the state. Households are struggling to cover child care costs and support online learning. Too many workers are going to their jobs in often unsafe conditions and for too little pay. And one in three children doesn’t have enough food or lives in a household that is behind on rent. As indicated in the chart below, the proposed increase in overall state General Fund appropriations year over year is minuscule in comparison to job losses over the year.

Public investments can minimize the harm of economic downturn, but must match the scale of need

The governor’s proposal to use additional General Fund dollars is essential to get closer to addressing the need, but it is a conservative proposal constrained by uncertainty around revenue losses at the state level and federal inaction.

For example, the governor is proposing roughly $200 million in additional General Fund appropriations this year, but only $500,000 of that represents recurring commitments. Even with the expansion in General Fund appropriations, North Carolina remains far below historic levels of spending since changes this fiscal year are built on a budget that was primarily built two years ago. This is because legislative leaders opted to simply continue spending at prior levels and enact piecemeal budgets rather than reflect on and respond to community priorities last year.

Importantly, the governor proposes two bonds to get at long-standing community infrastructure needs, including public health care facilities, broadband, public school capital projects, water and sewer infrastructure improvements, and affordable housing. These investments, one of which would require a vote of the people, would provide the much-needed foundation to support resilient and thriving communities after the pandemic.

Moreover, the Governor proposes deploying the substantial Unemployment Insurance Trust Fund at the state level to stabilize households affected by job losses by fixing our state unemployment insurance to better replace wages instead of setting an arbitrarily low cap on benefit amounts and extending the duration of weeks available.  These first steps are in important as Unemployment Insurance is a critical tool in minimizing the harm and length of the downturn but more changes will be needed like changes to the formula that disadvantages workers who lost wages before they lost jobs and to ensure those working part-time who have lost hours can still get support for lost wages.

For North Carolina families to survive COVID-19 and for post-pandemic communities to thrive, our leaders at the state and federal level need to be willing to match community needs with public investments at scale and in ways that consider the range of fiscal tools available to them. Arbitrary constraints on investments — or worse, a turn to austerity — will only delay our progress.

That means a federal package with significant aid to states and individuals is urgently needed in the next month, and over the next year, it will be essential to consider how our own state tax policies can provide for adequate and equitable public investments.

Many have suggested that next week will be the last time that legislators return to Raleigh this fall. It is critical that legislative leaders act boldly to meet the needs in communities and that legislators be willing to return to Raleigh to respond and continue to invest in a strong, inclusive recovery.

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

Commentary, NC Budget and Tax Center

NC unemployment benefits have plummeted 71%; immediate action is needed

More than 500,000 unemployed North Carolina workers and their families have lost badly-needed emergency income because President Trump and the U.S. Senate majority refused to extend the extra $600 in weekly unemployment payments that ended the week of July 25.

In March, Congress enacted the $600 supplement, known as Pandemic Unemployment Compensation (PUC), to help people who lost their jobs through no fault of their own. With COVID-19 still not under control in many parts of the country, this is no time to pull the rug out from under the millions of jobless workers who still cannot safely go back to work or who have no job to go back to.

The bottom-line is that the public health crisis must be contained for a robust recovery to begin. In the meantime, supporting those who have lost jobs is the first step to building a pathway for us all to rebuild and recover from the economic downturn. While workers across industries have been impacted by the pandemic and its economic ripple effects, it has been part-time workers, workers in service and caring sectors, and workers of color and women who have borne the brunt of losses.

It should be clear to policymakers that it is no longer an option to allow any worker – and especially those already excluded in good times from good pay, paid sick days, health care, and stable work – to be excluded from a system meant to sustain workers during the worst of times.

Unemployment insurance can keep families and the economy afloat but its federal-state connection has left too many workers—mostly those working in southern states—with too little wage replacement when jobs go away through no fault of their own. When Senate Republicans left Washington without reauthorizing the PUC relief package – already approved by the House of Representatives early in July – and allowed the program to expire, they doomed North Carolina workers to a system wholly inadequate to the task of sustaining the labor market and our collective recovery. What’s more, the partial, temporary and all-around convoluted replacement plan hastily concocted by the Trump administration is not a viable substitute.

Restarting our economy requires restarting federal and state level efforts on both sides of the aisle to fix our unemployment insurance system so that it aids jobless workers in these unprecedented times. Simply put, a policymaker can’t be “pro-economy” if they’re not “pro-worker” during a moment like the present. After all, workers are the economy—the people who produce goods and deliver services, who pay bills and buy at businesses, and who innovate and design new ways of doing jobs. When they are struggling so too will their employers, local businesses and the broader prospects for sustained growth. Read more