NC Budget and Tax Center

Federal court decision on Medicaid waivers at odds with N.C. General Assembly

Last week, a federal judge in Washington, D.C., blocked Medicaid waivers submitted by Kentucky and Arkansas, ruling that the waivers were “arbitrary and capricious” and that they undercut the objective of the Medicaid program: providing “medical coverage to the needy.” The waivers, which had been approved by the Trump Administration, allowed the states to place harsh work reporting requirements as conditions for low-income workers to receive health care.

Since Arkansas implemented the harsh requirements last year, as many as 18,000 people have lost health coverage, largely for failing to meet the reporting requirements. Also, state officials have failed to prove that their provisions are having the intended effect of helping people to find work. This should come as no surprise. Research from the Center on Budget and Policy Priorities finds that coverage increases the likelihood that an unemployed worker will be able to find and keep employment. When people have access to treatment for chronic illness, it increases their ability to hold a steady job.

North Carolina is no stranger to conversations around restrictions to Medicaid for low-income families and workers. Introduced just last week, Senate Bill 387 proposes to place work reporting requirements on low-income parents with young children who currently receive Medicaid. The bill would require NC DHHS to submit a waiver request to the federal government by Oct. 1, containing the work requirements just deemed illegal by the court.

This change in policy, if allowed to go forward, would not only be expensive to enforce and difficult to navigate, it will legitimately threaten the well-being of not just parents, but the children who rely on them.

In addition to imposing work-reporting requirements on existing Medicaid participants, legislators have in the past suggested that these barriers be included as part of  any Medicaid expansion under the Affordable Care Act, thus creating greater administrative costs and reducing the effective closure of the coverage gap in our state.

In general, work-reporting requirements ignore the fact that a significant number of Medicaid recipients who can work are already working. According to the Working Poor Families Project, three out of every four low-income families in North Carolina have at least one family member who works. But another study finds that even among those working at least 1,000 hours a year, one in four would be at risk of failing to meet work requirements due to unpredictable work scheduling and temporary work.

What does this court decision mean for North Carolina? Read more

NC Budget and Tax Center

New Living Income Standard shows many families can’t afford the basics in North Carolina

Many families in North Carolina do not earn enough to pay for their basic needs, according to a new report by the N.C. Budget & Tax Center.  Many more live paycheck to paycheck and don’t earn enough to save in order to plan for their future or invest in their children and their education.

The Budget & Tax Center has updated its Living Income Standard (LIS) for 2019, a measurement that gives a more accurate and comprehensive picture than more traditional measures of what it takes for a family to make ends meet in each of North Carolina’s 100 counties. For example, the LIS shows that in North Carolina, a family of two adults and two children must earn $52,946 a year in order to actually afford housing, food, child care, health care, transportation, taxes, and other necessities – more than double the federal poverty threshold for a family of four. The report also breaks the numbers down by county and family type. The same family of four living in Mecklenburg County would need to earn $59,597 to afford the basics, while a Richmond County family would need to earn $44,163.

The report details the problems with current measures like the Federal Poverty Level and the federal minimum wage, which don’t accurately reflect what is actually needed to make ends meet in North Carolina. For example, the Federal Poverty Level doesn’t take into account expenses such as child care or regional differences in the cost of living.

Click here to check out the full report.

Commentary, Legislature, News, The State of Working North Carolina, Trump Administration

Trump’s overtime proposal leaves behind almost 300,000 North Carolina workers

Earlier this month, the U.S. Department of Labor (DOL) announced a proposal to change the salary threshold under which workers are entitled to overtime pay — to $35,308 a year from $23,600 a year.

Under federal law, people who work more than 40 hours per week are supposed to be paid 1.5 times their regular hourly rate for each overtime hour unless they fall into one of the many overtime exemptions.   The so-called “white collar” exemption allows employers to exempt salaried workers who make above the salary threshold from overtime pay if they are engaged in executive, administrative or professional duties.  Once the proposed rule takes effect, anyone making under $35,308 per year (or $679 per week) will not qualify for the exemption.

If you are experiencing déjà vu reading this, that’s because we have been here before.  Well, kind of.  In May of 2016, after two years of research and public input, the Obama DOL also published a new rule updating the salary threshold to $47,476 per year (or $913 per week).  That rule, however, was blocked by a federal court in Texas shortly before it was due to take effect.

The Trump Administration is taking credit for this proposed change, touting it for bringing “common sense, consistency, and higher wages to working Americans,” but they are actually leaving behind millions of Americans who can be required to work 50, 60 or 70 hours per week with no additional pay.

Because the 2016 rule included automatic increases every few years, by January 1, 2020 the salary level would be about $51,000 – $16,000 higher than the Trump proposal.   According to the Economic Policy Institute, the difference in salary levels means about 278,000 people in North Carolina who would have benefited from the 2016 rule are left out by the 2019 rule.  Nationally, that number is over 8 million.

Jumping to $35,308 from $23,600 may seem like a decent increase – and going from $23,600 all the way to $47,476 may strike you as extreme – but it is important to consider those numbers in context.

DOL used to periodically update the salary threshold to reflect changes in the economy and inflation, but the only time it has been updated since 1975 (setting aside the 2016 rule which was blocked) was in 2004.

According to the National Employment Law Project (NELP), in the 1970s, about 65% of salaried workers earned under the threshold and were entitled to overtime pay.  The value of the salary threshold has eroded over time such that today, at the 2004 salary level, only 7% of salaried workers are under the salary threshold.

If the 1975 level was updated for inflation, it would be $55,000 today and would, likely, have the effect that the overtime requirement was originally intended to have: ensuring that overtime exempt employee are getting fairly compensated for extra  hours.

Between now and mid-May, the public can and should comment on the current salary proposal.

Clermont Ripley is a senior attorney at the N.C. Justice Center’s Workers’ Rights Project. 

NC Budget and Tax Center

Berger-Moore spending target locks in current, failed path

House Speaker Tim Moore (L) and Senate President Pro Tem Phil Berger (R)

House and Senate leaders have agreed to a spending target that will guide the development of both chambers’ two-year budget proposals this year before they have fully catalogued the needs in communities and discussed the smart public investments that help communities thrive.

While the proposed target of $24 billion dollars represents a year-over-year increase, it falls short of making progress toward meeting the unmet needs and backlog of projects in communities that could strengthen our economic foundation and the well-being of families.

The proposed spending amount would keep the budget a full $5.8 billion less than what would have been invested if we were at historic levels of public investment.  To be at the 45-year average of state spending as a share of the economy of 6 percent, the state budget would have to invest roughly $29 billion. It was that historic investment level that laid the foundation for economic advancement of our state, promoted improvements on a range of indicators of family well-being, and increased educational attainment and commercial activity.

Indeed, releasing a spending target without a debate about how the state will support the health and safety of its residents, connect our young people to educational opportunities, and connect our workers and businesses to the cutting-edge training and technology they need is the wrong place to start.

North Carolina deserves a budget that raises revenue to reconcile the needs of a growing state with the consequences of a flawed tax experiment that benefits the wealthy and big companies and has reduced revenues over time.

Delaying this conversation any further is fiscally irresponsible and keeps us on a path that is not structurally sound.

As we noted in a release last week, a higher tax rate on income over $1 million would be a good first step toward funding community priorities.  In combination with addressing the erosion of the corporate tax base and unsustainable cuts to the corporate tax rate, it is possible to put in place a tax code that meets our needs.

As states across the country regularly show, taxing wealth and investing in shared services is the best way to build a resilient and inclusive economy. Let’s be clear: Our state is still not providing a job to everyone who wants to work, still has fewer people employed as a share of the population than before the Great Recession, remains challenged by persistently high and concentrated poverty, and is among the least economically mobile states in the country.

A formula approach to our budget based on flawed economic theories and national groups’ soundbites is untethered to our state’s economic realities nor will it allow us to reach our full potential.

More than an arbitrarily low spending target, North Carolinians need and want our policymakers to commit to funding the programs and services that make early learning opportunities affordable and accessible for more young children and their parents, that eliminates the gap in health care coverage for hundreds of thousands of North Carolinians, that makes housing affordable and safe in every community, and that provides opportunities to learn and build skills for jobs of the future.

North Carolina needs leaders to forge a new path based on what works to connect people to opportunity and grow our economy for all, not just the wealthy few.

NC Budget and Tax Center

School construction debate part of a larger infrastructure crisis for NC

The current debate in Raleigh over how to address the billions of dollars in school construction needs is part of a much larger discussion about how to maintain and build the physical infrastructure that makes modern life possible. A new report documents how declining public investments have left America’s roads, bridges, water pipes, sewers, airports, railroads, and schools in bad shape.

See our recent report Make Space for Learning on how years of tax cuts and broken promises created the school facility crisis and for analysis of the competing plans currently in the legislature.

Even as the nation’s engineers sound the alarm, governments across the country are investing less in infrastructure as a share of the economy than at any point since the 1950s, and North Carolina is no exception. Our collective investment in shared infrastructure has fallen markedly, a major reason that our schools, roads, and other systems are in such dire need of an upgrade.

As is often the case during economic downturns, the NC General Assembly diverted funds from infrastructure to address the budget crisis created by the Great Recession, delaying repairs and putting off new projects. What came next, however, was less common. Instead of getting back to work when the economy improved, legislators passed several rounds of tax cuts and kept kicking the infrastructure can down the road.

The choice to pursue tax cuts that overwhelmingly benefit the wealthy is why we are behind on paying for infrastructure that benefits us all. It is why North Carolina passed the $2 billion Connect NC bond to pay for university, community college, and state park facilities in 2016, it is why the legislature authorized the $3 billion Build NC bond Act to update North Carolina’s roads last year, and it is why we are contemplating issuing bonds this year to pay for school, water, and sewer facilities. Tax cuts have costs, and those costs manifest over time in crumbling roads, failing bridges, and decaying classrooms.

Public investments can knit the country together, ensure that our drinking water is free from poison, that our children have inspiring places to learn, and create public spaces and parks that feed the soul. As we can see in the current school construction debate, when we turn away from building a better future, we all suffer.