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.

Latest labor market data highlight NC’s economic struggles, need for more federal assistance

Even before the jump in COVID-19 cases related to holiday travel became clear, local labor market data for November showed the ongoing consequences of federal and state inaction. The most recent aid bill passed by Congress in December provided some long-overdue assistance, but not nearly enough to get families through to the end of the pandemic.

While it’s certainly good Congress finally passed more COVID-19 assistance in December after months of inaction, the financial bridge won’t span the gulf that still exists between where we are now and the other side of this pandemic. As the latest labor market data confirm, COVID-19 is still inflicting the worst pain on many families with the least financial cushion, so leaders in Raleigh and Washington, D.C., still have a lot of work to do to sustain people during this unprecedented crisis.

Economic challenges facing North Carolina include: 

  • Largest cities recovering faster, raising risk of another unbalanced recovery: Some of the worst job losses during the first few months of the pandemic occurred in North Carolina’s largest cities and tourist regions. Over the past few months, cities like Raleigh, Durham, and Charlotte have recovered more of the jobs initially lost during the pandemic, while the scope of the persistent losses remains larger in regional job centers like Asheville, Morganton, Goldsboro, Greensboro, and Rocky Mount. This raises the distinct risk of repeating the experience from the Great Recession when a handful of faster-growing cities recovered years before many other communities got closer to pre-recession levels of employment.
  • COVID-19 has erased all job gains, or deepened losses, since the start of the Great Recession in a majority of counties: Nearly 60 of North Carolina’s 100 counties had fewer jobs in November of this year than before the Great Recession. Many parts of the state had never recovered all of the jobs that disappeared in the Great Recession, so the losses during COVID-19 are further compounding a long-term problem. In many other counties, all or nearly all of the jobs that had been created since 2009 were wiped out in the first few months of the COVID-19 pandemic.

  • North Carolina’s regional employment engines have seen the worst employment losses. Cities across North Carolina that often serve as the employment hubs for their entire regions have been particularly hard hit by the COVID-19 pandemic. Regional job centers that have experienced some of the worst declines since February include Asheville (-8.4%), Hickory-Lenoir-Morganton (-8.3%), Goldsboro (-7.8%), Greensboro-High Point (-7.0%), Greenville (-6.9%), Fayetteville (-6.9%), Wilmington (-6.7%), Rocky Mount (-6.7%), New Bern (-6.6%), Winston-Salem (-6.2%), Durham-Chapel Hill (-6.2%), Raleigh (-6.2%), Charlotte-Concord-Gastonia (-5.8%), and Burlington (-4.7%).

For charts showing the most recent labor data and COVID-19 job data, visit the Budget & Tax Center’s Labor Market page at www.ncjustice.org/labormarket.

For more context on the economic choices facing North Carolina, check out the Budget & Tax Center’s Prosperity Watch report.

Patrick McHugh is the Research Manager at the NC Budget & Tax Center — a project of the North Carolina Justice Center.

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

Image: AdobeStock

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.

Billionaires are getting even richer during COVID-19

Many corporate titans have profited handsomely from the COVID-19 pandemic. Even while the death count rises, millions of American families struggle to make ends meet, and main street businesses shutter, some of the biggest companies in our country have recorded record profits. Corporate windfalls from this catastrophe have further concentrated wealth in a few hands as 647 billionaires in the United States saw their personal fortunes grow by nearly $1 trillion between the start of the pandemic and mid-November.

That kind of haul is hard for most of us to wrap our minds around What would that kind of wealth mean for people whose lives have been upended by COVID-19? The $960 billion in new wealth for America’s billionaires would be enough to:

  • Give every adult and child in the United States a nearly $3,000 stimulus check or to pay for a year of $600 supplementary unemployment insurance payments for over 30 million people,
  • Cover the average rent on a two-bedroom apartment for every rental household in North Carolina for 64 years,
  • Keep over 85 million families of four fed for a year, or
  • Put almost 10 million students through UNC Chapel Hill.

All told, less than 700 people profited enough in a few months to sustain a family of four in North Carolina for over 20 million years. (If you’re wondering, humans and the rest of the Great Apes only evolved around 6-8 million years ago). As people struggle to put food on the table, stay in their homes, keep the lights on, and stay warm through the winter, there’s no excuse for a handful of billionaires to make off with almost a trillion dollars. It shows what’s broken in our country and why we need a better kind of recovery.

Patrick McHugh is the Research Manager for the N.C. Budget & Tax Center.

As Biden introduces key cabinet members, economically stressed North Carolinians await a just recovery

Logan Rockefeller Harris

As President-elect Joe Biden formally introduces his economic team on Tuesday, there’s a long list of financial challenges facing many families.

Logan Rockefeller Harris, a senior policy analyst with the NC Budget and Tax Center, says North Carolina entered the pandemic with more than 1.4 million residents in poverty.

COVID-19 has also magnified gender inequalities in the labor market in unprecedented ways, with women in North Carolina being far more likely to file for unemployment than men, according to Harris.

As the Budget and Tax Center explains in a new report:

Economic insecurity is not an uncommon experience — almost 60 percent of Americans will experience poverty at some point in their adult life, and more than 3 in 4 will spend at least one year below 150 percent of the poverty level. But mass unemployment caused by the COVID-19 pandemic, combined with a total lack of sustained government response, has pushed levels of hardship to new extremes.

How should the new administration, Congress, and the North Carolina legislature address this daunting challenge?

Listen to Rob Schofield’s full interview with Harris below and read the Center’s 2020 Poverty Report.