NC Budget and Tax Center

Investing in early childhood would have substantive, long-lasting benefits for children and North Carolina

Yesterday, early education workers and thought leaders joined together at the North Carolina Child Care Coalition’s annual Early Education Forum to discuss ways to use research, policy, and advocacy to address the high cost of early education as well as to transform the early care and education workforce.

Those concerns are substantiated in a new Economic Policy Institute report that details the high cost of child care in every state. In the new report, It’s time for an ambitious national investment in America’s children, the authors outline the benefits of public investment in early childhood care and education (ECCE), to children, families, society, and the economy. They also propose that lawmakers enact critical public investments, including:

  • The public provision of early childhood education, including high-quality pre-kindergarten education;
  • Subsidies to allow parents to afford high-quality child care; and
  • Expanded public funding for home visits by trained nurses to help parents both before and after childbirth.

These recommendations would help address some of issues that attendees raised at the forum yesterday. Child care is one of the biggest expenses that North Carolina families face. It’s so sizeable that infant care in North Carolina now costs $2,677 more than in-state tuition for 4-year public college. High costs mean that many families cannot send their children to high-quality education centers—even for low-income families because long waiting lists persist for subsidies. That hurts children, families, and our economy. Read more

NC Budget and Tax Center

Revenue is up but North Carolina still falls short

Revenue remains up in North Carolina. This isn’t surprising as the national and state economies are growing. Revenue collections are expected to be $237 million above projections for this fiscal year, which is welcome news. However, as previously highlighted, this better-than-anticipated revenue does not mean we have adequate revenue to meet the needs and priorities of a growing state.

Costly income tax cuts enacted in 2013 greatly reduced revenue for public investment – reducing annual revenue by around $1 billon. Last year, state lawmakers passed more tax cuts that, once all tax changes are fully in place, will reduce annual revenue by more than $2 billion. These are dollars that otherwise would be available for public schools, affordable higher education, healthcare services for the elderly and poor, and helping ensure that economic growth extends to rural and distressed communities across the state.

The projected $237 million in better-then-anticipated revenue falls far short of what’s needed to adequately address challenges we face as a state. Getting average pay for North Carolina teachers closer to the national average, reducing Pre-K waitlists that totaled more than 7,200 children last year, helping promote economic growth in rural and distressed communities, and improving the states foster care system are among challenges that require additional state funding support. Many other challenges exist – ensuring affordable higher education and a growing elderly population – that have implications on the economic health and overall quality of life for North Carolinians.

While better-than-anticipated revenue is welcome news, such news does not serve as validation of costly tax cuts passed in recent years. Nor does this news mean that North Carolina is positioned for broadly shared economic prosperity in the years ahead. Rather, concern about whether our state will truly be able to keep up with the needs in a growing state that seeks to remain competitive and an attractive place to live should continue.

NC Budget and Tax Center

Unemployment much higher than official rate

North Carolina’s economy is still not creating enough job opportunities. According to the latest unemployment figures, there are more than a quarter million people actively looking for work across the state. However, the problem goes much deeper. As shown below, the unemployment rate is likely closer to 10% if we account for all of the people who have left the labor force because there are not enough job opportunities, a group commonly referred to as “missing workers”.

Missing Workers Graphic - Feb 2016

Read more

NC Budget and Tax Center

Latest sales tax expansion highlights need for state EITC

Today North Carolinians will begin paying sales tax on various installation, repair and maintenance services on everything from appliances to musical instruments to vehicles. This modest expansion of the sales tax base was included in the state budget passed by state lawmakers last year and represents another step towards aligning the state’s tax code with a more service-based economy. Today, the purchase of services is far more common than the purchase of goods compared to prior periods and this economic activity trend is likely to continue.

The effort to better align the state’s tax code with a 21st century economy is important. However, proponents of the sales tax move have used this good tax policy to fuel far more bad ones. The sales tax base expansion is part of a larger transformation of the state’s tax code that shifts away from the income tax, which is a better tax policy tool for achieving long-term revenue adequacy via a structure that’s based on ability to pay. Furthermore, this shift away from the income tax and to a greater reliance on the sales tax fails to acknowledge the increased tax responsibility on low- and middle-income taxpayers and away from the wealthiest who have reaped the greatest benefits from tax changes since 2013.

State lawmakers continue to be susceptible to special interests and this was highlighted with decisions regarding the expansion of the sales tax. Read more

NC Budget and Tax Center

North Carolina needs to invest in infrastructure, according to national study

With North Carolinians set to vote on a $2 billion Connect NC Bond Act on the March 15th primary, a new national report shows how badly the funds CBPP Infographic - Its time to Investare needed.

The author, Senior Fellow Elizabeth C. McNichol warns that neglecting infrastructure has serious consequences for a state’s growth and quality of life. “States must turn their attention back to the type of infrastructure investments that will boost productivity, support business growth, create jobs, provide a healthier environment, and improve opportunities for all of their residents,” McNichol wrote.

(Stay tuned next week for a NC Budget and Tax Center analysis on estimates of the economic impact of the Connect NC Bond Act investments)

The report shows that investment in unmet infrastructure needs will improve North Carolina’s economy now and in the future. Modernizing transportation systems and other infrastructure boosts productivity by supporting businesses and residents, improving the education and job readiness of future workers, and helping communities to thrive. Key infrastructure improvements also will provide immediate job opportunities for Americans who are working less than they would like and making less than it takes to get by. Infrastructure investments typically bring higher wages and better quality of life for years in the future.

States and localities own 90 percent of the nation’s non-defense public infrastructure, so this problem has to be solved here at home in North Carolina. The Connect NC Bond Act is a first step to strengthening North Carolina’s infrastructure for a growing economy.