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NC Budget and Tax Center

It hasn’t taken long for the costly tax plan passed last year to replace grandiose promises with an unfortunate reality. State officials recently confirmed that the 2013 tax plan passed by state policymakers will cost at least $200 million more each year than initially projected, with a price tag of at least $5.3 billion over the next five years. Our own estimates point to the potential for the total revenue loss to reach $1.1 billion by 2016.

As the prolonged negotiated budget for fiscal year 2015 highlights, North Carolina’s revenue challenge hampers our ability to invest in public education, healthcare services, and other public investments that serve as the foundation of economic growth.

The General Assembly’s Fiscal Research Division (FRD) was charged with assessing the fiscal impact of the tax plan and confirms that the personal income tax rate reduction is having a greater immediate impact on revenue collections. FRD attributes the larger-than-expected eventual revenue shortfall to slower wage growth. But it’s difficult to imagine that the income tax cuts are not driving the greater revenue losses given what we know about who benefits from the tax changes and slower wage growth suggests that the tax changes should cost less, not more. Moreover, slow wage growth raises additional concerns about the reality of a Carolina Comeback. Read More

Falling Behind in NC, NC Budget and Tax Center

Governor McCrory signed a final budget into law for the current 2015 fiscal year, which runs from July 2014 through June 2015, this morning. The $21.1 billion budget includes new spending initiatives – largely pay raises for teachers and state employees – but fails to include additional revenue to sustain this spending in the long-term. Contrary to fueling North Carolina’s economic comeback, as Governor McCrory claims, the final budget continues to fund core public services at diminished levels, well below pre-recession levels, and compromises the ability of the state to get ahead and prepare for the future.  Moreover, it puts North Carolina on a fiscally irresponsible path that will continue to create budget challenges in the years ahead, largely as a result of the tax plan that was little debated and discussed in the final budget.

North Carolina faces a revenue challenge, and actions taken within the final budget make this reality clear. The final budget signed by the Governor spends every available dollar and uses dollars from last year’s budget as a result of the Governor requiring agencies to cut their respective budgets. No funding is available to build up the state’s Savings Reserve fund, which is meant to position the state to weather a future economic downturn. Furthermore, the budget relies on one-time funding sources that, once depleted, cannot be replenished with such low revenue and shifts funding for core public investments such as K-12 education to lottery receipts and early childhood programming to federal block grants.

Such budget decisions are driven largely by the tax plan the governor signed into law last year, which significantly reduces revenue available for public investments. Revised analysis by the General Assembly’s Fiscal Research Division estimates that the income tax rate cuts in the plan will cost at least $200 million more annually than initially expected – more than $1 billion less in annual revenue once the plan is fully implemented. The Governor and state policymakers failed to account for this reality in the final budget, which means that, absent new revenue, more budget cuts to core public services are likely to occur in future years as the tax plan continues to be implemented. Another round of tax cuts is set to occur in January 2015.

Under the final budget signed by the Governor, state spending remains 6.6 percent below pre-recession levels (see chart below). Read More

NC Budget and Tax Center

Another new jobs report, the same old story for North Carolina’s metro areas–too many of the state’s urban centers are struggling to create jobs and meaningfully create opportunities for the unemployed. Some of the low-lights from yesterday’s June report on local area unemployment include:

  • 13 out of 14 metros saw their labor forces decline since June 2013, suggesting that too many workers are unable to find work and continue to drop out of the workforce.
  • 8 out of 14 metros saw their unemployment rates drop because the majority of unemployed workers moved out of the labor force rather into jobs. That means that the unemployment rate isn’t going down because things are getting better for workers, but rather because things are getting worse.
  • 3 metros (Fayetteville, Hickory, and Jacksonville) have fewer people going to work in June 2014 than they did last year.
  • Only 4 metros (Durham, Raleigh, Charlotte, and Wilmington) have created enough jobs to fully replace the jobs lost during the Great Recession. After five years, 10 metros have yet to fully recover from the recession.
  • For 10 metros, it will take more than a year to fully replace those lost jobs, if they create jobs at the current pace.
  • One metro, Hickory-Lenoir, will take almost a half century to fully return to pre-recession employment levels if they maintain their current pace of job creation.

All told, this is a dismal jobs reports for our state’s metro areas, far removed from recent claims about the state’s supposed economic renaissance.

Women and the Economy

Support for Paid family leave advanced in the U.S. Senate yesterday, as lawmakers heard testimony on its benefits in a key Children and Families Subcommittee hearing on Capitol Hill.

During the hearing—which was requested by U.S. Senator Kay Hagan—North Carolina business owners, advocates, and representatives of working families made the case for why paid family medical leave policies benefit both employees and businesses. Such programs allow workers to recover from a serious illness or care for a sick loved one or new child without risking their job or the income they need. The hearing renewed a call for a universal family and medical leave insurance program that doesn’t shoulder all the burden of cost on employers.

Currently the Family and Medical Leave Act is the only federal law designed to help working people succeed both as providers and caregivers. It leaves out 40 percent of the workforce and guarantees only unpaid leave, which millions cannot afford. Only 12 percent of U.S. workers have access to paid family leave through their employers, and less than 40 percent have personal medical leave through an employer-provided temporary disability program. This means millions of workers who develop serious health conditions, have seriously ill family members or become parents are forced to choose between providing care or having the income they need to cover basic expenses.

In North Carolina, 77 percent of mothers with children under 18 work, and 44 percent of workers have no access to paid sick days, let alone paid family medical leave. Low-income workers have it even worse off and are often given no flexibility in their work schedules at all.

Two North Carolinians testified at the hearing. Jeannine Sato is a resident of Durham, NC and member of NC MomsRising. Sato’s previous employer denied her extended leave after the birth of her first child. She said:

We are human – to pretend that people don’t get sick and that they don’t give birth just doesn’t make sense….Families should have the opportunity to care for their loved ones without the risk of losing their jobs or falling into poverty…. America needs to step up and join the rest of the industrialized world in offering paid family leave in order to be competitive and humane.

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This morning consumer advocacy group Families USA released a report along with the NC Community Health Center Association and the NC Justice Center showing that most people who stand to benefit from closing our state’s health insurance gap are working. Many of these folks are in low-wage service jobs. The report also examines the top occupations in North Carolina where employees would benefit from Medicaid expansion.

There are 59,000 construction workers who would benefit from Medicaid expansion and 56,000 food service workers. When these employees are in good health we are all better off. Construction workers at home with a serious illness and food preparers with untreated diseases decrease productivity and threaten public health.

Chid care workers and home health aides are also disproportionately impacted by our state’s stance on Medicaid expansion, which means that the people who help nurture our children and tend to the elderly can’t take care of their own health needs.

It is a positive sign that Gov. McCrory says that he is keeping the door open to Medicaid expansion in the state. Still, this passive stance will not move us anywhere. If we are going to prevent unnecessary deaths, extend needed preventive care, and help the people who make our food and care for our kids then we need the Governor to lead.