The consensus revenue forecast released yesterday provides further evidence that North Carolina leaders—Governor and General Assembly alike—can make the transformational and necessary investments to deliver a just recovery.
In the latest forecast, the Office of State Budget & Management and the Fiscal Research Division concluded in their analysis that federal stimulus and resurging economic activity have resulted in a rosier revenue outlook than previously projected.
The February 2021 Consensus Revenue Forecast estimates that total revenue collections for fiscal year 2020-21, “will exceed the May 2020 revised consensus forecast by $4.1B (17.6%).”
North Carolina’s state revenue rebound can largely be attributed to a boost in individual income collections (bolstered by federal unemployment insurance benefits and stimulus payments), robust sales tax collections (fueled by requirements to collect sales taxes for online purchases), and soaring corporate profits.
Many of North Carolina’s wealthiest people never missed a paycheck, and global corporations have enjoyed record profits during the pandemic. These factors contribute to state revenues that can be put to work protecting the people bearing the brunt of this crisis.
Although North Carolina’s current revenue outlook is better than expected, revenue for FY 2021-22 is projected to decline by 0.9% before returning to historic levels of growth.
That roughly $300 million decline in revenue is not enough to result in a budget shortfall. Years of underinvestment in public institutions and services have resulted in appropriations that are well below what is needed to ensure that all communities have access to economic wellbeing. Last fiscal year the state appropriated $24.5 billion or just 4.7% of total state personal income, well below the 45-year average of 5.9%.
Just as North Carolina leaders could have chosen to invest in good times, the latest revenue forecast affirms that our state has the capacity to make targeted investments to help ease the worst harms for people who need it most.
Although uncertainty related to the virus and economic recovery remain, the consensus revenue forecast suggests the potential for strong growth in the second year of the biennium. The 4.1% projected revenue growth in FY 2022-23 would be on pace with the most recent expansion. The latest forecast points to the critical role that public investments and public policies have played in stabilizing household budgets, supporting businesses and ensuring communities can access public services. The choices our elected leaders make this year will determine who benefits from stimulus measures and who is left out.
The General Assembly and Gov. Cooper should not allow revenue to sit on the sidelines while hundreds of thousands of families in our state struggle to put food on the table and keep a roof over their heads. The evidence is clear that public investments can connect people to the supports they need to minimize long-lasting harm, address systemic inequities and failures that hold down well-being, generate greater resiliency and strengthen the pace and strength of a recovery.
Until the economy recovers for all Americans, not just the fortunate few, North Carolina needs federal stimulus and unemployment benefits to help people make ends meet. At the state level, we must dedicate available state funds now to shore up the institutions and supports that can alleviate mounting costs to people and the economy.
To build the just recovery our state needs, elected leaders need to do more than the bare minimum and consider what families need to thrive. The Consensus Revenue Forecast shows that we can secure greater shared economic well-being for generations to come if we commit to acting in the interest of all North Carolinians, not just a wealthy few.
Leila Pedersen is a policy analyst with the NC Budget & Tax Center.