NC Budget and Tax Center

A federal budget that reflects our values

Friday is the deadline for Congress and President Trump to put forward a long-term plan to fund the government and the essential services that the federal budget funds in communities across the country including here at home in North Carolina.  Now with a potential deal that would provide $1.375 billion in funding for border security measures, it appears that there could be a long-term funding agreement signed by the deadline.

Of course, this deadline and the entire saga that resulted in human and economic costs for North Carolina was avoidable.  The impacts of the first federal shutdown that ended on Jan. 24 affected federal employees, contractors, those North Carolinians engaged with federal programs and services, state agencies administering programs and services and visitors and businesses in our state.

But even more damaging is the lasting effect on the budget process and our democracy.  The funding of core government services, programs, and employment was held hostage to the demand for funding one specific priority of the President: the building of a wall on the country’s southern border.

With a compromise made that will spend $1.375 billion of taxpayer money on a symbol of exclusion with limited value to the integrity of our country’s immigration system, it is worth asking what precedent this sets for the process going forward and what priorities these dollars could have instead been committed to.

$1.375 billion could have:

  • Provided maximum Pell grant awards to 267,770 people across the country,
  • Ensured 499 million more meals each year were available to hungry families,
  • Connected 205,443 children and their families to the assistance needed to afford a quality early learning experience
  • Trained 311,791 workers for jobs of the future

Our federal budget, like our state budget, is about priorities and what we value.

In light of the recent raids that have occurred in our state in the past two weeks, North Carolinians are all too aware that ICE enforcement does not just occur at the border, and that it can hit where people feel the most safe and secure – in their homes, at their workplaces, and in front of their children’s schools.  The notion that a wall will serve as a cure-all for our immigration system or correct  years of missed opportunities for comprehensive immigration reform as a nation rings even more hollow now.

Indeed, the taxpayer dollars that are proposed to be spent on the wall could instead serve to strengthen our immigration system by doubling existing funding for immigration courts to reduce backlogs and increase efficiency in the process. Those dollars could provide universal legal representation to ensure every immigrant, regardless of income, has access to counsel. Alternatively, the funds could be utilized to fund the integration and support of children of immigrants already in the United States to ensure their economic and social mobility through early childhood programming and  affordable higher education.

As long as our elected leaders advance the notion that monuments to exclusion and displays of force should trump common-sense measures and sound investments that strengthen our communities, we should be clear that we are far from realizing our values as a nation.

Commentary, Education, NC Budget and Tax Center

Report: Early childhood is worth the investment for N.C.

A new report from the National Institute for Early Education Research released last week confirms that North Carolina’s early childhood ambitions haven’t matched the commitment of funds needed to achieve it.

Like studies before it, the researchers find overwhelming evidence that North Carolina has designed a uniquely effective program for preparing four-year-olds for Kindergarten, 3rd-grade reading, and, indeed, life.  And yet, the ability to reach all those who would be eligible and fully realize the benefits has been arbitrarily limited by under-funding from North Carolina lawmakers.

The report finds in particular that:

  • 47 percent of eligible four-year-olds are served by the NC Pre-K Program.
  • Both urban and rural communities are not meeting the needs.
  • Funding for slots alone will not close the gaps; 44 counties declined expansion funding in recent years.

The report lists important recommendations around recognizing the full costs of delivering the program, accurately measuring county-level preschool needs, and establishing goals that push us all to commit to reaching more children.

However, certain recommendations could be improved. In suggesting changes to the reimbursement rate, the report misses the opportunity to specifically recommend the state move to a market-based analysis of the cost of early childhood programs.  Such a method would take into account the cost of additional teacher salary, facilities, and instructional materials and supports for children, rather than just utilize the cost of tuition.

In suggesting the state integrate NC Pre-K into funding formulas for K-12 public schools, the researchers fail to acknowledge the existing K-12 funding challenges in the state and the potential harm that could be done by shifting more programming needs onto a funding formula and system that is substantially underfunded.

But the report’s largest oversight is ignoring the key piece in the puzzle explaining why our early childhood programs continue to struggle to be accessible, equitable, and high quality. State policymakers continue to prioritize wasteful tax cuts for wealthy North Carolinians and corporations over proven investments in early childhood programs. These tax cuts have reduced state revenue by $3.5 billion per year.

North Carolina could easily meet all of the report’s goals if state lawmakers prioritized early childhood over tax cuts for big companies and wealthy taxpayers. The roughly $530 million needed to get the program to full enrollment could be raised if incomes over $1 million were taxed at 7 percent – a rate that would still leave their taxes lower than they were in 2013. Alternatively, a similar amount could be generated by taxing corporate profits at rates similar to South Carolina’s 5 percent.

As the CEOs who sponsored the launch of the report recognize, early childhood is worth the investment.  What better way to start to apply the findings of the report than for them to publicly call for corporate and income tax rates that would enable our state to give every four-year-old the opportunity to thrive?

Alexandra Forter Sirota is the director of the N.C. Justice Center’s Budget & Tax Center. 

NC Budget and Tax Center

Federal government shutdown affecting housing access

The partial federal government shutdown is worsening the documented affordable housing challenge across North Carolina by disrupting the systems that provide housing support and assistance in various forms to families across the country and state.

Most directly, the partial government shutdown has affected the operations of Housing and Urban Development programs, with 95 percent of personnel furloughed, and the ability of the agency to renew contracts for project-based rental assistance. Nationwide, this project-based rental assistance goes to private landlords and fills the gap for more than 1 million households living on low incomes who pay rent and for whom the rental assistance fills the gap from that amount up to the contract rent.

In North Carolina, an estimated 118 contracts have expired or will expire through February, affecting the availability of early 2,000 units statewide. The map below provides a view of the counties where these contracts are currently at risk because of the shutdown.

Click here for an interactive version of this map. 

Read more

Commentary, NC Budget and Tax Center, Trump Administration

As shutdown lingers, unemployment insurance claims for N.C.’s federal workers in holding pattern

President Donald Trump (Credit: Gage Skidmore/Wikimedia Commons)

As highlighted last week in The News & Observer, the federal shutdown is having another ripple effect through North Carolina.

That’s because recent state policy changes make it harder for agencies to respond to community needs that arise when the unexpected occurs.  Federal workers’ claims to receive unemployment insurance are not being paid, leaving a critical stabilizer to household budgets and local economies unavailable to far too many in our state.

The article noted that the state unemployment insurance system is accepting claims but not currently issuing payments for claims made by federal workers affected by the shutdown. A look at weekly claim numbers confirms that there is, as yet, no spike in the number of claims issued over the extended federal shutdown.

In part that is due to the complicated nature of the shutdown, where some federal workers are showing up to work without pay, while others are furloughed. In the case of those essential workers working without pay, current guidance suggests these workers are not able to claim unemployment insurance.

However, questions remain about the urgency for federal workers, enough so that Gov. Gavin Newsome in California is considering providing unemployment insurance to these workers. Guidance says furloughed workers can receive unemployment insurance benefits, but will need to repay the benefits when the shutdown ends and back pay is received.

Many states have proactively made clear the guidelines for those federal workers affected by the shutdown, including prominent placement on websites about the claims process and making clear their willingness to support workers through this difficult time.

In North Carolina, state changes make the matter even more complicated. New requirements state that the Division of Employment Security must give employers 10 days to respond to a claim before moving that claim forward. But right now, many employers themselves are difficult to reach because they are not at work. A second requirement — reporting on the number of work searches —is impossible for most federal workers to meet because they are not looking for work but instead waiting to be recalled.

For contract workers and others whose employers have been impacted by the federal shutdown, their job loss, through no fault of their own, leaves them to access a flawed North Carolina unemployment insurance program — one that replaces the lowest share of lost wages of any state in the country for the fewest number of weeks, and with the lowest recipiency rate in the country.

A number of states are taking steps to ensure federal workers and those affected by the shutdown are able to access unemployment insurance.  Gov. Michelle Lujan Grisham of New Mexico proposed waiving work search requirements. Massachusetts Gov. Charlie Baker is weighing providing unemployment benefits, including tapping into state funds to do so, so that people have the security of dollars coming in to stabilize their budgets.  Read more

NC Budget and Tax Center

A new year, another round of tax cuts for the wealthy, big companies

On January 1st, wealthy individuals and big corporations will get another break on their taxes, continuing a shift in the tax load to privilege the select few that leaders in the legislature have been pushing since 2013.  Sadly, this change will continue to ignore the public good and the need for investment to support a growing state.

The latest rate cuts will mean approximately $900 million less in annual revenue for the state, and legislative leaders did not account for the full cost of these tax cuts in their last budget.  It is therefore unclear how legislators will pay to educate every child, protect the health and well-being of families and steward the state’s natural and economic resources in the next year, let alone the future.  Given the growing unmet need in classrooms, crumbling school buildings and faltering infrastructure, failing to meet these pressing community needs will undermine the long-term prosperity and economic health of our state.

Let’s be clear about what these tax cuts are really about:  keeping in place rules of the game that build the wealth of the already wealthy.

These tax cuts aren’t going to boost the economy.  In 2018, North Carolina’s job growth not only faltered but failed to surpass its south eastern neighbors resulting in the failure of job opportunities to keep pace with those seeking jobs. The latest round of tax cuts come when the state’s wealthiest taxpayers and companies are already benefiting from federal tax cuts that passed in December 2017. As is evidenced by research into the more than 30-year experience of a tax-cut-for-the-rich approach, these tax cuts aren’t going to grow new jobs, spark new investments or address the long-run challenges and barriers that persist in our state and country’s economy.  These challenges—slow wage growth, high and concentrated poverty, exclusion and discrimination—require different policy responses that a focus on the already wealthy.

These tax cuts won’t make North Carolina more competitive.  A favorite talking point of legislative leadership is that the tax cuts in 2013 made the state more competitive in the hunt for multi-state and multi-national companies.  Never mind that our ranking on these indices were already high before the tax cuts largely due to our commitment to public and higher education or that these efforts didn’t seem to win the latest race to the bottom for Amazon.  North Carolina’s tax rates will now be among the lowest in the South Eastern region.

These tax cuts don’t put more money in the pockets of most North Carolinians.  The tax cuts since 2013 have disproportionately benefited the very wealthy.  Because of a focus on lower income tax rates—and the rates paid by few, big companies not small, home-grown ones—the tax cuts that North Carolina legislative leaders have pushed forward don’t mean everyday taxpayers have all that much more in their pockets on average.  In fact, many of the tax credits that specifically provided a break to working families were eliminated to pay for the rate cuts for the few.

These tax cuts have meant fewer dollars for priorities that can boost our well-being.  North Carolina legislators have failed to invest in the ongoing requirements of a sound, basic education and the evidence that early childhood education can improve lifetime outcomesMany other investments over the years have also been shortchanged to deliver the billions of dollars in tax cuts that go overwhelmingly to the wealthy: investments in public health have been cut, infrastructure, disaster preparedness and resiliency planning, health care and community economic development as well as affordable housing and environmental monitoring. To balance their budget and be able to afford the tax cuts for the wealthy, legislative leaders cut programs and services and used dollars we used to dedicate to things like school construction to pay for corporate income tax cuts.

Throughout this entire process, legislative leaders delayed phasing in tax cuts to disguise the true cost of the policy choices they were making, which is why wealthy people and rich corporations are set to get yet another round of tax breaks on January 1.

As North Carolina rings in the new year, it is time to resolve to end this failed tax cut experiment and return to smart public investments through a tax code that doesn’t ask more from nearly every taxpayer in the state while millionaires and big companies get a tax break year after year.