For an effective and equitable recovery, NC must direct dollars to hardest hit local governments

The last downturn in North Carolina — the Great Recession — resulted in a slow and geographically concentrated recovery that never fully reached all counties by the time COVID-19 hit. At the conclusion of 2019 and the pandemic’s subsequent onset, 42 of the state’s 100 counties still had fewer jobs than before the Great Recession.

If current recovery efforts do not help communities replace lost jobs and income, stabilize housing, and improve the health and well-being of families, North Carolina will reinforce persistent inequities. Those inequities will make it increasingly difficult for our state to promote economic mobility for children and families, support business entrepreneurship, and reduce the concentration of disparate outcomes.

Intentional public policy choices at the state level will be imperative in ensuring that North Carolina recovers equitably. The aid that local governments receive from the American Rescue Plan also will be a critical tool for communities to deploy those resources that are proven to support economic well-being.

COVID-19 has impacted local governments specifically in a range of ways. Communities across the state are being challenged by the reduction in local revenues (primarily occupancy and prepared meals tax), the loss of fees, and moratoria on utility payments alongside the rising need to ramp up vaccination drives, remote school services, and supports to businesses.

The American Rescue Plan represents the first time in the COVID-19 federal relief packages that all local governments and tribes are guaranteed to get monetary assistance. Of the $350 billion disbursed by the federal government, $220 billion (63 percent) will go to state governments while the remaining $130 billion (37 percent) is reserved for metro cities, other municipalities, and county governments. Although there is an allocation for smaller governments (i.e., cities, towns, counties), states may pass on additional dollars to these communities depending on how each state government chooses to invest its respective aid monies.

For context, North Carolina is receiving roughly $8.7 billion (excluding capital projects). Of that amount, $5.3 billion is for state aid and $3.4 billion is for local aid spread across our cities, towns, and counties. A detailed breakdown of local and state ARP aid can be found here.

As local governments begin to consider where to make much-needed investments, communities hit the hardest and too often excluded should be engaged to ensure that dollars go to the greatest need. As found in a recent analysis by Resourceful Communities, BIPOC organizations were least likely to access support even though they represent trusted stakeholders in various communities and can connect underserved people with services and programming.

When deciding how to allocate aid monies, well-resourced stakeholders may seem to be making a larger impact because they are serving a larger number of constituents, have a more established network of partnerships locally and statewide, and have the means to institute an extensive data collection process — but it is important to recognize capacity limitations. In many instances, BIPOC organizations are overworked and lack the capacity needed to illustrate larger impacts, but they are indeed reaching community members in need of the most assistance and often are the only entities doing so. Local officials must take this into consideration.

It is clear that as communities move ahead, as, for instance, New Hanover County has already done with an initial framework, they must establish a process for residents’ input and make a commitment to ensuring that resources go to groups that were left out of previous aid. Helping those still on the front lines of harm can create more resilient communities in the long run.

Decision makers must also recognize that the American Rescue Plan is not the final solution. Even with local governments receiving aid, most aid is highly concentrated in densely populated and well-resourced areas (e.g., Raleigh and Charlotte) as opposed to the areas hardest hit by COVID-19. The fight is far from over, and more is to be done in the coming months.

Parker Martin is a Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center.

North Carolina’s tax changes miss the mark … again

The socio-economic hardships that individuals have battled with since COVID-19’s arrival are well-documented. The state of North Carolina and federal government have made investment decisions and developed new programs over the past year to reverse negative outcomes and jump-start recovery.

Unfortunately, many efforts have been plagued with inequities that prolong the recovery process and exacerbate longstanding disparities. The Payroll Protection Program was one such effort — which, while well-intentioned in its effort to keep people employed by their businesses — had the impact of excluding many of the businesses hardest hit, particularly businesses owned by people of color and women.

That North Carolina policymakers would choose to double-down on the disproportionate benefits by providing a tax break to businesses who have received PPP loans is perplexing — particularly given that the $367 million cost to the state could instead be invested to ensure those businesses left out of the PPP process get the support they need to stabilize their bottom-lines and remain critical anchors and employers in the economic life of their communities.

Easing tax burdens for PPP recipients

Easing tax burdens for PPP loan recipients is beneficial at face value, but it has exacerbated existing disparities for marginalized communities. To begin, women and BIPOC-owned businesses shuttered at significantly higher rates at the onset of the pandemic due to a lack of access to capital. PPP loans were intended to provide struggling businesses with much-needed cash infusions, but many minority-owned businesses were the last to receive assistance, if they received any at all.

Their PPP loan applications were also denied at disproportionate rates, funds were disproportionately directed to higher-income communities with existing resources, and clients with existing relationships received more assistance, most of whom were disproportionately white. Much of this is a by-product of the banking industry’s historic biases being exacerbated by policy oversight.

It should be concerning to policymakers that communities that have historically received inequitable assistance and investment are once again being left out in the face of one of our nation’s most dire financial crises.

Easing tax burdens for PPP recipients will help some in North Carolina’s business community, but what will be done for the many more that were excluded from these opportunities? Although data is available for North Carolina, an overwhelming majority of recipients have not disclosed any demographic data, which masks the program’s (in)efficacy. But for those who have chosen to do so, it is clear women and BIPOC-owned businesses are not able to access the support at an equitable rate. Unfortunately, this mirrors national trends.

What’s next

Without better decision making, achieving true equity in North Carolina is nothing more than a fairy tale. As a suggestion, state and local leaders could use recovery monies for targeted investments in BIPOC communities and entities such as the Office of Historically Underutilized Businesses (HUB), which administered the ReTOOL program with limited resources far below what was necessary for more sizable impacts. Our recent brief shows the importance, too, of structural changes in our policymaking to ensure that our collective commitment to building a more equitable landscape of jobs and entrepreneurship is built into our practices for the long-term.

Parker Martin is a Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center.