It’s time to use the state budget to fix North Carolina’s leaky roof

Years ago, a traveling salesman was stuck outside in a thunderstorm, miles from the nearest town. At the next house he came to, a man was standing in the door watching the rain pour. The salesman walked up and asked whether he might be able to stay the night while the storm passed.

“Well,” the man replied, “the only place I’ve got is in the kitchen, and the roof leaks so bad in there you’d get just as wet as staying out here.”

Taken aback, the salesman asked, “Why don’t you fix the roof?”

“Are you crazy?” the man replied. “It’s raining out here!”

“’Course I don’t mean now,” the increasingly frustrated salesman retorted. “Why don’t you fix it when it ain’t raining”?

“’Cause then it ain’t leaking.”

There’s some wisdom in that old country yarn about where North Carolina was when COVID-19 arrived. Our state government is like the roof in the story. We had been through the longest period of uninterrupted economic growth in generations, but leaders allowed our shared home to fall into disrepair. As soon as the storm started, it became even more painfully evident how years of neglect had left our public institutions unable to cope with a crisis.

We also allowed an economic situation to evolve that left far too many families with little or no shelter of their own to fall back on. Big corporations and the ultra-rich did just fine in the wake of the Great Recession, but most families and working people in North Carolina didn’t have the savings to survive without work or income when the pandemic shuttered businesses across the state. Like the traveling salesman, millions of North Carolinians were left out in the storm with little shelter in sight.

Now the combination of broken public institutions and a top-heavy economy are undermining the pace of our recovery. As we document in a recent report, hundreds of thousands of North Carolinians face enormous barriers in their effort to rejoin the labor force. Around 250,000 people in our state, mostly women, can’t work because they don’t have access affordable child care; roughly 100,000 have site concerns about contracting or spreading COVID-19 by working in person, 50,000 lack reliable transportation, and many either can’t access the jobs that do exist or lack broadband needed to work remotely or search for a job. In most of these cases, people of color and women who had the least financial cushion to fall back on when they lost jobs due to COVID-19 face the largest obstacles to rejoining the labor market.

The good news is we have an opportunity to rebuild our collective home. As legislative leaders huddle behind closed doors to hash out a budget, the question is whether they will make the long-overdue choice to fix our public institutions or continue down the path that left us out in the rain when COVID-19 darkened the skies. After years of not passing a budget, North Carolina has billions of dollars sitting in the bank that could be used to help people still struggling to make it through the pandemic. Unfortunately, the proposals made by both the Senate and House failed to tap into those resources and would continue to hand out tax cuts to profitable corporations. State action is also urgently needed to make good use of any potential additional federal support. Years of neglect made it hard for the state to deploy previous rounds of state aid, so investment is needed to get any future relief to where it is most needed.

It certainly hasn’t stopped raining yet, but it’s time to get those hammers swinging to put a new economic roof over the people of North Carolina.

Patrick McHugh is the Research Manager with the Budget & Tax Center.

About that labor “shortage” – Look to wave of retirements, not government aid to understand

Photo by Joe Raedle/Getty Images

For all the discussion about what’s making it hard for people to return to the labor force – lack of child care, transportation, housing, training, etc. – a major story that hasn’t received nearly enough attention is how the COVID-19 pandemic has pushed a huge number of North Carolinians into retirement. 

A lot of politicians and special interests want to blame any difficulties businesses are having in hiring workers on unemployment insurance, government benefits, lazy millennials, the vague specter of “socialism, and a supposed general decline in the American work ethic. Hold for a moment the fact that the whole “shortage” story is a bit of a misnomer (there were more people looking for work in June than before COVID-19 in 97 of North Carolina’s 100 counties and every big city) , but actual labor market data and government surveys tell a decidedly different story.  

The U.S. census has been surveying North Carolinians throughout COVID-19 about how the pandemic is impacting their lives, and the responses point to a big increase in the number of people who consider themselves retired. Between July and October of last year, roughly 1,320,000 people in North Carolina reported that they were not working because they were retired. More recently between April and July of this year, the average had shot up to over 1,485,000. That’s an increase of around 165,000 people, or a 12 percent jump, in just a few months. Understandably, a lot of people who were already contemplating retirement decided that putting their well-being at risk by continuing to work during a global pandemic just wasn’t worth it. 

Compare that shift to unemployment insurance (UI), which conservative leaders and the media have blamed for businesses struggles with finding workers. In the week before the 4th of July holiday, fewer than 110,000 North Carolinians were receiving either state or federal supplementary unemployment insurance, a number has been steadily declining throughout 2021. While leaders in the General Assembly were trying to cut off federal benefits, and blaming UI for businesses inability to find workers, they failed to note or acknowledge that a far larger number of North Carolinians appear to have exited the labor market into retirement in the past several months. So, while ignoring a major driving force of declining labor force participation, leaders sought to cut off vital benefits, which have not been shown to decrease peoples’ availability for work. 

To be clear, this isn’t about blaming retirees instead of people receiving UI benefits. We should never have been pointing the finger at people forced to rely on UI benefits for our collective failure to fix our economy, any more than we should tut-tut at older people going into retirement now.  Read more

North Carolina ain’t broke (financially), so now let’s fix it – New revenue data show NCGA has a choice: help people or corporations?

Image: Adobe Stock

North Carolina has the funds to invest in a just recovery. An updated assessment of state revenues shows collections have come in stronger than previously expected over the past year and continued growth should provide some of the resources needed to dig out of the COVID-19 hole. 

First the numbers. North Carolina is on track to collect $29.5 billion in revenue for the current fiscal year and is projected to see modest revenue increase in each of the next two years. That means the state should have almost $5.6 billion more this year to fight the effects of the pandemic than came in during the last fiscal year. That could be great news for people and communities still struggling to rebuild from COVID-19, but it depends on whether the legislature chooses to direct resources to where the need is the greatest. With the state $7 billion a year short of what we have historically invested in the people of North Carolina, this jump in collections won’t get us to where we need to be, but it could be a start. 

So how did we get here?  

Some of it was federal aid preventing another Great Depression, some is corporations and high-income people having a good financial year, and some is due to the timing of when revenues actually came in. 

First, federal aid headed off what could have been worse than the Great Depression. What could have been a recession of nearly unimaginable proportions was tempered as supplemental unemployment benefits, stimulus checks, and other aid created a safety net for many North Carolinians. When the pandemic arrived in North Carolina, most people rightfully worried state revenues would shrink dramatically. But that was before the federal government stepped in with several rounds of financial assistance for people and businesses. Federal aid hasn’t addressed all of the need, but it provided a vital backstop that kept people in their homes, food on the table, and the lights on. Aid for families also helped to prop up, personal income and sales tax collections increased during COVID-19, instead of revenues falling off a cliff. The most recent round of aid passed is partially responsible for the state’s financial outlook improving even since the last forecast was released in February before the historic American Rescue Plan was passed. 

At the same time, a lot of big corporations and well-healed tar heels had a very good financial year. Many big corporations posted record profits over the last year, which drove up corporate and franchise tax payments. The figures just released expect corporate and franchise collections to jump by more than a billion dollars, an increase of more than 75% compared to the last fiscal year.  

Finally, some of the jump in collections is rooted in one-time changes which impacted when revenues were actually collected. The filing deadline for personal income taxes was delayed, so some of the revenues which would have come in during the last fiscal year showed up during the current one. Second, North Carolina started collecting sales taxes on many online sales, so sales tax collections jumped significantly, pushed even further by people shopping online during the pandemic. 

So where do we go from here?  

The choice is pretty clear. Either we invest in rebuilding a more just North Carolina or continue lining the pockets of rich people and big businesses. 

Some legislative leaders would love to divert more state resources into corporate balance sheets and wealthy shareholders’ bank accounts. The Senate recently moved to eliminate the corporate income tax entirely without really doing anything to help the families and businesses which have born the brunt of the pandemic. That bill still has not become law, so there is time to head off this most recent attempt to funnel funds into the deepest pockets. 

Now that we know the state isn’t going broke, its time for a real recovery plan. Far too many North Carolinians still face barriers returning to the workforce, covering the cost of basic necessities, and the financial fallout from COVID-19 has been the most dramatic for many low-income workers, people of color, and women.  

The question now is what leaders in Raleigh will choose to do. Will we see another windfall for profitable corporations and wealthy people, or a down payment on a just recovery. Justice and economic imperative point in the same direction – invest our public funds in building a better future. 

Patrick McHugh is the research director for the nonpartisan N.C. Budget & Tax Center. Mel Umbarger contributed to this post.

Lost jobs in January highlight the importance of the federal rescue plan

Preliminary labor market figures for January underscore why the American Rescue Plan signed into law last week was so vitally needed. After months of slow recovery and a holiday spike in COVID-19 cases, North Carolina lost over 3,000 jobs in January, a clear sign our recovery is far from complete.

The relief plan provides the kind of support at scale needed to turn toward a more just and inclusive recovery. Months of half steps had seriously hampered the pace of recovery in the latter part of 2020, so it’s encouraging to see our elected representatives enacting the kind of bold rescue plan families across North Carolina so desperately need.

Economic challenges facing North Carolina include: 

  • Recovery has slowed dramatically in recent months: North Carolina added fewer than 30,000 jobs in the final quarter of 2020 after recovering over 230,000 jobs in May and June. All told, one-third of the jobs lost since the start of the recession have not been recovered, and North Carolina still needs to add nearly 195,000 jobs to get back to where we were before COVID-19.

  • Recession is over for most highly paid North Carolinians while still devastating low-income workers. While not captured in the headline unemployment figures, job losses have fallen the hardest on North Carolinians with the least financial cushion. Data through mid-January show high paying jobs with annual wages over $60,000 have fully recovered. While the recession is effectively over for many people in good-paying jobs, nearly one quarter of the jobs that paid below $27,000 before the recession are still missing.
  • Job losses are heavily concentrated in some industries, particularly among worst-paid workers: The COVID-19 recession has devastated workers in some industries, while others have almost fully recovered. The largest persistent job losses since February of last year have occurred in industries like Accommodation and Food Service (-68,300), Government (-38,100), Manufacturing (-18,300), Health Care and Social Assistance (22,000), Arts, Entertainment and Recreation (19,500), and Education Services (15,300).

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COVID-19 pandemic continues to devastate the incomes of low-wage workers

For many well-off North Carolinians, however, the recession ended long ago

Almost a year on after the arrival of COVID-19, hundreds of thousands of our state’s worst-paid workers still can’t find a job even as the recession is effectively over for some of the high-wage industries in North Carolina.

Anyone who’s been paying any attention knows COVID-19 is creating outsized suffering for low-wage workers, women, and people of color, but the magnitude of the economic disconnect is still often under-appreciated. In two short months from February to April of last year, nearly 270,000 leisure and hospitality jobs (roughly half of the positions in North Carolina) vanished. Most of the people who were put out of work had been getting paid meager wages and had little financial cushion to fall back on. A long history of occupational segregation and barriers to lucrative careers also meant women and people of color were particularly likely to have their livelihoods disappear.

On the other end of the wage scale, North Carolinians working in finance, business services, technology, and other white collar positions saw their daily lives upended, but many were able to shift to working remotely and most kept pulling down good paychecks. Even at the worst of the recession, 9 out of every 10 professional and business services workers were still on the job, and only 3% of people in finance were out of work

As different as the immediate impacts were, the divide is in many ways even more dramatic today. The recession was effectively over for the best paid North Carolinians by the later part of 2020, but our worst-paid workers are still stuck in a devastating economic hole. By the end of last year, all of the jobs lost to COVID-19 in Professional and Business Services had been recovered while one-fifth of the pre-pandemic jobs (117,500) in leisure and hospitality are still missing.

Patrick McHugh is the Research Manager for the N.C. Budget & Tax Center.