NC Budget and Tax Center

N.C.’s ‘rainy day’ funds need a boost this Hurricane season and ahead of the next downturn

Image: Adobe stock

North Carolina legislators are considering a bill that would distribute dollars to some taxpayers from a revenue surplus coming in over conservative projections, due to the stock market gains of a few. This flawed strategy would distribute to individuals small amounts of funds that would instead have a much larger impact if applied to one of the many needs in our state, such as ensuring our communities are resilient in the face of the next natural disaster or economic downturn.

The state’s savings reserve, often called the Rainy Day Fund, should be the obvious vehicle to hold these dollars for the greatest good of North Carolina. In June, the balance reported by the State Controller’s office totaled approximately $1.2 billion, down over 30 percent from the prior year and well below what could be needed in the near-term.

First, with the successive hurricanes Matthew and Florence, efforts to build up the state’s savings has met with the ongoing pressures created by underinvestment in the infrastructure —planning and affordable housing, particularly — which results in higher rebuilding costs.  North Carolina’s hurricane season is well underway, with the damage of Hurricane Dorian still being assessed.

Last week’s Hurricane Dorian is likely to be just the first of several this year, climate experts have predicted. With ongoing efforts to recover from Hurricane Matthew in 2016 and Hurricane Florence last year, our legislators should be looking to increase the amount we’re saving as a state, not looking to threaten our state’s financial solvency through one-time redistributions.

Second, during the Great Recession, the state cut funding for basic services, including public schools, in order to make up for the $2.5 billion budget shortfall, in order to balance the state budget. That is precisely the purpose of building a strong Rainy Day Fund – to prevent a budget shortfall that would result in a cut in services by having funds available during recessions or other unexpected events that cause a decline in revenue.

With some economists predicting that a U.S. recession is imminent, it would be the fiscally responsible thing to build up our state’s dwindling savings rather than advance this gimmick of a bill.

What’s more is that our state is operating on a continuation budget, which means no funds have been appropriated to the Rainy Day Fund for the fiscal year currently underway. Instead our General Assembly has chosen to pass smaller, piecemeal budget bills so they can avoid coming to the table to discuss what public investments are needed to build thriving communities.

Lawmakers’ decisions about where to allocate tax dollars have tangible effects on our state. Similarly, decisions about where not to allocate funds — like preparing for the next devastating manifestation of climate change, or the next economic downturn — have long-term effects for all of us whose well-being is on the line.

The revenue surplus is ultimately the result of our state’s wealthy becoming even wealthier, and policymakers would do well to strengthen the connections to opportunity for everyone.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Piecemeal budgets reveal dysfunctional process and a refusal to come to the table

Yesterday the NC House gave unanimous approval to the Senate’s version of four bills that would provide pay raises to state employees, adult correctional employees, state highway patrol employees, and state bureau of investigation (SBI) and alcohol law enforcement (ALE) employees, respectively.

At first glance, this effort to provide small pay increases may seem like a genuine effort to get things done for our state. But in reality it’s a way to appease narrow, politically powerful segments of the population by providing extremely small – less than the rate of inflation—pay increases.

This “effort” reveals a new level of dysfunction whereby legislative leaders continue to refuse to come to the table to pass a complete budget. It fails to recognize that the budget process is an important one, because it requires debate and a full accounting of how our tax dollars will advance our shared priorities. It is a vision of where our leaders think we should go.

North Carolinians deserve more than a few elected leaders making decisions behind closed doors about how the state should be funded for the next two years. They deserve more than piecemeal approaches that can’t chart a path forward.

Rather than take the Governor’s June 28th veto of the budget as an opportunity to score political points, it should have been an opportunity to sit down at the negotiating table. Instead of viewing the veto as a sign of no compromise, it should have opened dialogue about concerns with the budget.

The reality is that North Carolina deserves a budget that works for everyone. Maximizing investments in areas that benefit us all, like public education, classrooms that are safe for learning, opportunities for early childhood education, resilient communities, and healthy environments.

The path to strong communities does not include tax cuts for those at the top. It requires corporations and wealthy North Carolinians paying their fair share, not asking more from those with the fewest resources, as reflected in our current tax code and would be worsened with the budget’s proposed tax changes.

The legislative budget failed on all of these fronts, and the “mini budgets” also fail our state.

The piecemeal pay raise budgets are a way to strong-arm support for modest pay raises and are a distraction from the real problem at hand: North Carolina is two months into the new fiscal year and operating on insufficient stopgap measures. More fundamentally, we are a decade into the austerity that results from prioritizing the few over the many.

The current ploy is an attempt to isolate issues—public education, taxes on the wealthy and corporations, Medicaid expansion, school infrastructure—and pit them against each other.

The reality is that we do not need to choose state employee salaries over safe schools for our children, or healthcare over roads, or parks over food. These are false choices. North Carolina deserves a good faith effort on the part of our lawmakers to invest in our state.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Federal court strikes down Medicaid work requirements — this time in New Hampshire

On Monday, a federal judge overturned approval given by the U.S. Secretary of Health and Human Services that would have allowed New Hampshire to impose work-reporting requirements on Medicaid recipients. Such requirements are at odds with the objective of Medicaid to provide medical assistance, the judge stated, citing the experience in Arkansas where more than 16,000 individuals lost their Medicaid coverage.

“In short, we have all seen this movie before,” U.S. District Judge Boasberg stated in his decision. The same judge struck down similar waivers in Arkansas and Kentucky earlier this year.

Proponents of work-reporting requirements claim that they improve enrollee health and incentivize community engagement. However, the reality is that many low-income adults who need health coverage in order to enter the workforce lose coverage as a result of the requirements, thereby making it harder to manage their health needs.

Adults who meet exemption criteria are unaware that they do, or are unable to jump over the hurdles necessary to prove that they are exempt. Others don’t meet the narrow criteria for disability that would grant them an exemption. A recent study (summarized here) from Arkansas found that many of the individuals who lose coverage are actually meeting the requirements but are unable to report their hours for various reasons.

Our findings estimate that 88,000 North Carolinians could lose coverage due to work reporting requirements.

In addition to the harm they impose on Medicaid recipients, work reporting requirements are costly and complicated to administer. Modifying current systems to determine eligibility and exemption, creating and implementing ways for recipients to report work hours, and disseminating information about the new requirements as a condition of Medicaid coverage are just a few of the costly steps to administer and that require hiring additional staff.

The legal precedent supported by this latest federal court ruling should discourage states from following a similar path to Medicaid expansion with a waiver, given that they’ve been deemed illegal in three states so far. Instead, states should seek to increase access to Medicaid coverage through “clean” expansion and not by erecting barriers that create harm and unnecessary cost.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Trump administration rejects Utah’s bid for more federal funds for “partial” Medicaid expansion

Late last week, White House officials stated that they would not approve enhanced federal funding for Utah’s partial Medicaid expansion, according to news reports, raising questions about the viability of the plan given the significant cost to the state.

This follows an earlier decision from the Centers for Medicare and Medicaid Services (CMS) that gave approval for Utah’s waiver request to expand Medicaid only up to 100 percent of the Federal Poverty Level (FPL). Medicaid expansion under the Affordable Care Act permits states to expand up to 138 percent FPL in exchange for the federal government paying 90 percent of the cost of services for those who gain new coverage, up from the current 68 percent match rate in Utah.

It turns out that Medicaid expansion up to the 138 percent level is not only best able to maximize the health and economic benefits to states, it also is the most (and only) fiscally responsible option for state policymakers.

Utah is the first state to submit a waiver for partial expansion without already having expanded Medicaid and, given the absence of additional federal funds to do so, it would seem fiscally unwise that a state would take up this option moving forward.

Wisconsin is the only state to extend coverage up to 100 percent FPL, absent Medicaid expansion, and does not receive the enhanced federal match. In fact, Utah’s funding rejection follows in the footsteps of other states, who both sought to lower their income eligibility requirements for Medicaid.

Partial Medicaid expansion is one of several mechanisms by which states have tried to restrict eligibility and coverage while expecting the federal government to provide additional financial support.

It not only compromises the integrity of Affordable Care Act, which created the option for states to expand Medicaid in the first place, but blocks the possibilities for greater health from being realized through state action.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.

NC Budget and Tax Center

Conference budget is a disappointment for North Carolina

The conference budget passed this past week by both legislative chambers misses a whole host of opportunities to provide adequate, basic services and improve the lives of everyday North Carolinians. Legislative leaders describe this budget as a compromise that maximizes the use of limited dollars, yet those very legislators have prioritized tax cuts over investments in the services and programs that strengthen our growing state.

The false choices represented in this budget — innovations waivers versus closing the coverage gap, teachers versus early childhood programming — are largely the result of these tax cuts for the wealthy, which began in 2013. With $3.6 billion in lost revenue each year since then, General Assembly leaders have proposed additional cuts for the richest North Carolinians that worsen the already upside-down tax code that places a greater tax burden on those with the lowest incomes.

Here are just a few of the ways that the conference budget fails to make proper investments in our state:

With Friday’s veto from the Governor, we will look to legislators on both sides of the aisle for a sustained veto so that our elected leaders can start over on a new budget that reaffirms our collective values and better addresses the needs of all in our state.

Suzy Khachaturyan is a Policy Analyst at the Budget and Tax Center, a project of the North Carolina Justice Center.