Commentary, COVID-19, NC Budget and Tax Center

Three reasons why federal aid to state, local governments is not enough

Last week, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was immediately signed by the President.

While the bill has many good provisions, it misses the mark in many ways, like prioritizing tax breaks for big companies over federal aid to state and local governments.

Of the approximately $4 billion North Carolina is expected to receive, the Center on Budget & Policy Priorities estimates that $3.5 billion will go to the state and only about $481 million to local governments. This is largely a result of the allocation formula, which only provides allocation to local governments if the population is above 500,000 residents.

State and local governments are on the front lines of trying to keep communities healthy and to protect people from losing income and access to basic needs. Prior to the passage of the CARES Act, the NC League of Municipalities wrote letters to state leaders calling for additional resources to make up for declining revenue and meet the growing need for public safety personnel and broadband access. In a letter to Congress, the National League of Cities outlined four recommended improvements the CARES Act: enact a stabilization fund for cities and states, make local governments eligible for tax credit to offset costs of paid leave, stabilize the municipal bond market, and repeal state and local and property tax deduction caps.

Although the state and local aid in the CARES Act is a meaningful and important first step, it is likely to be insufficient to support North Carolina’s increased expenditures from combating COVID-19, as well as the potential loss in revenue from an economic downturn. Read more

Commentary, COVID-19, NC Budget and Tax Center

What to watch now that Congress has passed the America CARES Act

Image: Adobe Stock

There’s a lot to digest in the $2 trillion rescue package Congress just passed. The wide-ranging bill contains some vitally needed aid in this moment of crisis, some dubious handouts to multinational corporations, and some provisions that could be helpful or irresponsible depending on how they are implemented. With all that remains uncertain, there are, however, some things we know already.

The COVID-19 pandemic has achieved the recently unthinkable, forcing bipartisan compromise and cooperation. The America CARES Act evolved rapidly over the past several days as Democrats and Republicans in Congress negotiated over both substance and scope. A Congress often girdled by rancor managed to overcome partisan disagreements and deliver needed tonic to a nation in distress. We’ve become unused to seeing our most powerful institutions respond to the pressing needs of the day, so take some solace in this moment that Congress stepped up to the plate.

For a bipartisan response to be most effective will require swift implementation of the America CARES Act and recognition that there are still gaps in relief and emerging issues that will require further response to fully address the country’s pressing needs.

Among the implementation considerations will be the speed with which cash gets into the pockets of people who need it the most and how we provide relief to impacted people who are not provided adequate relief in this bill, as well as whether corporate executives use it to enrich themselves and their wealthy shareholders.

Moreover, while many important provisions were included like unemployment insurance enhancements and small business supports, some issues like paid sick leave and much-needed health care supply shortages were not addressed. Finally, some of the provisions like aid to state and local governments were valuable, but they will likely not address the full impact of the pandemic. Read more

Commentary, NC Budget and Tax Center

COVID-19 pandemic reveals North Carolina’s economic vulnerability 

Just as it is doing with our health care system, the COVID-19 pandemic is revealing North Carolina’s economic fragility. A reliance on low-wage jobs has left families with no financial cushion, and elected leaders are scrambling to make up for our lack of an adequate social safety to save people in a moment of crisis.  

The hammer is going to fall first and hardest on poorly paid workers in restaurant, retail, tourism and other recreation jobs. After a decade of job growth being concentrated in low-wage service jobs, over one-quarter of all private sector jobs in North Carolina are now in leisure, hospitality and retail. Sadly, these are precisely the workers who can least afford to lose income and often don’t have employer-provided health care, paid sick leave or other benefits that would soften the blow. 

To make matters even worse, the collapse of service sector jobs will likely hit particularly hard the communities that were already economically struggling. Roughly half of North Carolina’s counties never recovered all of the jobs lost during the Great Recession, and many of them are the most heavily reliant on the low-wage service jobs at most immediate risk of disappearing. 

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Commentary, NC Budget and Tax Center

Pandemic likely to render effects of NC’s existing affordable housing shortage even more dire

Now more than ever, housing is a health care issue. People who don’t have safe, secure housing are struggling to follow social distancing and personal hygiene guidelines. Isolation strategies, like stocking up on food and working from home, are a luxury that many cannot afford. Businesses that have closed are already laying people off. When people earn less, they are more likely to become homeless because they can no longer afford housing.

Not surprisingly, the National Low Income Housing Coalition (NLIHC) has confirmed that extremely low-income renters are most at risk for being inadequately housed. This NLIHC’s latest report found that no state has an adequate supply of housing. In fact, the United States faces a shortage of over 7 million affordable and available homes for renters making less than 30% of the area median income. For people who lack the safety and security of an affordable home, this pandemic could be a death sentence 

At the federal level, HUD announced a moratorium on eviction and foreclosure actions for single-family properties. Unfortunately, this action will need to be enforced and does nothing to help those who rent or are homeless. Congressional actions to date have failed to address the concerns of homeless and extremely low-income people. Funding for housing has been notably absent from legislation responding to the coronavirus pandemic. This has meant that many states and localities are scrambling to figure out how to handle a potential increase in the number of homeless people in their communities, while also protecting the health and well-being of every community member. 

North Carolina has paused eviction and foreclosure hearings for the next 30 days, but income challenges could disrupt rent and housing payments for longer than that. There is also a risk that some eviction orders that were already in the pipeline are still proceeding. This means that some local sheriffs are still evicting people. No one should be pushed out of their home during a state of emergency.  

North Carolina is home to 330,144 extremely lowincome households, but there are only 141,278 units for these families. There are only 43 affordable and available units for every 100 extremely low-income households. As this situation has worsened, a growing number of people are forced to find refuge in shelters, hotels, and on the street. This trend will become more pronounced as businesses lay off workers due to closures and lost revenue. 

Local housing bonds are good first steps toward providing more housing for those who need it most, but state and federal action is urgently needed to slow the rate of infection, narrow the housing affordability gap, and sustain healthy communities for the long-term. That starts with halting all evictions, and it ends when there are enough affordable homes for everyone. People at every income level deserve health and housing.

Leila Pedersen is a policy analyst with the N.C. Budget & Tax Center.

COVID-19, NC Budget and Tax Center, public health

State and federal policy responses to the COVID-19 virus

This blog post will be regularly updated to capture key policy responses to the COVID-19 virus. (Last updated 1:45 p.m. Tuesday, March 24)

Reports from Budget & Tax Center Staff

This post summarizes steps taken thus far at both the federal and state levels. Scroll down to see a list of steps taken so far, or click on the following links to bring you directly to a specific section:

COVID-19 provides a sobering reminder of how much we need effective and well-resourced governance at the state and federal levels. Particularly in times of crisis, we need an infrastructure that delivers a coordinated, seamless response and reaches each and every person in the community.

The coming months will test federal and state leaders’ ability to blunt the impacts of this global pandemic and contain the harm to the health, well-being, and economic security of people.

Decades of tax cuts have left us vulnerable to a moment like this. Conservative leaders in Raleigh and Washington have given huge tax breaks to rich people and multinational corporations instead of building the systems we need to respond with a coordinated and collective set of programs.

Years of policies that attacked the very institutions that are so critical now have made the response more fragmented and challenged.  Our public health agencies are under-resourced for the growing complexities and services needed in the face of this new coronavirus pandemic coming on top of a very bad flu season. Our public schools haven’t received adequate resources to provide classroom materials and technology in school, let alone outside of it, and many school personnel are worried about their ability to make ends meet in this time. Indeed, many workers will struggle to make ends meet if their hours are scaled back, they get sick, or they lose their jobs because our policy choices have failed to provide access to affordable health care, paid sick days, and a strengthened unemployment system.

COVID-19 is likely going to have an even broader economic impact going forward and could push the United States into a full-blown recession.  Strengthening our programs that can automatically stabilize the economy by helping people make ends meet is critical, as will be aid for states to maintain balanced budgets without dramatic cuts to programs and services needed now.

In short, North Carolina will need a robust policy response at the state and federal level.

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