NC Budget and Tax Center

“Tweaking” North Carolina’s state budget fails to address the underlying issue of failure to invest

Legislators are planning to release and vote on a state budget for 2019 by June 1. The budget this year will be released as a conference report which according to House Speaker Moore will only deal with minor changes to the second year of a two-year budget, which was debated and approved last year.

While the final details are yet to be seen, based on recent budget proposals it is clear that ”tweaks” to the budget will not address its shortcomings and the under-investment that is occurring because of tax cuts.

Analysis of both the final $23.6 billion budget passed by the legislature last year and the Governor’s recent $24.5 billion budget proposal shows that while they contain different priorities for 2019 they share one thing in common: they are missing investments because of the tax changes that have primarily benefited the wealthy and profitable corporations since 2013.

Reconsideration and debate of the tax changes since 2013 and how they continue to hamper our commitments to community and family well-being is fundamental to creating a budget that reflects our values as a state.

More than tweaking here are also some key areas of investment that are critical and will require a tax code that aligns with the needs of our state:

  1. The aging of North Carolina’s population

The final budget last year put $1 million less in the Division of Aging and Adult Services than was invested in 2017. Preparing for the aging of our state is critical as analysis within the budget shows that North Carolina’s population age 65 and over is already growing faster than other age groups. According to the state’s budget office, “between 2017 and 2037, the older adult population will increase by just over 1 million people (63.3%) to 2.6 million in 2037, and the oldest adults (ages 85+) will more than double from 181,000 in 2017 to 381,000 by 2037.”

  1. The infrastructure for the 21st Century

North Carolina’s infrastructure ranks as the 11th worst in the country yet the final budget did not address in a strategic and comprehensive manner the state’s need to rebuild our infrastructure and create jobs for the 21st Century. A comprehensive approach would target investments towards decaying water systems, mass transportation projects, a clean-energy future, and resilient infrastructure in natural disaster prone areas. It would also advance a more robust investment in broadband access so more people, particularly in rural areas, could access high speed internet.

  1. The preparation of our future leaders and workforce

The final budget fell short of investing in each child’s education because it prioritized another round of tax cuts. Those dollars could have allowed North Carolina to get back to pre-Recession per-pupil spending levels. They could also ensure that children have the textbooks, technology and instructional materials they need to get ahead. Not only in the K-12 classroom but in early childhood, North Carolina continues to miss an opportunity to follow the evidence and commit state resources to expanding pre-k access and supporting access to quality early childhood programs for children in low-income families. At the other end of the education pipeline, North Carolina has not kept post-secondary education affordable or adequately supported a workforce development system that can reach those looking for work and careers that will pay a living wage.

Tweaks won’t make the fundamental fiscal challenge we face go away. It is only likely to make it worse. North Carolinians need leaders to reconsider their prioritization of tax cuts over communities and families.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.

Commentary, NC Budget and Tax Center

Legislature considering changes to Medicaid that would pose a huge danger to mothers and infants

Early next week the North Carolina General Assembly is expected to release a budget that may include taking health coverage away from people who do not meet work requirements. Faced with unrealistic work hour quotas, these proposals will mean that many adults, such as new moms, will lose essential health coverage. Loss of coverage, and the decline in health that will result, will make employment and employment prospects more difficult and will push women and their families further into poverty. While it remains to be seen if CMS would approve such a harsh proposal, its potential impact would be felt throughout North Carolina.

These requirements would likely require new mothers to return to work 60 days after birth, at which time pregnancy Medicaid expires. In reality, many mothers do end up working; data show that 62% of parents on Medicaid work. Rushing new moms into the workforce is bad for infant health, and poor maternal-infant bonding is known to have lasting effects. Research shows that mothers’ early return to work has negative impacts on the duration of breastfeeding, infant vaccinations, and regular checkups, and may diminish maternal-infant bonding as a result of less time spent together and increased maternal stress. Studies show that children are more likely to receive the care they need if their parents have insurance coverage, suggesting that the health of low-income infants and children would decline as a result of work requirements for parents.

A rigid work requirement for moms and parents with low-income fails to account for the cost and difficulty of finding child care and job market realities.

And in the case of North Carolina, such a policy would create a cliff for many families where increasing work hours and income will push them into the coverage gap. For example, a single mother with two children who works 23 hours per week at minimum wage, earning only $667 per month, would be ineligible for Medicaid because their income is too high. With high-quality child care costing a median $832 per month per infant in our state in 2017, North Carolina mothers and families are already forced to make tough decisions about returning to work.

To protect maternal and child health in North Carolina, policymakers should be closing the coverage gap not pushing more people into it without the prospect of accessing the tools to live healthy and financially secure lives.

Suzy Khachaturyan is a MSW/MPH Intern, Budget and Tax Center

NC Budget and Tax Center, Trump Administration

Trump administration turning its back on refugees, a moral and economic failure

The Trump administration is following through on its threat to bar America’s doors against people fleeing violence and persecution. Trump’s cruel words are matched with devastating deeds, snuffing out America’s light of liberty in many corners of the world.

A new report from the Fiscal Policy Institute shows how dramatically refugee resettlement has declined on Trump’s watch and provides compelling evidence that we are turning away the very people that have long made America the economic power of the world.

Beyond documenting how dramatically the Trump administration has reversed America’s history offering safe harbor to people facing persecution the world-over, the report shows that these policies will hurt the U.S. economy.

The report’s authors interviewed business owners about their experiences hiring and working with people who arrived in the United States as refugees, and the results show that Trump’s policies are cutting businesses off from precisely the kind of dedicated employees that proprietors love to find. For example:

  • Refugees tend to be more loyal employees: Most business owners reported that, once hired, refugees tend to stay in their jobs longer than other workers. As any employer will tell you, replacing good employees is expensive and challenging, so having reliable refugees as part of a workforce can be an enormous plus.
  • Successful refugee hiring can help employers find more reliable workers: Once companies figure out how to successfully support refugees as they become employees, these businesses often find it easier to recruit more people from refugee communities. Just as with retention, finding skilled and dedicated employees efficiently can be an enormous boon for businesses.

Turning our back on people facing war and torment is wrong, and this moral failing will come with economic ramifications now and into the future.

NC Budget and Tax Center

Another Policy Proposal Ignores Reality of Today’s Job Market

Leaders in the General Assembly appear poised to take health care away from parents with low income through a change to Medicaid,  and they plan to do it using a budget process where no amendments can be offered.

The change would likely take the form of what some other states have proposed, requiring a certain number of hours each month in order to maintain health care access.  This plan ignores the reality facing more and more working North Carolinians who don’t control their schedules and are often at the mercy of economic forces beyond their control.

For this reason, and given what we know about what has happened when implemented in other areas, rigid work requirements will not deliver on the intended goal of increasing employment.  Indeed, researchers have documented the ways in which this could actually reduce employment in the long-term and grow poverty.  It may also be too harsh to receive federal approval.

Here are key facts about today’s labor market that legislators should consider as they seek to take health care away from parents with low income:

  1. There are too few jobs for those who want to work. Despite the state’s employment growth since the national recovery began in 2009,  there are still 87 counties where there are more jobless workers than job openings. In many communities, finding work is still a challenge, regardless of whether elected leaders in Raleigh accept that fact or not.
  2. Work is increasingly unstable resulting in a lack of consistent work hours each month. Research by the Center on Budget & Policy Priorities finds that of low-income adults who have worked in the past year, at least 1 in 4 have less than 80 hours of work in at least month.  This threshold is the one used by Kansas to determine eligibility on a month by month basis and failure to meet it means the loss of health insurance for a period. The issue of unpredictable hours is prevalent in the labor market and has created increased income volatility and economic hardship.
  3. Temporary and contingent work means despite working in a year, many workers face unpredictable employment. Temporary work has grown by 52 percent in North Carolina compared to 32 percent growth in the national economy.  Temp workers in North Carolina earn well below the national average. Temporary workers have little control over how many hours they work in a given month, which could put their healthcare coverage at risk through no fault of their own.
  4. Work at minimum wage doesn’t pay enough to make ends meet. A minimum age worker in North Carolina with one child who works just below the 80 hour a month threshold or 20 hours a week would qualify for Medicaid.  The annual income limit for Medicaid is 43 percent of the Federal Poverty level for an adult.
  5. Our labor market depends on public policies that make sure people can get by in low-wage work. One in five North Carolinians can’t afford to make ends meet in North Carolina based on work alone.  Food assistance and housing support, health insurance and child care subsidies aim to ensure people meet their basic needs and stay connected to the workforce.  Restricting access to these supports hurts employment outcomes and the well-being of families.  It also creates the wrong incentives by creating “cliffs” for working people where adding hours and income push them out of eligibility without ensuring that they can secure the needed benefit through work.  This is clear in North Carolina where those receiving Medicaid who could be subject to a new requirement to work a certain number of hours in the month and can’t meet it would be pushed into the coverage gap.  As a non-expansion state, North Carolina would be driving people out of a pathway to self-sufficiency.

On the heels of hundreds of business leaders, workers and advocates gathered in Raleigh on Tuesday to ask legislators to raise the state’s minimum wage from the current federal level of $7.25, it is clear our legislative leaders continue to miss the opportunity to advance policies that address the most pressing issues in today’s labor market.

Now they could consider a policy proposal that would actually make things worse for North Carolinians.

Let’s hope they reject including work requirements in the budget bill and taking health care away from low-income parents.

NC Budget and Tax Center

Governor Cooper’s budget points state in the right direction

The Governor’s proposed budget changes directions for North Carolina after years of tax cuts by focusing on urgent and smart public investments that communities have identified as critical to boosting our state’s economy today and in the future. By stopping the scheduled tax cuts in 2019 for the richest taxpayers and profitable corporations, the Governor is able to make some progress in meeting needs that have gone unmet under the budgets that have prioritized tax cuts.

Indeed, the Governor’s $24.5 billion budget stands in contrast to the proposed spending target of members of the General Assembly. The Senate and House have agreed to a $23.9 billion budget that keeps the tax cuts for wealthy taxpayers and corporations.

What do these numbers mean?

North Carolina has historically appropriated at the state level each year an amount that is 6 percent of the size of the economy as measured by state personal income. Governor Cooper would spend 5.1 percent in 2018-19, bringing us back to the level the state was investing at in 2017. The General Assembly leadership would spend 5 percent, or basically hold the line on the state’s diminished investments since the recovery began in 2009.

Here’s a baker’s dozen of investments in Governor Cooper’s budget that will position the state for long-term economic success:

  • Directs $110 million in revenue into teacher and principal pay with a stated goal of reaching the national average for teacher pay in four years.
  • Adds $55 million for mental health personnel and training, including $40 million for local school districts to hire more nurses, counselors, psychologists, and social workers who directly support student mental health
  • Provides an additional $25 million for textbooks and digital resources for all students.
  • Invests $366 million for state employee compensation and benefits package that among other things provides a recurring cost of living adjustment that is the greater of $1,250 or 2 percent. This is the largest increase in over a decade.
  • Adds 79 positions to the Judicial branch to effectively meet workload needs and new ‘Raise the Age’ legislation
  • Adds $9 million in community mental health funding to expand treatment and recovery services to help combat the opioid crisis
  • Invests $14.5 million in the clean-up and ongoing monitoring of air and water quality from Gen-X
  • Invests $28 million to improve the safety and security of prison facilities
  • Provides $3 million for state matching funds that will be used to leverage an additional $14 million in federal funds for drinking water infrastructure projects
  • Provides $30 million to create the NC GROW (Getting Ready for Opportunities in the Workforce) Scholarship, for students enrolled in curriculum programs or non-credit short-term workforce training programs leading to industry credentials in high-demand fields
  • Provides $17.5 million to increase Broadband Connectivity access and improve service to under-served households, businesses, and community anchor institutions
  • Prioritizes low-income housing by including $7 million to assist in developing more safe and affordable housing units in the state
  • Directs $175 million to begin necessary digital and physical upgrades, such as replacing the state’s 25-year old accounting system and repairing university and state buildings

As legislators prepare to release their budget for 2019, they should consider the Governor’s budget and stop the scheduled tax cuts in 2019 in order to make investments that help all North Carolinians and help our state be competitive in the future.

Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.