NC Budget and Tax Center

New state budget and child care: Looking like another missed opportunity

With current conference on the final budget between the House and Senate underway, a new report from the Budget and Tax Center, a project of the NC Justice Center, shows how critical the decisions will be in the coming days for the state’s youngest children.

North Carolina lawmakers last year failed to fully deploy federal dollars to their purposes and removed state commitments to child care subsidy programs, a critical tool in providing quality early childhood learning experiences to young children in low income families.  The result is that we have persistent unmet needs across the state that include: approximately 33,098 eligible children on the waiting list for child care assistance and many more eligible but not receiving child care assistance, the presence of persistent child care deserts, and barriers to enhancing quality through professional development and compensation programs for early childhood workers.

House and Senate proposals for the next two-year budget (FY 2020 and FY 2021) continue to swap federal dollars and fail to commit additional state dollars compared to current services, holding down the state’s overall commitment to keeping child care affordable and accessible.

House and Senate budget writers propose to increase total funding for the child care subsidy program for each year of the biennium budget. However, each budget proposal would reduce state support for these programs and increase federal support compared to the base budget — that is, they would shift toward a greater reliance on federal funding to support this crucial program. They also shift federal dollars further away from Temporary Assistance for Needy Families (TANF) and toward CCDBG again by the end of the biennium.[1]  As explained below, each budget doubles down on supplanting state dollars compared with FY 2019, particularly the Senate budget in year two of the biennium.

More specifically, House and Senate budget proposals for FY 2019-20 do the following: Read more

NC Budget and Tax Center

Work requirements for access to healthcare ignore a simple truth about modern employment

Proposals to require people to report on work hours in order to access Medicaid (something that’s being considered this session at the North Carolina General Assembly both for exiting program participants and as a part of GOP proposals to close the coverage gap) fly in the face of some very basic labor market realities of the 21st Century.

As we noted in our recent report, research has consistently showed that the vast majority of those receiving Medicaid who can work are working. Those who have jobs are often working in low-wage, part-time jobs with unpredictable schedules that would make it difficult to report work hours in compliance with requirements and keep their health care.

A new report released by the Urban Institute this week provides additional findings using newly available survey data about the unique challenges facing workers and their risk of transitioning in and out of compliance with work requirements week to week for reasons beyond their control.

The researchers find:

“Our survey indicates that most nondisabled adults whose families participated in safety net programs in the past year were not on the sidelines but in the game, with nearly three in five working at the time of the survey, including about half working for an employer. However, work schedules for these adults are often unstable and unpredictable:

  • One in five works a rotating, split, or irregular shift.
  • Over half report fluctuations in weekly work schedules of 10 hours or more during the past month.
  • More than a third (39.1 percent) usually know their schedule one week or less in advance.
  • More than half (56.0 percent) have little to no input on when their workdays begin and end.”

The reality of unpredictable work schedules and hours and the very nature of work arrangements in today’s labor market make it impossible to design work requirements to help people stay employed and healthy.

Falling Behind in NC, NC Budget and Tax Center

Starved of capital, small businesses in rural NC are fading away

Roanoke Riverwalk along Plymouth, NC photo credit: J Stephen Conn via Flickr

Along the Roanoke River, economic developers and policymakers in Martin County were not strategically planning a pitch to land Amazon’s HQ, nor were they particularly confident that they could lure Apple to the quaint streets of Williamston. Local leaders have long embraced the fact that their economies depended not on the big splash of major retailers, but the formation, retention, and expansion of small businesses. It is in this context that the NC Rural Center’s report on Small Business Dynamism in North Carolina, detailing the long term decline of business formation in rural North Carolina, is particularly distressing.

In an effort to grasp the implications of a slower recovery in rural North Carolina, the report reveals that “dynamism” — defined as economic vitality spurred by new firm creation, increased employment growth, wage growth, and labor mobility — has faded steadily outside of urban and suburban counties. According to the NC Rural Center, between 2005 and 2015 rural counties have lost 4,289, or 7 percent, of their very small firms. These, according to the center’s definition, are firms with less than 10 employees — the heart and soul of economies like Martin County. This is starkly different than the increase urban counties saw during the same 10 years. The six core metro counties added 5,534 (+9%) firms with fewer than 10 employees. After the Great Recession, small businesses grew rapidly in urban counties, seeing an increase of 3,180 (+5%) firms with 10 employees or less, while rural counties lost 2,657 (-5%).

While the report argues that there are a number of potential reasons for the decline of businesses with fewer than 10 employees in rural NC, it identifies access to capital as a primary contributor. Access to capital is a vital part of any firm’s ability to “get started, keep going, and grow,” but particularly so for small firms. In an effort to explain the increasing scarcity of commercial lending, the report points to the loss of local bank branches (252 from 2010 to 2015), which hit rural North Carolina especially hard. The net reduction of five rural bank branch closures for every one urban closure has created a desperate shortage of commercial loan officers in places least positioned to withstand such a shock. These officers are best situated to understand the nuances of the local market and work directly with rural small business communities to provide financing tailored to fit their needs.

Predictably, lending declines emerged. The report revealed that from 2005 to 2010, rural small business lending decreased by 53 percent, or $1.4 billion dollars, in North Carolina. In the five years after the Great Recession (2010 -2015), urban counties only saw a 1 percent decrease in small business lending. However, rural counties continued to experience steep declines, a loss of $218 million dollars, or 17 percent. Rural Eastern N.C. business communities faced the economic shocks brought by hurricanes Matthew (2016) and Florence (2018), starved of capital for the past decade. Innovative minds in rural Western N.C. are finding it difficult to finance the transition of old manufacturing operations to ventures suited for their community and a 21st-century economy.

This report offers undeniable evidence that a “tax cut only” policy will not provide the support necessary to reverse the trends that are undermining the formation, growth, and retention of small businesses throughout rural North Carolina. Special attention needs to be devoted to solving the challenges around access to capital so that the state’s brightest minds and ideas can prosper in their beloved communities.

Read the report here.

 

NC Budget and Tax Center

Tax changes in Senate, House budget proposals continue to benefit richest North Carolinians

The tax decisions in the Senate and House budget this year — as with each year — determine what the state is able to invest in. For years, North Carolina legislative leaders have prioritized tax cuts for the few over investments in all of our well-being.

Our tax code can and should support smart public investments that would otherwise not be provided or accessible to all in our state. Our tax code also shouldn’t ask more as a share of income from those with the lowest income while giving breaks to the few and special interests if there aren’t demonstrated broad-based benefits to our state.

The House and Senate budget agree on many of the major tax provisions in the two budget proposals.

The Senate budget, however, makes even deeper cuts to the franchise tax in pursuit of its goal eliminate the franchise tax in the near future. The Senate proposal would also increase the standard deduction threshold higher than the House proposal, which would mean a greater revenue loss and only a modest difference in the experience of taxpayers. Both proposals include extensions of tax breaks for the aviation and motor sports industry, a tax break for those receiving economic development incentives. Both also include a shift to the ways in which sales are apportioned across states to determine sales taxes owed and the extension of a gross premium tax to prepaid health plans in light of the transition to Medicaid managed care. Both proposals comply with the by expanding online sales tax collections, but with different revenue estimates.

Read more

NC Budget and Tax Center

Latest job numbers reveal the regional winners and losers in the NC economy

Last month’s labor market data show a trend of steady growth in urban North Carolina while rural parts of the state are recovering much more slowly. This marked growth in metropolitan statistical areas such as Charlotte-Concord-Gastonia and Raleigh buoy the state’s number of employed and are driving down the collective unemployment rate. However, according to April’s labor market data, the state’s concentrated showers of growth have not rained prosperity on all.

There are seven metropolitan and five micropolitan statistical areas that have seen double-digit employment growth since the start of the Great Recession. Most of these statistical areas are clustered along urban corridors and have apparently benefited from being part of connected economies. Conversely, there are seven isolated micropolitan statistical areas that have not recovered from the downturn. They have seen their employment levels decrease by double digits since December of 2007. Forty-five counties have lost a total of 67,000 jobs since the beginning of the Great Recession. As many of these counties are situated in the state’s coastal plain, higher temperatures and a warmer Atlantic Ocean make it more likely that destruction from stronger and more frequent hurricanes will create recurring economic shocks that further confound recovery.

Here are a couple of indicators illustrating some of the dramatically different regional outcomes:

  • Metro and Micro employment growth: Raleigh (33%), Charlotte-Concord-Gastonia (29%), Oxford (24%), Wilmington (22%), Durham-Chapel-Hill (20%), Boone (19%), Asheville (18%), Burlington (18%), Pinehurst-Southern Pines (16%), Greenville (14%), Dunn (12%), and Brevard (10%) all have seen double-digit employment growth since December of 2007.
  • Employment loss: Seven micropolitan statistical areas have lost jobs since the beginning of the Great Recession. Henderson, Lumberton, Wilson, Roanoke Rapids, Laurinburg, Rockingham, and Forest City have seen their employment decrease by double-digit percentages.  Forest City, in Western N.C., fared the worst, losing 17 percent of their jobs since December of 2007. However, the other six micro areas are clustered in the Sandhills and northeastern North Carolina, areas prone to damage from late-year hurricanes which create compounding challenges for economic recovery.

The bottom line: Our collective prosperity in North Carolina is inexorably tied to everyone; from the fishermen off the Outer Banks to schoolchildren in Robeson County. Tax cuts will not solve the economic challenges that require proper investment in infrastructure and resilience-based policy that prepare us for shocks, both economic and natural, that are likely to visit our state.

For charts showing numbers for all counties and micro/metro areas and for county-level data downloads, visit www.ncjustice.org/LaborMarket.

For more context on the economic choices facing North Carolina, check out the Budget & Tax Center’s weekly Prosperity Watch report.

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