COVID-19, NC Budget and Tax Center

How does health funding fare in the legislature’s COVID-19 response packages?

Tomorrow, the state House and Senate are expected to come to a compromise on what will be their first piece of legislation in response to the COVID-19 crisis, exactly two months after North Carolina’s first case was detected on March 2.

While life has changed for all North Carolinians, some have been more exposed to the dangers posed by the coronavirus pandemic due to policy choices that have blocked people from accessing health care, depleted the public health infrastructure, weakened the social safety net, and diverted money away from communities.

These choices and others translate into health disparities that are putting some in greater danger due to COVID-19 because their limited employment opportunities put them at higher risk of exposure, they have chronic conditions that make them more susceptible to the severe impacts of the disease, and structural inequities make it less likely that they will receive the care they need. The result is that African Americans are disproportionately contracting and dying from COVID-19 in North Carolina. In other areas around the country, Latinx and American Indian populations are also dying at disproportionately high rates given their relative share of the population.

Now is the time to make the investments in public health infrastructure, supports for communities who have been blocked from accessing care, school nutrition, COVID-19 research, and supports for hospitals so they can continue to serve their communities. Here’s how the House and Senate proposals to date compare:

In addition to the funding, there are other key provisions that differ across the bills. Read more

Commentary, NC Budget and Tax Center

Special update: Legislature’s initial COVID-19 response sets up need for additional sustained action

By Leila Pedersen, Suzy Khachaturyan, Alexandra Sirota and Patrick McHugh of the N.C. Budget & Tax Center

North Carolina’s General Assembly is poised to finalize its first legislative proposal this week, as Congress did in early March. The Senate has signaled it will return in three weeks to take up other matters, while the House has also suggested that it will meet in working groups beginning as early as next week. Given how limited in scope the current House and Senate proposals both are, we need quick, robust action to support families and communities struggling to cope with the COVID-19 outbreak. 

The Senate approved its first legislative action on COVID-19 last night before sending the bill to the House, which has developed several measures after weeks of working groups meetings. The House appears poised to combine those bills into its own omnibus legislation in today’s session. Its likely the differences between the House and Senate proposals will be worked out in conference committee, possibly as soon as this afternoon. 

There are distinct differences between the House and Senate proposals, but its fair to point out the two chambers’ proposals have more in common than what separates them. After weeks of conversations between leadership in the General Assembly and the Cooper administration, the legislation moving through both chambers represents a modest consensus “first response” to the COVID-19 pandemic.

The differences between the two bills could make the final legislation better or worse, but its also clear that leadership in Raleigh will have lots of work left in order to fully address the devastating health and economic consequences of the COVID-19 outbreak. 

Key similarities between the House and Senate proposals

Both proposals address some urgent needs. They include important investments and deploy critical federal funds to the agencies that are serving people and communities, while incurring new costs associated with COVID-19.

The proposals won’t go far enough to address the health and economic consequences of COVID-19. The language in both the House and Senate bills suggests that limitations of federal funding make it difficult to meet all the needs in this first effort. Yet available federal dollars could be used for priorities, such as providing essential, low-wage workers with pay that acknowledges their increased risk of exposure.

It could also be used for outreach on the federal Economic Impact Payments to maximize receipts by eligible families, as well as establish a state-level emergency cash assistance program for those excluded. The Senate and House have differed on their willingness to direct specific uses of the funds, creating challenges in ensuring state agencies make priority investments.

Missing the opportunity to strengthen the public infrastructure at a critical time – Both bills could do more to direct state dollars to agencies with uncertain revenue or receipts, and that are faced with unprecedented demand and capacity needs. The measures should shore up the institutions that will be on the front lines in building a stronger, more equitable recovery.

Key differences between the House and Senate proposals

The fine print of the Senate omnibus bill and several House bills expected to be combined today vary in many ways, but a few significant differences deserve particular attention, both in policy substance and the level of democratic transparency that was involved in developing these proposals.  Read more

Commentary, COVID-19, NC Budget and Tax Center

North Carolina’s first legislative response will fall short of meeting even immediate needs

The North Carolina General Assembly is scheduled to reconvene for the short session tomorrow.  All indications from legislative leadership suggest that this session will only last a few days and be limited to those items that have bipartisan support and require immediate action to move resources.

The General Assembly will likely reconvene in July or August to consider a fuller scope of proposals to address outstanding needs. That means there will be no full and transparent accounting through a revised budget document for a second year in a row. State agencies will have continued uncertainty at a time when they need to rapidly build infrastructure and adapt to address the surge in demand for public services.

It appears as if the state will not deploy the full complement of federal and state funds in a timely manner — namely the unappropriated balance from last year’s underinvest in public infrastructure, which is available now and needed to protect people from the worst public health threats and long-term economic harms.

Draft bills and summaries that the General Assembly will consider during the short session this week have been released by the House Select Committee on COVID-19. On Friday, the Governor put forward a budget proposal that would allocate $1.4 billion to meet needs identified in the House bills, including drawing down the Rainy Day Fund to stabilize the state’s current year budget that will be impacted by delays in revenue collections.

Given the urgent needs evidenced by the continued transmission of the coronavirus, the health risks faced by essential workers, and the historic scale of loss of work and wages, advancing community well-being in this moment requires bolder proposals.

Other states have done more to move swiftly and comprehensively make policy changes that meet the immediate health and employment issues brought on by COVID-19 and contain the ripple effects into education, environmental, consumer protections, justice, and public safety.  These states have more quickly been able to identify the gaps in federal programs and filled those gaps with policy action and state dollars.

Here are 6 urgent community needs that legislators must address now to ensure a quick recovery from the public health and economic crisis. Read more

Commentary, COVID-19, NC Budget and Tax Center

Maximizing federal dollars to meet urgent needs should be the first priority of state leaders

On Friday, Gov. Roy Cooper released his recommended coronavirus response budget, which would invest $1.43 billion through July 1, 2020. The budget proposes allocations for immediate public health and safety operations, education and state government services, and small businesses and local government assistance.

Prioritizing urgent necessities such as testing and other public health services is a crucial first step, but more should be done in the short term to meet the immediate needs of families and communities while also giving state agencies the assurance that they can build capacity and respond to increased public demands well beyond the three-month window proposed in this budget.

Our analysis of the first three pieces of federal legislation passed in response to the COVID-19 crisis suggests that at least $6.5 billion in relief funds have been allocated to North Carolina. To put this figure into perspective, if the state were to invest all of these dollars today, in addition to the piecemeal budgets enacted instead of a comprehensive budget, we still would only be spending at roughly the historic average as a share of the economy, despite the unprecedented economic shock to our communities.

That is to say, these federal dollars deployed for the increased needs of public health, workforce, housing, and education will barely scratch the surface in comparison to the scale of need that people and communities are facing during this pandemic.

Not all federal funds will be received in the state’s General Fund, the primary fund from which state appropriations are made. State agencies that directly receive federal funds should quickly and fully deploy these dollars to address those needs that they are expert at addressing and at the same time, they should provide the public with a way to understand the priorities and allocation formulas used to deploy those dollars.

Notably, the Coronavirus Relief Fund, the largest stream of federal funds thus far and the source from which the governor proposes appropriating dollars, cannot be used for one of the state’s pressing needs — the anticipated steep loss of revenue brought on by COVID-19 and the simultaneous economic crisis. That’s because this week, the U.S. Treasury released guidance for states that outlines the restrictions on allowable uses, including that the funds be used for necessary expenditures incurred “due to” the public health emergency resulting from the COVID-19 pandemic. These limits are another reason why we need a fourth federal relief package that includes flexible aid to state and local governments and an increase in the federal share of Medicaid costs. North Carolina needs more flexible federal aid to ensure that state leaders can access funds to address revenue losses without making cuts to critical public services and to ensure the state can sustain a crisis response beyond the next three months and for the duration of a full economic recovery.

After years of underinvestments and in light of the high demand for services, our state’s public infrastructure needs a rapid investment of dollars for supplies, technology, and – perhaps most importantly – administration. After all, people run our government.

Take the state’s Division of Employment Security (DES), for example. With over 700,000 state unemployment claims filed since the beginning of the crisis — up from about 2,600 claims per month during the period before the crisis – DES identified early on the need for more equipment, IT infrastructure, and staff and subsequently tripled its staff from 500 to 1,600. Still, many applicants are still waiting to receive their unemployment benefits or for their application to be processed due to the backlog.

Identifying needs and responding quickly by mobilizing dollars at the state and local levels will mean that more families will be able to make ends meet during this crisis by accessing the services and benefits they desperately need. North Carolina should maximize the federal dollars it receives and should prioritize smart investments that quickly put those dollars to use and strengthen the public infrastructure necessary to withstand this economic downturn and to rebuild our communities so they are more resilient for the future.

 Suzy Khachaturyan is a policy analyst at the N.C. Budget & Tax Center, a project of the North Carolina Justice Center.

Commentary, COVID-19, NC Budget and Tax Center

Latest federal aid package falls short in helping small businesses

Image: AdobeStock

New legislation also missed the opportunity to provide state and local governments with much-needed aid

The latest federal package to address the ripple effects of COVID-19 in our communities won’t do the work necessary to ensure people can put food on the table and stay in their homes, or that state and local governments will have the resources to respond to community needs.

Our North Carolina Congressional delegation should return to work immediately on a bolder, more comprehensive package that allows our state to fully recover from the public health and economic challenges we are facing.

The latest legislation narrowly focuses on increasing investments in small business programs established under the CARES Act and boosting the capacity for testing. All of that is important, but it’s already clear that we need a more effective way to support all businesses and people experiencing financial harm.

As has been well-documented in the national media, Black-owned businesses face greater barriers in accessing the existing small business supports because they are too often unable to access bank loans. Immigrant-owned businesses are also facing barriers to access, despite efforts to provide information about supports in multiple languages, because of similar issues in accessing financial institutions.

Many small businesses, which often have the least financial cushion, were pushed to the back of the line and didn’t receive aid from the CARES Act. The most recent bill uses the same broken infrastructure, so there’s little reason to expect that this time will be any different.

To make matters worse, many large businesses can tap into the Paycheck Protection Program.  Many financial institutions have put wealthier business customers at the front of the line, which has diverted funds from the smaller local shops that are hit hardest by stay-at-home orders. This flaw in the design was a major reason the first installment of funds was depleted so quickly, and this flaw isn’t addressed by the most recent bill.

Small business organizations are weighing in with concerns about the proposal on the table for its continued flaws, which threaten to exclude businesses owned by people of color and truly small businesses.

Small Business Majority writes:

“Our recent polling found a vast 9 in 10 small businesses have been harmed by the spread of COVID-19, but we know only a small fraction of those have received the help they were promised. While providing more funds to these assistance programs is necessary, we’ve already seen that they do not provide the quick relief that would help small businesses now and in the future. Equally troubling, this legislation fails to address a critical carve-out that allowed publicly traded companies, large restaurant groups, and hedge funds to apply for and deplete the PPP fund. Meanwhile, true small business owners were left behind, and now they are fearful that help may never arrive.”

The Main Street Alliance writes:

“For small business owners facing increasingly dire circumstances, additional funding for the existing Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) is necessary but not nearly sufficient. The serious design flaws of the PPP will not be solved by throwing more money at these programs. Even the new inclusion of Community Development Financial Institutions and other dedicated funding for smaller lending institutions to meet the needs of minority-owned, unbanked, and rural businesses around the country will not go far enough to secure our small business economy.”

Many changes are necessary to make this program more effective: Read more