March 29, 2024

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NC faces a big budget shortfall. Will Congress deliver billions in aid? And when?

North Carolina could face a $4.2 billion budget shortfall due to the economic impacts of the coronavirus and the shutdown implemented to stop its spread, the state’s budget forecasters predict.

Now congressional Republicans and Democrats are debating the best way to help states and local governments.

“It is clear that we continue to need significant federal resources to recover,” Gov. Roy Cooper wrote members of North Carolina’s congressional delegation earlier in May.

Cooper has spoken with President Donald Trump multiple times, including in the past week, and pressed for both additional funding and increased flexibility in using money already sent to states. Cooper has also talked with House Speaker Nancy Pelosi about these issues, spokeswoman Dory MacMillan said.

“If that’s not dealt with, then state government and local government are going to have to make significant cuts in core services like law enforcement, like education, like transportation,” the Democratic governor said at a news conference earlier this month.

But while the Democratic-controlled U.S. House of Representatives has approved money for states, cities and counties, the GOP-controlled Senate is more reluctant. Some Republican senators have expressed a desire for more immediate aid to states and cities, but others — including Sen. Thom Tillis of North Carolina — are content to wait for more consensus and examine the impact of reopening decisions across the country.

“I’m not sure we should be marching ahead toward June. June is a good time to look at how the economy is responding. A lot of things are going to be different. A lot of economies are going to be open again. What industries and sectors might need additional help? We’d be better served to tune the CARES Act and fill some of the gaps,” Tillis said in a phone interview with McClatchy.

North Carolina received $3.5 billion from the $2 trillion CARES Act, one of several congressional efforts to help deal with the effects of the coronavirus. State leaders agreed on a plan to allocate $1.6 billion of that money earlier this month.

Tillis, who said he has spoken with Cooper and state legislative leaders, said he wants to give states more flexibility in how they can spend money from the CARES Act. Tillis said he believes “there is an argument to be made” about aiding states and cities that can demonstrate they were in sound fiscal shape before coronavirus created a shortfall.

“A discussion I’m not willing to have is states that were already in an economic crisis before COVID-19,” Tillis said.

Cal Cunningham, Tillis’ Democratic challenger in the November election, said that since education and health care are such a large percentage of the state’s budget, it is important to prioritize keeping teachers and delivering health care during the pandemic.

“Our state is running a very significant shortfall. I’m hearing from local leaders about the challenges they have emerging: keeping first responders on the payroll, sanitation workers out,” Cunningham said in a phone interview with McClatchy. “We need to make sure the money is getting to the right place, the place where the needs are urgent and great.”

NC faces shortfall

North Carolina has $1.2 billion in rainy-day funds after Republican-led efforts to add to the savings in recent years.

But now the state expects shortfalls of $1.6 billion this fiscal year and $2.6 billion in the year that starts July 1, according to a joint forecast by the legislature and Cooper’s administration. The revenue for next year is about 10% lower than the $26 billion that had been expected.

Those shortfalls are in addition to an expected $774 million drop in the highway fund and the highway trust fund, according to the top Republicans in the legislature, Senate leader Phil Berger and House Speaker Tim Moore.

HEROES Act

The pleas of Cooper, other governors and mayors from across the country to do more led the U.S. House to pass the $3 trillion HEROES Act on May 15.

“Why? Because their budgets are challenged, they’re underwater. They cannot provide the services that their citizens need and expect,” said U.S. Rep. G.K. Butterfield, a Wilson Democrat, earlier this week.

“Unless we provide a rescue to municipalities, then they’re going to face a real crisis. They’re either going to have to cut back on services, lay people off or raise taxes. None of these options should be on the table.”

The bill includes $520 billion for states and another $500 billion for cities and counties over the next two years.

The state of North Carolina would received $13.3 billion in that time, according to estimates by Pelosi’s office. More than 680 North Carolina cities, towns and counties would also receive funds under the act, including more than $225 million for Raleigh and more than $420 million for Charlotte. Wake and Mecklenburg counties would receive more than $618 million each.

The bill also includes a continuation of direct payments to Americans and expanded unemployment benefits — items that were in previous coronavirus aid packages.

But Senate Republicans are unwilling to consider the bill, contending it is loaded with Democratic policy items not related to the coronavirus and weary of spending another massive sum after trillions in aid already passed. A “socialist wish list,” is what Rep. Virginia Foxx, a Banner Elk Republican, called it.

“We think we ought to take a pause here, do a good job of evaluating what we’ve already done,” said Senate Majority Leader Mitch McConnell, a Kentucky Republican, told reporters earlier this month.

Butterfield said the HEROES Act could be a start in negotiations as there are things Republicans want to see in the next aid package, including liability protections for businesses.

U.S. Rep. David Price, a Chapel Hill Democrat, took exception to McConnell’s use of the word pause. Price, like Butterfield and Rep. Alma Adams of Charlotte, voted for the HEROES Act. All three have called on the Senate to act soon.

“What makes him think this is time for a pause? Is there any pause in our constituents’ need for a paycheck? Is there any pause in the need to for testing and health care treatment? Is there any pause in people’s need for food and nutrition support? Where does this come from?” Price said on a conference call with other Southern House Democrats.

“The idea is to keep going here, to build this bridge until we get to the other side and to give our families and our communities the support they need.”

Senate campaign

Cunningham said money for state and local governments, additional resources to run elections, fixing the small business loan program and providing aid to hospitals, especially rural ones, are the priorities he wants to see in the next aid package. He backed the idea of extra pay for essential workers and wants to see rural broadband connectivity addressed as more people work from home and education moves online. Many of those ideas are included in the HEROES Act.

“We need bipartisan solutions and narrowly tailored solutions,” he said.

Just one Republican in the House voted for the HEROES Act and more than a dozen Democrats voted against the bill.

Cunningham stopped short of backing the HEROES Act, saying “it’s a lot of tax money and I think we need to make sure it’s directly calibrated to pandemic response.”

“What I would promote and support and work for as the senator from North Carolina would be calibrated to address the pandemic and address the things I’m hearing from North Carolinians,” he said.

For more North Carolina government and politics news, listen to the Domecast politics podcast from The News & Observer and the NC Insider. You can find it on Megaphone, Apple Podcasts, iHeartRadio, Stitcher or wherever you get your podcasts.

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