NC’s tax revenues are up. Does that mean we don’t need COVID relief?

One year into the pandemic and the limits on commerce and social gatherings, thousands of small business have closed and unemployment remains elevated, but amid these grim economic trends is an unexpected one – state tax revenues are up.

Tax dollars flowing into state’s coffers for the 2020-21 fiscal are expected to exceed last spring’s estimate by 17.6 percent, or $4.1 billion, according to the latest North Carolina revenue forecast. “We expect modest improvement throughout the upcoming (two fiscal years), with the worst economic impacts from the pandemic behind us,” state budget analysts said in the report.

There are various reasons for the revenue bump, but the main contributors are sales and income taxes revenues that rose after federal relief payments provided $18 billion to North Carolina households and $12.5 billion to businesses. “The federal stimulus had a much larger impact on the state’s economy than we anticipated,” the analysts said.

This is good news, but it also raises a question: How much more federal relief does the state need and what should be done with it?

President Joe Biden is intent on pushing through a $1.9 trillion stimulus plan that will provide $1,400 checks to individuals and billions of dollars for municipalities, schools, extended unemployment compensation, COVID testing and vaccine distribution. Senate Republicans are proposing a $618 billion plan.

State Sen. leader Phil Berger thinks the state is so flush it could get by without further federal help. His spokesman, Pat Ryan, told the Editorial Board, “If Congress ends up passing nothing, North Carolina’s fiscal position will be just fine because we’ve been preparing our budget to withstand the impact of a recession for the past 10 years.”

But North Carolina wouldn’t be just fine without the earlier federal relief packages . More is needed for the people, businesses and public schools and universities still struggling from the pandemic’s economic shocks.

Rep. David Price, D-4th, said North Carolinians “are desperately in need an influx of federal aid.” He knows that from more than statistics. “I hear from constituents every day who have lost jobs, gotten sick, cannot pay rent or are struggling to put food on the table,” he said.

Alexandra Sirota, who analyzes state spending for the N.C. Justice Center, which advocates for low-income North Carolinians, said earlier rounds of federal relief and a rebound in state revenues does not mean the pandemic’s impact on the health and income of North Carolinians has been addressed. “The scale of needs far outmatches the dollars that have been committed to date,” she said..

While lawmakers debate, Americans have made up their minds. A Politico/Morning Consult poll last week found 76 percent of Americans – including 60 percent of Republicans – support Biden’s stimulus package.

Greg Brown, a finance professor and executive director of the Kenan Institute of Private Enterprise at the University of North Carolina, takes a guarded view of the state’s economic condition

“I think it’s really surprising how robust the revenue has been for the state,” he’s said. “But I don’t think that just because revenue has been strong that it’s an ‘all-clear’ for the state and local economies.”

On the other side of rising state revenue are rising needs, Brown said, especially among municipalities, the hospitality industry and “lower income households that have been much harder hit because they don’t have a buffer of household net worth.”

There are still many unknowns about how the pandemic will change as the coronavirus mutates and restrictions are eased. North Carolina could yet see another spike in cases. In addition, it’s still not clear what it will cost to help students recover academically and emotionally after months of school closures. And towns and cities need help after losing revenue from a moratorium on utility fees and a sharp decline tax and fee revenue tied to events and conventions.

The needs are there. The public support is there. This is the time to deliver a response commensurate with the nation’s and North Carolina’s needs – some obvious and some still to emerge.