May 22, 2003

JUSTICE CENTER RELEASES WORKING HARD IS STILL NOT ENOUGH

In this update:

• Justice Center Finds Majority of Families Can’t Afford to Raise a Child
• Budget Update: More Save Services, Raise Revenue AND Federal Money?

JUSTICE CENTER RELEASES REPORT THAT FINDS A MAJORITY OF NORTH CAROLINA FAMILIES CANNOT AFFORD TO RAISE A CHILD

Read the full report
Click here if you would like a copy mailed to you or if you would like to endorse the report.

Sixty percent of North Carolina families with children, comprising 1.6 million individuals, are not earning enough to meet their basic needs according a major policy report released Wednesday by the NC Justice and Community Development Center (the Justice Center). The report, entitled Working Hard is Still Not Enough, updates the Justice Center’s 2001 Living Income Standard (LIS) and finds that, on average, North Carolina families with children need more than twice the income of the “federal poverty level” to meet their most basic needs. Even for small families with one or two children, this amounts to an average wage of $10.60 per hour. Over 600,000 North Carolina families with children simply do not earn this.

“In the majority of these families at least one parent is working. Before the recession, it is likely that even more had a job,” said Sorien Schmidt, co-author of the report and the Justice Center’s Legislative Director. “The problem is that these families are caught in a major restructuring of the economy. The manufacturing jobs that paid enough to support a family are permanently leaving the state and being replaced with a new economy that is divided into low-wage work and high-skill jobs. That trend did not start with the recession and it won’t end with it either.”

Working Hard is Still Not Enough reveals that six of the eight fastest growing occupations in the state pay average wages less than the Living Income Standard and, indeed, less than average manufacturing wages. Some, like childcare, pay only $7.23 per hour on average. Other fast growing job sectors, such as registered nurses, pay more but require higher or different skills than those possessed by most manufacturing workers.

The report identifies two other prime reasons that family income levels have stagnated. First, except for a small boost from the strong 1990’s economy, value of real hourly wages has been dropping in tandem with the decline of minimum wage. Neither the minimum wage (which has remained at $5.15 for six years) nor real average hourly wages have kept up with rising family costs, especially childcare and housing expenses. Second, as wealthy households have seen a drop in the overall share of their income going to taxes, the tax burden on middle and low-income North Carolina households has risen. This has meant that the families least able to bear the cost of increased taxes are being asked to pay the largest share of their income.

As a result, families are relying more heavily on unemployment insurance, the Health Choice children’s health insurance program, food stamps and other government funded services. These programs not only help the families make ends meet, but they also add much needed revenue and economic activity to communities, especially in counties devastated by plant closings.

“The bottom line is that North Carolina is becoming increasingly split in two, with half losing ground or stagnating,” said Elizabeth Jordan, Fiscal Policy Analyst at the NC Budget and Tax Center and co-author of the report. “Since the recession began, it appears that middle and low-income families have lost the income gains made in the 1990’s, while the wealthy are still experiencing income growth. Rural counties are also falling farther behind the urban. The middle class appears to be moving downward, rather than the poor moving upward as we would hope.”

“The good news,” Jordan continued, “is that this report provides state leaders and the public with the information they need to define the issues facing families and to deal with them. It lays out a blueprint for addressing the issues that are holding back the majority of families and ultimately, the entire state.”

The report makes specific recommendations to improve state and local policies in six areas:

“Ultimately, state leaders, advocates, workers, employers and families must come together in a concerted effort,” concluded Schmidt, “to bring the state through this economic transformation and craft an improved 21st century economy so that all hard working North Carolinians can meet their basic needs and have hope for the future.”

BUDGET UPDATE: SAVE SERVICES, RAISE REVENUE and FEDERAL MONEY?

The legislature is at a virtual standstill regarding the budget, at least when it comes to public debate. Since it was announced last week that there are $400 million less in revenue than was budgeted by the House or Governor in their 2004 budget proposals, legislative leaders have been working hard behind closed doors trying to find a way to come up with the needed funds. There is a real possibility that dramatic and devastating cuts would be the answer to this problem, and many legislators already found the proposed House budget cuts unacceptable. Consequently, the deadline for completing the budget moved from the historically early May 22 to still early mid-June.

Thursday legislators may have gotten some good news they hoped to hear from Congress. As Bush pushes Congress to pass another huge tax cut for the wealthy, many members of Congress have found it hard to swallow and have insisted that the tax cut bill also include aid to states. (38 states are suffering huge budget deficits) The legislature was abuzz with news that the latest agreement on the federal tax cut bill included $20 billion of relief for the states. Part of this would go to state’s for growing Medicaid costs and part would not be earmarked for any one program but would help states with their budget crisis. Estimates are that North Carolina could get from $300 to over $500 million between passage of the bill and September 30, 2004. The federal bill has yet to pass Congress and is expected to be a close vote. It would still implement substantial tax cuts to the rich that could mean a further loss of revenue for states. (Because state tax codes often link closely with the federal tax code, a cut at the federal level often means a cut at the state level.) Depending on when money is released and how much comes to the state, the state aid could possibly fix North Carolina’s budget woes --- but only for one year. Next year the legislature would still be facing the same budget crisis they are now, because it appears the federal money would only be for one time and not repeated in later years.

While nothing is certain about the federal dollars, it is still clear that legislators

Also on Thursday, a “super-coalition” consisting of AARP, the Covenant with North Carolina’s Children, Coalition 2001, El Pueblo, Inc., the NC AFL-CIO and 200 other individuals and organizations, sent a letter to all legislators, Lt. Governor Beverly Perdue and Governor Easley asking them not to fill the budget deficit with more cuts to critical programs and instead to raise revenue. Whether Save Services, Raise Revenue is essential this year or not, it is still critical to the state’s 2004-2005 budget AND SO legislators need still to be vigilant about the revenue issue. Below is an excerpt from the open letter.

SAVE SERVICES * RAISE REVENUE

For the past two years, the North Carolina General Assembly has faced unprecedented budget shortfalls. As a result, vital services for older adults, children, working parents, people with physical and mental disabilities and newborn infants have been cut or completely eliminated. Other critical needs must be addressed—our mental health and our child welfare systems remain in crisis.

This fiscal year, we again face another enormous state budget deficit. Solving the budget problem must not mean more cuts to vital services for the state’s most vulnerable citizens. Solving the budget problem should mean raising revenue where necessary to cover essential services.

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