Civitas Review

Much More Needed to Address NC's $25.5 Billion Unfunded Retiree Health Benefit Liability


At a Joint Legislative Program Evaluation Oversight Committee meeting Monday, legislators discussed ways to address the state's $25 billion unfunded liability for state retiree health care benefits. The primary recommendation at the meeting was to "force all retirees on the State Health Plan to enroll in Medicare Advantage. The federal plan, a basic version of which is free to retirees over 65, offers some drug coverage.Backers say the move would save the state up to $64 million per year by shifting costs from the State Health Plan to the federal government."

While its a good sign that legislators are recognizing this massive and growing liability, this proposal hardly amounts to a drop in the bucket. I wrote back in 2012 about this topic and how the generosity of NC's health benefits for retirees is a driving force behind this growing taxpayer liability:

For the (State Health Plan) SHP offers perks that many employees in private industry and even in government in other states might well envy. Consider the following:

  • The active employees’ portion of the SHP premium they are now asked to share for the 80/20 plan is roughly 5 percent of the total cost of the premium (the state picks up the rest of the costs). For the basic 70/30 plan, employees can still enroll at zero cost to insure themselves. For comparison:

    • Employees of large private sector firms pay an average of 19 percent of premium costs for their individual health coverage.

      State and local government employees in the South Atlantic region pay an average of 13 percent of premium costs.

    • Few employers in the private sector offer medical benefits to both active workers and retirees, as North Carolina state government does. In 2010, only 28 percent of large private sector firms offered medical benefits to both employees and retirees.

      • Of those large private employers that do offer medical benefits to both active workers and retirees, 40 percent require the retiree to pay the full premium for coverage while another 30 percent have capped the employer’s subsidy at a fixed dollar amount.

      • Roughly 70 percent of states require retirees to contribute more than a nominal premium, which is all NC now asks.

      • Only seven other states offer to pay 90 percent or more of retiree’s health insurance premiums – even after a maximum qualifying number of years of service.

      • North Carolina is one of only ten states that offer retirees a significant health insurance premium subsidy after only 20 years of service.

The Fourth Estate Needs More Econ and History, Not Less


books-1012088_1920By Jesse Saffron

“If the people who are supposed to keep us aware are unaware themselves, how can we know how to stand up for ourselves?” asks Jay Schalin in today’s Pope Center feature, titled “Ignorance Is Not Bliss for Journalism Majors.”

Schalin, the Center’s Director of Policy Analysis, is a former reporter who understands how important it is for professional journalists to have knowledge of basic economics, history and political theory. That’s why he was shocked to learn that UNC-Chapel Hill’s School of Media and Journalism recently eliminated its economics, U.S. government, and American history course requirements.

Instead, journalism majors will be able to substitute dubious general education courses, such as “Drama 470: Survey of Costume History” and “Women’s Studies 410: Comparative Queer Politics.” “Is [this] decision based on an astonishing lack of awareness…. Or is it due to cynical pandering to students who complain about challenging requirements that force them to expand their horizons?” asks Schalin.

Jesse Saffron is a writer and editor for the Pope Center. In addition to writing articles and editing website content, Saffron manages the Pope Center's summer internship program. He also is a frequent contributor to the National Review’s higher education blog, Phi Beta Cons.

New Study: "Free" Federal Funds Actually Quite Expensive


A new study released by the Civitas Institute and authored by Dr. Eric Fruits of Economics International Corp. finds that as states accept more federal funds, their state and local taxes increase.

In North Carolina, the research shows that each additional dollar of federal intergovernmental transfers to the Tar Heel State is associated with 81 cents in additional state and local taxes and fees.   

In short, as North Carolina accepts more federal funds, your state and local taxes rise.

Importantly, these results suggest that the increases in federal grants to state and local governments associated with the ACA’s Medicaid expansion will have significant future tax implications at the state and local level as these governments raise revenue to continue, expand, and promote these newly fund­ed programs into the future and as federal support tapers off once the expansion is in place.

Researchers believe that these findings have two main causes: states use federal dollars to supplement their spending rather than a substitute for state and local revenue; and matching requirements and maintenance of effort mandates require additional state and local expenditures on programs they otherwise may not have funded.

Also of concern is how the acceptance of federal funds by states erodes state sovereignty. The strings attached to federal funds means that states accept more and more rules created in DC rather than controlling laws and rules more locally.

Amidst Turmoil, Some Advances in Rights for UNC Students


By Jay Schalin

The last two years in higher education at times have seemed like nothing more than a series of outrages against freedom and its protections. Ridiculous new words and phrases have appeared—trigger warnings, safe spaces, and microaggressions—to describe tools used to silence speech. Government regulations and new bureaucratic positions, many courtesy of Title IX, have been created to interfere with the right to due process.

Such recent events as irrational mobs forcing a college president out of his job due to non-events—hoaxes, really—at the University of Missouri are pushing the attack on freedom to Maoist levels.

But perhaps things have to get to this point for a reaction to these intrusions to emerge, and there are some positive trends appearing. Jenna A. Robinson writes how, in North Carolina, there have been quite a few positive developments as far as protections for free speech and due process.

To read her  article, click here.

Jay Schalin is Director of Policy Analysis for the John William Pope Center for Higher Education Policy

Where Does NC's Tax Climate Rank This Year?


The Tax Foundation today released its new 2016 State Business Tax Climate Index. True to its name, the Index ranks the 50 states according to how conducive each state's tax code is to job creation and economic growth.   

North Carolina holds steady at 15th in the 2016 rankings, the same slot as 2015. This follows an historic jump from 44th to 15th in one year, following the 2013 tax reforms.

After the most dramatic improvement in the Index’s history—from 44th to 15th in one year—North Carolina has continued to improve its tax structure, with additional elements of the historic 2013 reform still phasing in. The corporate income tax, which was cut from 6.9 percent to 6 percent last year, has continued its scheduled decline, falling to 5 percent in 2015. The corporate income tax is subject to a trigger mechanism that will further reduce the rate in future years when revenues are healthy. The individual income tax, which was converted from a graduated rate tax with a top marginal rate of 7.75 percent to a single-rate tax of 5.8 percent in 2014, saw a further modest cut this year, decreasing to 5.75 percent, with further reductions scheduled through 2017.

NC spent years as one of the worst tax climates, according to the rankings, but now boasts a far more competitive tax code. And we may continue to improve. A recent Tax Foundation spotlight report projected that NC could climb to 13th when the 2017 rankings come out.

Gov. McCrory's office trumpeted the news, also crediting the 2013 reforms as a major boost to North Carolina's competitiveness. Here's what the governor had to say:

“Historic tax reform has significantly increased our competitiveness and strengthened North Carolina’s economy by putting more money into the budgets of working families,” said Governor McCrory. “This year’s Tax Foundation rankings are another reminder that nothing compares to the business climate of North Carolina.”

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