
January 31, 2025
1/31/2025 | 26m 46sVideo has Closed Captions
Helene funding hearings, a bill to end state taxes on tips and the effects of a federal grant pause.
Lawmakers meet to discuss the Hurricane Helene recovery budget and priority needs; and a bill proposes to end state taxes on tips. Plus, what the pause on federal grants could mean for NC universities and health care. Panelists: Mitch Kokai (John Locke Foundation), Dawn Vaughan (News & Observer), political analyst Joe Stewart and former State Senator Mary Wills Bode. Host: PBS NC’s Kelly McCullen.

January 31, 2025
1/31/2025 | 26m 46sVideo has Closed Captions
Lawmakers meet to discuss the Hurricane Helene recovery budget and priority needs; and a bill proposes to end state taxes on tips. Plus, what the pause on federal grants could mean for NC universities and health care. Panelists: Mitch Kokai (John Locke Foundation), Dawn Vaughan (News & Observer), political analyst Joe Stewart and former State Senator Mary Wills Bode. Host: PBS NC’s Kelly McCullen.
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Learn Moreabout PBS online sponsorship- [Kelly] State lawmakers reopen oversight into Hurricane Helene recovery, House Republicans propose no state tax on tips, and that pause on federal grant payments this week?
Well, it's open discussions on North Carolina healthcare.
This is "State Lines".
[bright intro music] - [Announcer] Quality public television is made possible through the financial contributions of viewers like you, who invite you to join them in supporting PBS NC.
[bright music continues] ♪ - Welcome back to "State Lines".
I'm Kelly McCullen.
Joining me today, our good friend Dawn Vaughan of The News and Observer, to her right, former State Senator Mary Wills Bode joins us, the John Locke Foundation's Mitch Kokai is in seat three, and political analyst, and you've done lots of things, Joe, but you're a political analyst right now, Joe Stewart!
Welcome, Joe.
- Thank you.
As my father said, a person that has at least two skills never goes hungry in a slow economy.
- And happy New Year.
Who's not been on the show since the...?
Happy New Year to you.
- I have not.
- Always want to wish everyone a happy New Year.
Happy New Year to you, in case I haven't told that to you in the other three shows of this month.
But let's start with the Stein administration.
Speaking of happy New Year, it told state legislators this week that Hurricane Helene recovery will be a $26 billion job.
Lawmakers heard the federal government seems willing to approve just under $16 billion of that amount.
The Stein team says demand for temporary trailers has turned out to be lower than expected and they want funding to rebuild private bridges and roads alongside state roads.
State House Speaker Dustin Hall told Raleigh reporters, "the state wants to release money quickly.
It doesn't want to cover any costs that the feds will use its money to pay."
Makes sense to me, but it slows things down when you just don't release money like a flood.
- I feel like we've kind of been talking about this for months now, where it's how much state money versus how much federal money, and I think it's gonna continue on.
The one good thing is that even though, y'know, Republicans and Democrats don't necessarily like each other some of the time, they all want Western North Carolina rebuilt.
And I think what's a little bit different with Governor Stein is that he seems more proactive to not want to repeat the criticism of former Governor Cooper's administration with the Eastern hurricane relief.
And the legislature is definitely gonna hold him to it.
They had two committees this week looking at not just what the state spending and federal spending could be, but also still being mad about what happened in Eastern North Carolina and wanting to put in these guardrails so that doesn't happen again when it comes to Western.
- Mary Wills, the political side of this.
At what point would Eastern North Carolina legislators, Democrats and Republicans, draw a line on the Helene Recovery to say, "we're eight years and counting down home"?
And it's great to bring the guy to Raleigh and blow him out in a public hearing, but that still doesn't get money back to Eastern North Carolina, which is sort of your neck of the woods, kind of.
- Sure, yeah, my new home in New Hanover County, of course.
So I think both the Florence, Matthew, and Helene recovery efforts speak to the fact that this is a money problem.
Pryor Gibson this week talked about how they asked the federal government for about $1.3 billion for Eastern North Carolina and they got less than half of that.
It's really hard to make up that kind of difference.
And so as we look to Western North Carolina, the federal government has said they're gonna pick up about $16 billion, which leaves the state with $10 billion to have to come up with the monies to fund.
And our last budget in North Carolina was about $35 billion, so we're looking at a tab of about a third of our state budget, and that's a very, very high hill to climb.
And so I'm gonna be really interested in seeing how the legislature looks forward and projects on how they're gonna make up that difference in a very short amount of time.
- Mitch, there's three or four ways to take this conversation.
You can look backwards in time to the Eastern North Carolina recovery.
Helene's demanding fresh billions now, or you can look towards what she's saying as a third of our state budget, if they wanna bite it off.
This isn't a group that's going to raise taxes.
You can't cut a lot, and the feds are drawing a line on what they'll help with.
So, take this ball and run with it.
And Pryor Gibson has credibility in Raleigh, Former state legislator, well respected by both sides.
So, who's making more sense here?
- Well, I think the thing that helps the situation the most is that you do have some new people in this debate.
Having Josh Stein in there rather than Roy Cooper, basically sets aside the argument of NC Corps, and just how well or how poorly it did.
I think if Roy Cooper were still the governor, and if Helene Recovery was going to be run by the same outfit that's dealt with the Eastern North Carolina hurricanes, that legislators would be a lot more critical in saying, "Wait a minute, we had the hundreds of millions "of dollars of missing money.
"You've had years and years, "and these houses haven't been built."
I think by having Josh Stein, by having him set up a new group, they're not gonna give him a free pass because they've saw what happened when they did not have as much oversight probably as they needed to for what was going on with NC Core.
But, it's a chance for a fresh start saying, "All right, you know what problems we've identified, "you've started this new Grow NC group, "let's make sure we get it right this time."
But I think, as has been alluded to, the biggest problem is gonna be where's the money gonna come from, and how much of it can be taken care of right away, and how much will be lingering for years on end?
- Joe, you're in the insurance industry in your civilian job.
I'll ask you this.
All the attention is on state response.
Where do insurance companies fit in for these disasters where they haven't had a flood in 200 years, and all of a sudden everything's gone?
Does the industry just kind of stay quiet?
- Yeah, the event in the West was very unusual in terms of a flood event in Western North Carolina.
The thing to remember though is, we think of these perils being associated with large scale natural disasters like hurricanes.
The truth is, the prediction is that North Carolina will experience five additional inches of rainfall every year anyway.
We may have more casual flooding occurring across the state.
There is a tremendous amount of pressure in the property insurance markets right now.
If you look at the wildfires in California, that's probably gonna end up being a three quarter, at least a quarter trillion dollar loss of property in that part of the state.
We still have a lot of pressure in the markets because of the cost of capital, the reinsurance that companies have to buy is incredibly expensive right now because of all of these natural disasters that are occurring.
And the thing to always remember, the amount of federal money notwithstanding, sometimes getting it implemented is tricky because of the necessary documentation, and other measures that are required by the feds for the money that they do provide.
You're dealing with people who in many instances, have lost everything, and so, they don't have the necessary documentation immediately available.
It takes time.
Sometimes where they wanna rebuild is not a place the feds think they should have their money spent to rebuild a property because of the peril that's faced there.
This is a tremendously challenged time and North Carolina fortunately has not had an availability crisis of insurance as some other states are beginning to experience.
But many more events like this, and I hate to say it, we're the number one risk for wildfire this spring because of all of the timber that's on the forest floor in the West because of Helene.
And, Hurricane season is just five months away.
- I think that the state budget process this year is gonna have a lot more scrutiny because of, there's already been talk about having a much larger rainy day fund, because obviously, you know, the state needed it needs it, is going to continue to need it, and every line of like, "Why are you spending money on this, "when we have this big bill coming due?"
So I think that just the way things are scrutinized is gonna be a little bit different because I mean, every dollar counts really, you know?
And again, people are waiting and all this red tape that was the problem with Eastern North Carolina, or part of the problem, they really don't want a repeat of it.
- And it'll be very interesting to see how much bipartisanship takes place because of this.
I mean, we saw that at, right after Helene struck, that first bill that was passed that pretty much everyone was on board, by the time the second bill, I think everyone voted for it, but there were starting to be some talks about why aren't you moving more quickly?
And then the third bill, of course, got caught up in all of the partisan heat because of so much that was put in the bill that didn't have anything to do with relief.
It was about changing government structure.
So if the Helene bills are kind of clean Helene relief, does everyone get on board or does it end up getting to be the partisan fights that we're used to now?
- Well, I think, and Speaker Hall had said that he wanted it, he called it, you know, passing a mini budget sooner than waiting for the budget process that could drag out, you know, beyond the summer, just to get that money out there faster.
- So budget talks are already there.
They're already talking about budget.
- Well, a Helene bill, a standalone bill, earlier, because when you tie it to everything else in the budget, that's a lot of policy, that's a lot of, like I was saying, scrutiny about other spending, and this would be a way to get some more money out the door sooner.
- Well, and to your point, Senator Heis said, at the end of last year, he had always thought about around $5 billion in a rainy day fund was more than enough, and what we're quickly realizing is it's not.
So how do we spend the rainy day fund wisely and also build it to prepare for the next?
And so I think there are just a lot of challenges and you know, we also have to keep a certain amount in reserve so that we're eligible for federal matching.
And so we can't just spend everything down immediately, and a lot of this uncertainty about what's gonna be repaid, how do we repay it, how do we get it out fast, but keep enough, it's incredibly complicated.
And so I think we really also need to manage expectations about what people can expect so that frustration doesn't percolate and become a finger pointing of who's not doing their job, which we've seen in other, unfortunately, disaster situations.
- Moving quickly matters for two reasons, one, the contractors that you would want to come into the area to do the repairs need to know that money is flowing so that they have a business reason to be in the West.
And the second is, you want people to be restored residentially.
That helps get the economy starting back, if people are back in their homes, able to work, then the amount of federal money that's needed is lessened because people are getting back on their feet.
- And another point on that, that was very interesting, prior Gibson's already been referenced, the person who's now overseeing the NC Corps operations in the East, he told lawmakers, basically, "Here's the amount of money that we think we need, but even if you don't want to give us that amount of money, tell us what you're going to give us so that we can secure those contractors.
If they don't think any money's coming, they're going away.
- I got a question for you about that.
If the legislature did not fund NC Core for Eastern North Carolina at a level they said they could be effective, why should people believe the state legislature's gonna fund Helene recovery at the level they say they need to recover?
- Yeah, I mean, I think the issue there is that legislators will be looking at NC Core and saying, "We've already given you a ton of money and you've wasted it.
Why should we give you any more?"
Whereas the Helene situation is still fresh, it's a new group of people, a whole new different outfit.
But I think you would have some problems with the legislature and with people who are following this very closely saying, "All right, why are you helping these folks and not these folks?"
And that could end up being a political and a potentially partisan fight.
- Joe, last question on this.
The Biden administration promised up to $150 billion to rebuild the LA area in California.
You also have the Olympics coming in that Donald Trump wants to make the marquee event of a restored Los Angeles metropolitan area.
In DC, how did Tillis and Ted Budd and our Congressional caucus way up against Adam Schiff and all the Democrats in the House.
And influence and the ability to steer some of $150 billion back towards us.
- Well, I think certainly, I mean, it's not a partisan issue to try to respond and help people recover, but North Carolina is a relatively significant state.
The president won here, he didn't win in California.
And think the delegation is very strong in terms of their stature.
Tillis running for reelection in '26.
I think the White House would wanna be supportive of Tillis being able to say that he was able to deliver on federal assistance to the state.
And we're a growing state, we're economically significant to not only the southeastern part of the country, but the entire country.
Given the companies that are headquartered here, I think we're in pretty good shape.
It is a competition and its resources are scarce, but I don't think we'll lack for any ability to draw down federal money.
Our delegation in Congress is pretty strong.
- 10 billion short as of recording this show, we'll see how that goes.
Excellent point, Joe.
House majority leader, representative John Bell's, announced state legislation to end state taxation of tips, bonuses, and overtimes this week.
The house bill would end taxation of all tips and overtime, but allow a $2,500 deduction on bonuses.
Representative Harry Warren says it could spur workers to take on extra shifts and fill labor shortfalls.
Mary Wills, well, there you go, free overtime if you wanna work 41 plus hours a week.
- Yep, yep, so directionally, I agree with this bill.
I think we need to be doing more to help low-wage earners, you know, make ends meet.
That's certainly a challenge that folks are facing.
But in terms of substance, the reality of the situation is that tipped workers make up about 2.5% of our workforce in this country.
And about a third of them aren't even eligible for income tax.
They don't make enough to meet that requirement.
So we're talking about really assistance to very small sliver of our working population, a tipped working population.
And so I would much rather see a much broader, more comprehensive look at how we can help these people in these lower-wage brackets get where they need to go to make ends meet.
And, you know, I will say about tax policy in the legislature, I think it is very interesting that in just about five years, corporations in North Carolina will not be paying any taxes.
So I think this is a raw deal for our low-wage earners in North Carolina, that a very small percentage of them are gonna have zero taxes on their tips or their bonuses or their overtime pay.
When corporations in North Carolina will not be paying anything in just a couple years.
- What would be a better bill and deal if this is a raw deal for them as proposed?
- So I think we need to take a really honest look at minimum wage laws in North Carolina.
I think $7.25 is very low.
I don't know how families are making it to be quite honest.
I think we need to take a really hard look at childcare and how we can ease that burden.
And you know, I think that if we're gonna do something to help a certain subset of the population that is struggling, we need to take a much more comprehensive look instead of just a very, very small percentage of the population.
- Sounds good.
Mitch, it was thrown out there by a Trump speech, what about September?
And Kamala Harris jumped on the bandwagon as well, but that's Nevada where there's a lot of housekeepers and card dealers and things of that.
what makes a Nevada proposal to pander to those voters, good policy for North Carolina, if it does?
- Well, I'm not sure that this was done because it was thought to be necessarily good policy.
I think it was, "Hey, this sounded good on the campaign trail.
- It's popular for sure.
- Why don't we put it out there for North Carolina?
It's definitely true that this would not have a major impact one way or another on the North Carolina economy it would help some people, might not help others as much.
If they really want to help people who are at the lowest end who are still dealing with any taxation, those who are still paying taxes in North Carolina, they can raise the standard deduction again.
That's been one of the key things that's been done as the rate has been lowered and the rate is continuing to go lower as the years go past.
If we hit some revenue triggers, the income tax rate will go lower again.
But they've also raised the standard deduction so that more and more North Carolinians are paying no income tax at all, which is better than just getting a break on your overtime tax.
- But Joe, it's not cool and it's hard to articulate an increased standard deduction when most folks just fill it out and send it in.
Tax on tips, it's a good political optic and a lot of voters like that.
It may have pushed Nevada over into the Trump column.
- Well, there's a theory behind this, at least in terms of the overtime provisions.
And I'm not sure that it works entirely.
I'm not an economist, but some part of this is we have, relatively speaking, still a relative low participation in the workforce.
We had about a high 60% of the eligible workers in this country actually in the workforce prior to the great recession of 2008 and 2009.
And then it's dropped to the low 60s and sort of bumped along there through COVID and to the current point.
The honest story, the story here is that we don't have enough people working in America for us to remain productive at the level we need to be to fully compete in a global economy.
Some part of the theory behind taking the taxation disincentive away from overtime is that you encourage people to work more, hopefully raise up productivity, not more people in the workplace, but the people in the workplace working more.
And I'm not entirely sure that it works that way to get to the level of productivity that we need, but something's gotta be done to get more of the eligible workforce in this country actually working.
I'm not sure taxation is the right way to do it, but that's a fundamental problem if we're gonna remain competitive in a global economy.
- It sounds good.
I mean, no one wants to pay taxes, so if they say, you know, "You can get this bonus" or, "Your tips, you won't pay taxes on it."
That sounds good.
Now, incentive wise, to Mary Will's point, if your overall pay is higher, that's gonna put a smile on your face a lot more than me paying a little bit less in taxes if your whole income is higher.
- And I was gonna say that you mentioned for global competitiveness, the other reason you need more people working and working more is to pay for all of the government benefits that the increasingly larger number of people are taking.
I mean, the baby boomer generation is now the retirement age.
Next it'll be the Gen X folks who are retiring.
You need people working to pay for that because all of what we have been paying in paid for the previous retirees, it's not just sitting in a bank growing.
You need to have a lot of workers paying for this.
- Mary Wills, is this a cue that this bill, if it ever passed the House, goes with the Senate, does that get put in the old budget negotiation final package?
That sounds ripe for, if you give us casinos, you'll get, you know how the game works.
- Some horse trading?
- Absolutely.
- Yeah.
Between the two, the House and the Senate.
Yeah, I mean I think this is still a very new idea.
And so I think the legislature, you know, I know President Trump is very interested.
He ran on it, as mentioned, the federal government, I believe has introduced similar legislation.
I think we still need a little bit more time.
I think one of the most important laws that we consider in the legislature is the law of unintended consequences.
And I think there are a lot of potential unintended consequences that we really haven't had time to think through.
And we just talked about how we're gonna be facing a $10 billion shortfall.
And so is it really the best time to be thinking about, you know, a couple cuts here, a couple cuts there.
When we can do a much more comprehensive, well-rounded tax policy that really sets North Carolina on a very positive fiscal path forward.
- Democrats will go for this?
They go for this bill?
- I think so.
I mean, I really, I think we still need more time to study it and to see who would be impacted by it.
I mean, a lot of younger, a lot of younger people, the statistics show are these tipped wage earners.
And part of the problem when I was doing research on this is that, you know, your income is what determines your eligibility for a loan, like a home loan.
So, if your income is lower, because that's not what's being taxed, you're not gonna be able to get a loan for a home or some of these other things.
- Off the books.
- To your point about the horse trading though, since this was sponsored by the house, one of the house leaders, John Bell, that could be a reason that it would get tied up if this becomes a high priority for 'em.
- It seems like, I mean, it's a messaging bill, too, from him.
- Right.
- That if you know, if Bell is the sponsor, then it's gonna go somewhere.
- All right.
The Trump administration announced a pause on paying federal grants for many government programs this week.
The pause caught the attention of university hospitals and research agencies in this state.
It's a $2 billion source of funding.
The National Institutes of Health reported previously that approved grants would still be paid out, but it would still need guidance, Joe, before they approve any new grants.
The state's Department of Health and Human Services based in Raleigh, nearly 80% funded by the federal government and Medicaid expansion hinges on feds not reducing subsidies for all those new patients, 675,000 of them in this state.
I'll turn this over to you.
Judges has paused this, so I guess the grants are still, but Donald Trump rang the bell and that brings it home to us.
Are people worried about DHHS funding, university funding, or Medicaid expansion?
Which one has the political eye?
- Well, you know, the bigger story here is I think the Trump administration is very interested in actually exerting greater control over how federal appropriations are actually handled.
The Trump administration internally has had some discussions about this phenomena of abatement, which is going back to a 1974 law that gives the president the ability in some very limited circumstances to not spend the money that Congress has authorized for federal programs, but only if the president provides adequate notice to Congress.
I think the Trump administration is very interested in trying to create a test case to prove that it's unconstitutional to limit the president's ability to spend the money or not that Congress has appropriated.
This causes a lot of disquiet.
I think like any business, people need to know a reasonable expectation of how the revenue will flow.
Researchers and scientists and other people that were counting on federal money being dispersed that had been approved for that purpose by Congress, I think were disquieted by this.
And there was a little bit of a Humpty dance.
It was a memo that was leaked and then they rescinded it and then there was a court case.
But I think at the end of the day, this is gonna be a very interesting effort on the part of the Trump administration to make the point that they want to try to restrain federal spending.
They need to reduce the debt.
They feel very strongly they need to reduce the deficit, which is $36 trillion.
They want to end the sunset of the Trump era tax cuts.
That's $4 trillion in the federal government that's gotta be found.
They wanna reduce Medicaid spending overall by $2 trillion.
It's gonna take a very strong and powerful executive in the White House to be able to do those sorts of things with the federal budget.
This is unchartered territory in terms of the relationship between the President and Congress, both of which are controlled by the same party now.
We'll just see how Congress feels about this sense of its power of the purse being taken away by a very strong president.
- Yeah, I think like everything in the past, what has it only been a week, two weeks now of Trump?
He's getting all the attention now, but there's another, there's other branches of government and then, there's also state versus federal.
So, I think we're gonna see state versus federal and local involved there, especially when it comes to these federal grants that come down to states and local governments.
And then the fight between, just because it's all Republican controlled doesn't mean they all agree.
And I think we will start to see that play out.
- And remember, we're dealing with the art of the deal President.
He puts something out there, which some people may get shocked at, it kind of throws them off balance, and then sometimes comes back with something that they can accept.
Even if that wasn't what they would've liked at first, they look and say, well, he wanted something crazier or even worse than this and that's part of his deal making - In Raleigh, Mary Wills in the Senate and House, they're very conservative, but if it comes down to even a slight reduction in Medicaid subsidies for the expansion, it does trigger a cancellation or a rollback to previous standards.
What happens, in your opinion, and you're not even in office anymore, you can tell us, what happens in that case?
Democrats have something they can lean on, but what do Republicans do?
- Well, I mean, and we do.
I think this is kind of a nice end point of our segment here.
I mean, we talked about the uncertainty at the federal level and how that has, for Hurricane Helene, and how that has cascading implications here in North Carolina.
We cannot effectively plan for the future if we don't have certainty about what we can expect from our federal government.
And I think one of the points that Joe mentioned about this unprecedented usurpation of power from the executive branch of the power of the purse is that traditionally, when we have seen such oversteps from one co-equal branch to the other, that branch, the legislative branch stands on its power and says, no, no, you can't, that is our power.
And what we have seen is a real acquiescence from the majority party in Congress.
They haven't been loud about how that power has been taken away.
And I think in large part, that's because one of President Trump's key allies is the richest man in the world, Elon Musk and he has threatened to finance primary challenges to any of the Republicans who do not fall into line.
And so I think that is something we all need to be very concerned about going forward.
- Yeah, but Congress falling down on the job has been a longstanding problem.
It's been a long time since Congress, whoever's been in charge, has stood up to the executive.
The executive has really built up power, going, at least, back until the the Clinton years.
- Yep.
- Well, that's a great way to conclude this program.
Thank you so much for being on.
Congratulations, Mary Wills.
- Thank you.
- Happy New Year to all of you.
And well, we had such a robust show, but you know, we have very big topics at the state.
I appreciate your insight.
Appreciate you for spending this 26 minutes with us every week.
It means a lot to us.
Email your thoughts and opinions, I know you have them.
The email address is always open, statelines@pbsnc.org.
I'll check every email and forward a few of them.
I'm Kelly McCullen.
Thanks for watching, I'll see you next time.
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