Loss of federal funds from HB2 could eliminate 53,000 jobs, $2.4 billion in wages

Loss of federal funds from HB2 could eliminate 53,000 jobs, $2.4 billion in wages

HB2--graphic3cNew report finds rising economic cost to state from discrimination law

North Carolina’s economy could suffer significant damage if House Bill 2 is not repealed and the federal government cuts off funding for key investments in education, job training, and public safety, a new report finds.

The federal government has determined that HB2 violates key provisions of the Civil Rights Act and a range of federal regulations that prohibit discrimination on the basis of sex, sexual orientation, and gender identity in the administration of federal programs, according to a new report from the North Carolina Justice Center. As a result, conservative estimates suggest that nearly $3 billion in yearly federal funds could be lost if HB2 is not repealed, although the scope of threatened federal funds may be substantially larger.

Using the same methodology as legislative leaders to assess the economic impacts of their tax cut proposals, the report finds that unless HB2 is repealed, the loss of these federal funds would result in the following damage to North Carolina’s economy:

  • A loss of 53,000 jobs and $2.4 billion in workers’ wages
  • Job and wage loss would wipe out half the job gains made in North Carolina in 2015

These job losses would also be the equivalent of every worker in Greenville – or High Point, or Asheville – getting a pink slip. “HB2 is a creeping economic disaster for North Carolina. By shrouding discrimination in the mantle of state authority, HB2 has thrust North Carolina into a global spotlight that grows more unflattering by the day,” said Patrick McHugh, Economic Analyst with the NC Justice Center’s Budget & Tax Center and lead author of the report. “This misguided legislation has already cost the state millions of dollars in private investment. Now the loss of $3 billion in federal funds could kill tens of thousands of jobs.”

This analysis applies only to the potential loss of federal funds that legal experts have found violate Titles VII and IX of the Civil Rights Act along with federal anti-discrimination regulations. Specifically, the report examined the $1.44 billion in K-12 dollars that could be lost; the $1.38 billion in university and community college funding; the $80.37 million in job training programs administered through NCWorks; and $5 million for the Violence Against Women Act.

While legislative leaders are hoping that litigation may save these funds, fiscally prudent policy making should motivate them to plan for the possible—even likely—loss of federal support, especially given the more than 50-year record of Federal court support for enforcement  of the Civil Rights Act.

“Thousands of North Carolinians and more than 200 business leaders have said that HB2 is clearly discriminatory – and now it’s clear that the federal government undoubtedly agrees,” said Allan Freyer, director of the NC Justice Center’s Workers’ Rights Project and co-author of the report. “With $3 billion in federal funds and 50,000 jobs at stake, the Governor and legislative leaders need to start listening.

The real economic cost of HB2 is doubtless much higher than the numbers uncovered in the report. This study does not address the loss of business investment that is already taking place, the conferences and events that will avoid the state, the talented people who will choose to make a home somewhere else, or the myriad ways that consigning a group of North Carolinians to the shadows undermines their lives and communities.

Download the PDF of the report here.