HB2’s Growing Economic Toll

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

House Bill 2 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, costing the state millions of dollars in business investment, conference cancellations, and lost tourism. More than 200 business leaders have come out in opposition, as the economic damage continues to mount.

Compounding business dismay, the United States Department of Justice has informed North Carolina leaders that HB2 violates various provisions of federal civil rights law, and as a result, may cost the state billions of dollars in federal support for a variety of public services, including education and public safety. Based on a conservative estimate, nearly $3 billion in yearly federal funds could be lost if HB2 is not repealed, although the scope of threatened federal funds may be substantially larger.

Beyond the negative impact on the state’s budgetary bottom line, losing these federal funds will cause significant damage to the state’s overall economy. If North Carolina loses the nearly $3 billion dollars clearly endangered by HB2, it could destroy more than 53,000 jobs and cost North Carolina workers $2.4 billion in wages. To put that in context, losing $3 billion in federal funding would have an economic impact that costs roughly half of all the jobs created in the last year — which is equivalent to all workers in a city the size of Asheville, Greenville, or High Point getting pink slips.

The real economic cost of HB2 is doubtless much higher. This study does not address the loss of business investment that is already taking place, the conferences and events that will avoid our 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. This analysis applies only to the potential loss of federal funds, a devastating blow to be sure, but only a fraction of the ills that HB2 will visit on our state. 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 federal enforcement of the Civil Rights Act.

HB2: A Summary
On March 23, 2016, the North Carolina General Assembly passed HB2, The Public Facilities Privacy & Security Act, which Governor McCrory signed later that same day. In the weeks since HB2 became law, the full scope of the discriminatory impacts permitted by the bill has become increasingly clear. First, the new law requires schools and public agencies to designate and restrict multiple occupancy bathrooms and changing facilities for use based on the user’s “biological sex,” as stated on a birth certificate. It also allows discrimination in public accommodations by permitting businesses to discriminate against LGBTQ customers and banning local governments’ ability to prohibit this kind of discrimination. In practice, this allows businesses to turn away customers simply because they are gay.

HB2 also bars City and County governments from enacting living wage ordinances that apply to private employers or to the businesses that provide goods and services to local government. This provision also prevents local governments from requiring contractors to not discriminate against LGBTQ workers in their hiring.

Lastly, HB2 returns North Carolina to an era when employers were allowed to discriminate against employees and potential employees based on their race, gender, age, sex, religion, or national origin. It prevents cities and counties from banning this kind of discrimination by private employers, and eliminates a worker’s right to sue their employer in state court if they are fired for a discriminatory reason. Thanks to HB2, workers who are fired simply because they are gay, Black, or a Christian have no remedy in state courts. North Carolina now joins Mississippi as the only state without these basic protections under state law.