A effort to reduce the state’s $2.4 billion debt to the federal government for jobless benefits could prove rocky for Scotland County businesses and displaced employees who receive them.
The General Assembly’s Revenue Laws Committee is expected to meet Dec. 5 to consider cuts to unemployment benefits. There is talk that the committee may reduce the maximum weekly unemployment benefit from $535 to $350. Workers might also only be covered for 20 weeks instead of 26.
Businesses could also have to pay more to help pay down the debt.
State Rep. Garland Pierce of Wagram said he is not sure what the committee will do, but that he will be looking carefully at its recommendations.
“I plan to wait and see what that committee does,” Pierce said. “But from what I’ve read, it may be tough on businesses and on people needing those benefits.”
North Carolina is one of 19 states that still haven’t repaid the federal government when they began borrowing money at the height of the Great Recession as insurance taxes were outstripped by benefits from a flood of unemployment applicants. North Carolina’s tab is currently the third-highest in the country, behind only California and New York. The state’s unemployment rate remains above 9 percent. The jobless rate in Scotland County for October was 15.7 percent.
Federal law also says the state needs to set aside more than $2 billion in reserves by 2019 to borrow interest-free in the future.
Businesses already are being forced to pay higher federal and state unemployment insurance taxes to pay down the debt and make interest payments: Another $21 per-employee increase is on the way in January.
“We’re going to have to make some tough decisions so that we can maintain the financial integrity of the system,” said Sen. Bob Rucho, R-Mecklenburg, co-chairman of the Senate Finance Committee. “We need to fix a serious problem.”
But not everyone is pleased with that get tough approach.
Bridgette Burge, one of the more than 430,000 unemployed people in North Carolina, said she is frustrated with attempts to cut unemployment benefits.
“People are in such dire straits right now, and it feels to me like being kicked when I’m down,” she said. “I’ve done everything right. It’s just devastating.”
Harry Payne, senior counsel for policy and law with the North Carolina Justice Center, and a former head of the state’s Employment Security Commission, agreed.
“These people are the biggest victims of the economy, and the very thought that the victims of the economy should pay its costs doesn’t work.”
Federal law also says the state needs to set aside more than $2 billion in reserves by 2019 to borrow interest-free in the future. Businesses already are being forced to pay higher federal and state unemployment insurance taxes to pay down the debt and make interest payments: Another $21 per-employee increase is on the way in January.
Ben Stuck, a vice president of a company that manufactures restaurant equipment, said more taxes mean less for retirement income and profit-sharing, as well as capital improvements that can help the 100-employee business grow.
“If I have less money to reinvest in my business, then that’s going to affect the economy in a negative way,” Stuck said.
New Republican leaders at the General Assembly vowed to find a solution to the debt nearly two years ago. At least two studies have now been issued on North Carolina’s unemployment benefit challenges. Last year legislators overhauled the state agency that manages the program and are looking for more ways to reduce fraud and restrict who gets benefits.
“Reducing that debt is going to have an impact on everyone,” Pierce said. “When we get back we’re going to have to see what can be done to get a handle on it.”