With Debt Paid Off, How Balanced Is NC Unemployment Insurance Overhaul?

May 7, 2015

Credit Bytemarks/Flickr

Now that North Carolina has paid off its unemployment insurance debt, businesses will no longer face tax penalties, but the unemployed will still get the same reduced benefits. Labor organizers say that's not fair, and are calling on lawmakers to restore some of the cuts.

One result of the recession was that North Carolina had to borrow nearly $3 billion from the federal government to pay out unemployment benefits.

When Rep. Julia Howard and other Republican leaders overhauled the state's unemployment insurance system in 2013, they talked about spreading the pain between businesses and laid off workers.

"It was a balanced bill, and it has achieved what we hoped that it would achieve," Howard says.

State leaders announced this week that North Carolina has paid off the debt. A key thing that sped up that process had nothing to do with the state overhaul: the federal government automatically raises taxes on businesses each year until it gets its money back.

The state Commerce Department says that added up to an extra $84 per employee. Now that the debt is gone, Howard says that pain goes away.

"Those dollars the employers are able to keep in the company, they can give raises," she says. "They can hire more people. They can expand with new equipment."

But there's no change to an even bigger driver of the repayment: cuts to unemployment benefits.

Lawmakers slashed the maximum weekly benefit from $535 to $350, and they cut the number of weeks benefits are offered. The legislature's fiscal research division estimated those cuts would account for roughly three-fourths of the overhaul's savings.   

MaryBe McMillan of the North Carolina AFL-CIO says lawmakers should restore at least some of that.

"Now that the debt is paid off, employers will get automatic tax breaks," she says, "so where's the relief for workers?"

Rep. Howard says Republican lawmakers have no interest in restoring benefits this session.

The N.C. Chamber's Gary Salamido points out not all the pain is gone for businesses. The overhaul also raised their state taxes slightly.

"There were companies that didn’t pay anything," Salamido says. "Now every company has to pay something based on their experience."

Companies that don't have a history of layoffs don't pay as much. And all businesses will pay a little extra to help the state build a bigger cushion for the next recession.

Still, the fiscal researchers estimated those changes would amount to less than 5 percent of the overhaul's fiscal impact. Labor organizers say that's a far cry from shared pain.