News: CJ Exclusives

Dispute Over Number of Unemployed Affected By Cuts Continues

State employment official Folwell says he has no idea where estimate of 170,000 is derived

RALEIGH — This is the final week 70,000 jobless workers in North Carolina will receive a federal emergency unemployment compensation check. But Dale Folwell, the state official in charge of jobless benefits, says reports claiming that as many as 170,000 unemployed state residents might lose federal benefits by the end of the year are bogus.

Democrats and liberal activists blame the GOP-led General Assembly and Republican Gov. Pat McCrory for the loss of benefits, citing a law passed this session that will retire a $2.5 billion debt to the federal government on an accelerated schedule. Meantime, Republican legislative leaders say North Carolina’s 2012 congressional delegation — which was dominated by Democrats at the time — failed to protect state workers when they had an opportunity to ask the Obama administration for a waiver that would keep the federal benefits coming.

The dispute over how many North Carolinians eventually will be affected continues. Folwell, North Carolina’s assistant secretary of employment security, said “the 170,000 is a number that the [U.S.] Department of Labor is using under a completely false assumption” — the assumption that no unemployed person will accept a job until all unemployment insurance benefits are exhausted.

“The fact is that every week [an unemployed person applies for benefits], you have to certify that you are ready, that you are able, that you are seeking, and that you are available for work.” Folwell said the Labor Department’s extrapolation doesn’t take those factors into account.

The current estimate of 170,000 is nearly double the 87,000 who were expected to lose benefits immediately when Congress initially planned to end emergency federal unemployment compensation at the end of 2012.

Folwell said he never saw a projection of how much higher that number would be over the entire calendar year of 2013, adding, “Nobody’s ever been able to tell me how they got that [170,000] number.”

Congress reversed course and reauthorized the emergency compensation program for 2013.

Federal unemployment compensation is awarded when a jobless worker’s state benefits run out. Federal benefits recipients in North Carolina will receive their final checks this week.

Folwell emphasized that jobless workers on North Carolina’s state benefits plan will continue to receive full state benefits after July 1 for the period allowed under state law.

A person who received his first week of unemployment benefits before the July 1 change can collect full state benefits for 25 more weeks, according to Folwell. There will be no reduction in income or allowable weeks to collect.

The July 1 change affects unemployment insurance benefits for new claims. Legislation passed this session will accelerate a repayment plan to the federal government for unemployment insurance debt accumulated since 2009. Over the past two decades, North Carolina has reduced employers’ UI premiums and increased benefits. By the time the recession hit in 2008, the UI trust fund was exhausted, and the state had to borrow from Washington.

Under the repayment plan, the maximum duration of state benefits will be scaled back from 26 weeks to 20, and maximum weekly payout will dip from $535 to $350.

By law, states cannot reduce UI benefits and receive federal extended benefits unless the federal government issues a waiver, which it has to a handful of other states. Arkansas, Indiana, Pennsylvania, and Rhode Island all received waivers in 2012 for grandfathering into the system that year, but none of those states reduced their state benefits.

North Carolina was one of several states reducing benefits this year. Arkansas, Florida, Georgia, Illinois, Indiana, Michigan, Missouri, and South Carolina reduced the number of weeks benefits could be claimed this year to reduce stress on the unemployment system, according to the Congressional Research Service.

And due to the federal sequester, which has imposed across-the-board spending reductions, states must reduce federal unemployment insurance payments that begin when state benefits are exhausted. The average loss per recipient nationwide will be nearly 11 percent; it would have been 5.1 percent in North Carolina.

A June 21 statement from the office of state Senate leader Phil Berger, R-Rockingham, said the General Assembly worked closely with the Labor Department when crafting its unemployment insurance bill for this session. It incorporated the department’s feedback into the legislation. And it submitted the bill to Labor for review to ensure its compliance with federal law.

“Federal fiscal cliff negotiations threw a wrench into the plan by failing to grandfather our unemployment insurance reforms [set to begin July 1] into an extension of federal emergency unemployment benefits,” the statement read. “A condition of the fiscal cliff deal was that North Carolina maintain its current benefit levels in order to accept a one-year extension of federal benefits.”

As early as Dec. 7, 2012, state legislative leaders called on Democratic U.S. Sen. Kay Hagan, whose party led fiscal cliff negotiations in the U.S. Senate, and the remainder of the state’s Democrat-dominated congressional delegation, to grandfather unemployment insurance reforms into the final fiscal cliff package, according to the statement. That would have preserved North Carolinians’ extended federal benefits.

It was “their failure to act” that resulted in the lack of an exemption from the rules, the Berger statement said.

But a Labor Department official said that as the department worked with North Carolina on technical issues with its bill, it made all consequences of the state’s plan to reduce payment benefits “abundantly clear at the time.” State legislative leaders knew “full well and clear once they cross[ed] that line, there’s nothing we [could] do to reverse it.”

Now that the cuts are about to take place and are viewed unfavorably in some quarters, legislative leaders might point fingers elsewhere, the official said.

Acting Labor Secretary Seth Harris said in a February news release regarding North Carolina’s situation that cutoff of federal unemployment benefits to the state “is automatic under federal law” because the state changed its formula on state benefits. “I have no discretion to stop it.”

Folwell never bought that argument. “The U.S. Congress and the U.S. Department of Labor decided to cut off our benefits because of the changes we thought we needed to make to get solvent to fix our bankrupt system,” he said. Congress set a deadline of Jan. 1 to ask for a waiver, and the General Assembly was not in session at the time, Folwell added.

“The fact is, [House Speaker Thom] Tillis and Berger requested a waiver on March 5 so that North Carolina could extend [federal] benefits. We were denied,” Folwell said.

Folwell says the feds have the ability to restore benefits. “The Congress could wake up tomorrow morning and extend benefits for North Carolinians. [Washington] could have done it yesterday, and they could do it tomorrow,” Folwell said.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.