News: CJ Exclusives

McCrory Signs Unemployment Insurance Reforms

Business owners call early retirement of debt to feds a relief

Gov. Pat McCrory Tuesday signed into law a bill that would rework the state’s unemployment insurance system.

House Bill 4 increases taxes for some employers, shortens the number of weeks an unemployed worker is eligible for benefits, and reduces the maximum benefits such a person can receive.

The action by the GOP governor came as good news to Chuck Edwards, president and CEO of the C. Edwards Group Inc., which owns seven McDonald’s Restaurants in western North Carolina.

“I know that business in general is very appreciative of the state leaders for giving this some attention because the problem wasn’t even on the radar screen two years ago,” Edwards said.

Edwards, 52, started working at a McDonald’s Restaurant on Spartanburg Highway in Hendersonville when he was 16 years old. Now, that restaurant is one of the seven that he and his wife own. He said they have 360 employees at the restaurants.

The legislation is geared toward repaying a $2.5 billion debt that the state borrowed from the federal government to pay unemployment benefits during the Great Recession.

The federal government slaps a surcharge on businesses as a means of repaying that debt. Edwards said that beginning in 2011, he was assessed $21 a year per employee. The per-employee surtax would increase by $21 a year until it maxed out at $96, Edwards said. That surcharge would be in place until the debt is paid off.

This year, that surcharge amounts to $63 per employee, he said. With 360 employees, that would make his federal surcharge $22,680.

Fiscal analysts say the changes in H.B. 4 will help retire the debt by late 2015 or early 2016. Without any changes, the debt would not be repaid until 2019, legislative fiscal analysts say.

Edwards said the unemployment insurance penalties that businesses have to pay is an impediment to reinvesting in his business.

“I think that it’s critical that business sees some relief in the penalties so they can continue to provide jobs,” Edwards said. “It is a limiting factor to being able to re-invest in our business, add jobs and give back to the community.”

Edwards said he isn’t trying to claim that the surcharge, in and of itself, will keep him from hiring new employees.

“But it’s one factor in a complicated equation,” Edwards said.

The bill cuts benefits by reducing the maximum weekly amount from $535 to $350 and reduces the maximum number of weeks a jobless worker can collect unemployment benefits from 26 weeks to 20 weeks. However, the duration could be reduced to 13 weeks if the economy improves and the unemployment rate drops significantly.

As a result of the new law and federal legislation passed earlier this year, a number of North Carolinians receiving extended unemployment benefits will see those checks stop later this year.

In addition to the surcharges assessed by the federal government, some businesses also will see increased taxes as a result of the new law. Those include businesses currently paying no taxes because they have a good employment history and businesses already paying the highest unemployment tax rate as a result of numerous layoffs.

“This bipartisan solution will protect our small businesses from continued over-taxation, ensure our citizens’ unemployment safety net is secure and financially sound for future generations, and help provide an economic climate that allows job creators to start hiring again,” McCrory said in a statement announcing his signing of the legislation.

Republicans did find some limited support from Democrats for the bill in the General Assembly. Four Democratic senators voted for the bill, as did three Democratic representatives.

Two Republicans in the House voted against it. One of them, Rep. Kelly Hastings, R-Gaston, said he voted against it because he believed he would be violating a no-new-taxes pledge if he voted for it.

In the legislature, many Democrats argued that the benefit cuts were too steep and would result in critical losses of income for laid-off workers.

The bill takes effect July 1 and will apply to claims for benefits filed on or after that date. The tax portion of the bill takes effect Jan. 1, 2014.

Barry Smith (@Barry_Smith) is an associate editor of Carolina Journal.