News: CJ Exclusives

Unemployment Insurance Reform One Step Closer After Committee Vote

Bill to repay federal debt and cut benefits could be on House floor Monday

The effort to reshape the state’s unemployment insurance program took one step forward on Thursday when the House Finance Committee gave the bill a thumbs up.

The bill, which would reduce the maximum weekly benefit from $535 to $350 and reduce the maximum benefit duration from 26 weeks to 20 weeks (or fewer if the economy improves) is scheduled for its first of two floor votes on Monday night.

Proponents and businesses are hoping that the lowered benefits and duration, along with some increased unemployment taxes, will help retire a $2.5 billion debt owed to the federal government years sooner than they’d otherwise pay off the note.

“If we do not pass this legislation or some part of it, it will be 2019 before this debt is retired and we have a stable SUTA [unemployment trust] fund,” said Rep. Julia Howard, R-Davie, the sponsor of the bill.

If the legislation becomes law, supporters believe the debt can be repaid by 2015 or early 2016.

Earlier in the week, the state’s business community called a news conference to urge lawmakers to approve the bill. They said that surcharges being added to their unemployment insurance bill by the federal government to help retire the debt are limiting their ability to create jobs.

“We can’t create jobs if they cost too much,” said Lew Ebert, president of the North Carolina Chamber.

“Our state’s unemployment insurance system is not only broke, it’s broken,” said. Bruce Clarke, president and CEO of Capital Associated Industries Inc.

Opposition to the bill came from Democrats, who said that the proposal was one-sided, favoring businesses over unemployed workers.

In response to questions from Rep. Paul Luebke, D-Durham, legislative fiscal analyst Rodney Bizzell said that such legislation, had it been in place during the Great Recession, would have affected benefits that went to 132,000 unemployed North Carolina workers. Bizzell estimated that it will likely result in reduced benefits totaling $225 million over the first six months, once it takes effect.

“To take it out of the unemployed in North Carolina is to me totally unacceptable,” Luebke said. “It’s reprehensible to do that.”

“We also have to think about the human cost,” Rep. Deborah Ross, D-Wake, said.

Under the proposal, the reduction in benefits would start taking effect for people who begin filing unemployment claims July 1.

Some employers would see the state portion of their unemployment tax increase Jan. 1, 2014. Affected employers would be those who currently pay no state unemployment taxes because they have a positive employment history, and those who pay the highest amount in taxes because they have a history of significant layoffs.

Supporters of the bill note that employers already are being assessed surcharges as a result of the debt owed to the federal government.

The committee gave its favorable recommendation to the bill after a number of Democratic-sponsored amendments were ruled out of order by Finance Committee Chairman Mitchell Setzer, R-Catawba. Setzer suggested that the amendment sponsors offer their proposed changes when the bill hits the House floor.

Barry Smith is an associate editor of Carolina Journal.