Changes to the state’s unemployment insurance system inched closer to becoming law on Tuesday when the state Senate gave such a bill its initial approval.

House Bill 4, which puts a tax increase on some employers and reduces benefits for laid off workers, passed the Senate by a 36-13 vote. A final Senate vote is expected Wednesday. If approved there without any changes, the bill could be on Gov. Pat McCrory’s desk later in the week.

“We have a monumental task to re-establish solvency,” Sen. Bob Rucho, R-Mecklenburg, and the floor handler of the bill, told his fellow senators.

The unemployment insurance bill is the GOP-led effort to repay a $2.5 billion debt that was borrowed from the federal government to pay unemployment benefits during the Great Recession.

Supporters say that if nothing is done, the state’s businesses will see federal surcharges mount on their tax bill until the debt is repaid, likely in 2019. With the increased taxes and cuts to benefits, supporters hope the debt will be repaid by late 2015 or early 2016.

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.

Some employers would see increased unemployment tax rates, a move that one former business owner questions.

Charles Carter, who recently sold his three Mountain Java stores in Asheville, questioned why the state would be increasing taxes on businesses, saying that the increased taxes would add to the cost of hiring a new employee. He is also a former Democratic state senator.

“We need to hire North Carolinians, not tax more to hire them,” Carter said. He also said he hopes that McCrory will veto the bill. He questioned why McCrory and other GOP legislators, who signed a no-new-tax pledge would support such a proposal.

House Speaker Thom Tillis, R-Mecklenburg, said the tax pledge issue was a matter of concern among the GOP caucus when the bill was in the House.

Tillis said that he asked House Republicans who signed such pledges to ask the organizations proposing the pledge if supporting the bill would violate their pledge.

“Every organization indicated that it wasn’t,” Tillis said. “Americans for Tax Reform, Grover Norquist’s organization, and Americans for Prosperity said that was good policy and not inconsistent with the tax pledge.”

Tillis said that these organizations didn’t view the move as a tax increase if they maintain or reduce the overall tax burden.

The bill includes triggers to reduce taxes on employers once the debt is repaid and a sizeable trust fund is set up to pay future benefits.

Sen. Floyd McKissick, D-Durham, said the proposal was unbalanced. “We all want to achieve a reasonable balance,” McKissick said.

The Senate approved the bill after turning back a series of Democratic-sponsored amendments aimed at restoring some of the benefits being cut. One of the defeated amendments would have delayed implementation of the bill until the first of the year, which would have allowed thousands of laid-off workers receiving long-term benefits to continue collecting them until that time.

If the bill becomes law, the reduced benefits would apply to people seeking such benefits as of July 1. The increased tax provisions would take effect Jan. 1, 2014.

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