Raleigh, N.C. — A key lawmaker says the state House will push ahead with plans to remake North Carolina's unemployment insurance system, even if it means thousands of North Carolinians will lose federal benefits.
"I’m saying that we have to find jobs for people, This is becoming a welfare program. We have got to get jobs in North Carolina. We have got to stop the extra taxation of businesses," said Rep. Julia Howard, R-Davie. "They (businesses) could be hiring people and creating new jobs."
North Carolina currently offers unemployed workers 26 weeks of state-funded benefits. During the recent recession, the state had to borrow $2.4 billion to pay its share of first-time unemployment claims. As a result, federal unemployment taxes on employers will climb by $21 per worker every year until the debt is paid off.
Business groups have lobbied lawmakers to head off those tax increases, and Howard is one of the authors of a plan to do just that. Under the proposal, the state would lower the maximum value of weekly unemployment benefits from $535 to $350 and limit state-funded benefits to a sliding scale of up to 12 to 20 weeks.
That plan would run afoul of part of the recent "fiscal cliff" deal. That deal included a one-year extension of federal unemployment benefits for long-term jobless workers in states with high unemployment rates.
Under that law, the federal government will not extend benefits in states that make cuts to their own unemployment benefits. The federal government uses such "maintenance of effort" provisions to ensure states don't shift tax burdens onto federal programs.
So, any cut North Carolina makes to its own benefits would trigger an end to federally-funded payments for workers who have been unemployed longer than 26 weeks.
"We have a bill drafted, ready to roll. The federal extended benefits stopped on Dec. 29. We tied everything on that assumption. We didn’t know they were going to extend the benefits a year," Howard said.
Asked what she would say to jobless workers whose federal checks will stop July 1, Howard said, "I'd tell them they got 26 more weeks."
"It's a policy decision," she added. "It is what it is. We have tried to fix the system. This is the best deal we can come up with."
The move has drawn criticism from liberal advocacy groups, who said that Howard's plan already helps cut business taxes at the expense of the unemployed. This further exasperates that disparity, said Harry Payne, an advocate at the N.C. Justice Center.
"This chops it off cold at the start of July," Payne said. "It's horrendous."
Roughly half of the workers who receive unemployment benefits in the state receive those long-term, federally funded benefits. According to the state Division of Employment Security, more than 85,000 were on long-term benefits in December.
"It's critical to remember that we got into this mess not because of too much benefits, but because in the 1990's, the state cut taxes and cut taxes to the point where it was like having an insurance program without enough money to pay the premiums," Payne said.
It's unclear if the bill will stand as is. When Sen. Phil Berger, R-Rockingham, the top leader in the Senate, spoke to reporters earlier this month, he said that changes to federal law may force lawmakers to rewrite, or at least delay, plans to rewrite the unemployment insurance system.
Howard, however, said that it was critical to move ahead.
"It will cost the business community about $500 million to go another year to pay that extra (federal unemployment) tax. We need to get this debt paid. We need to get the trust fund solvent. The longer we wait, the longer it’s going to be," she said.