NC alone in choice to end extended unemployment checks

Posted June 20, 2013
Updated June 21, 2013

— North Carolina lawmakers had a tough choice this spring: Change how unemployment benefits are calculated, potentially cutting off benefits to tens of thousands of people, or allow the state's debt to the federal government to continue as a drag on the economy.

The Tar Heel state was one of many in the same situation, but North Carolina lawmakers were the only ones who chose the quicker fix. Effective July 1, 71,000 people will see their extended benefits end.

During the 1990s, states gradually cut back on the unemployment tax they charged to businesses, explained Duke University economist Aaron Chatterji. When recession hit in 2008, and unemployment claims began to climb, the states lacked the trust fund to pay those benefits. They borrowed from the federal government, and now that bill is coming due.

"Most states have these have this deficits with the federal government," Chatterji said. "They are all dealing with it in different ways. North Carolina is unique in terminating the program so abruptly."

In order to pay down that debt, lawmakers agreed to a plan that reduces state unemployment compensation, eliminates extended benefits and raises employer contributions into the system. Under the plan, the debt owed will be paid off in 2016, three years early. It takes effect June 30.

"We believe it's the right decision," said Sen. Bob Rucho, R-Mecklenburg. "Had we not made these changes to start putting some fiscal sanity back into the system, that fund would not exist for any future people."

In a statement issued Friday, Sen. Phil Berger, R-Rockingham pointed the finger of blame on Democratic administrations past. 

"During good economic times, previous Democratic legislatures and administrations made irresponsible decisions that hurt the solvency of our state’s unemployment insurance system," a Berger spokeswoman wrote. "If the General Assembly had failed to act, the state’s debt would not be paid off until 2019."

Chatterji agrees with the long-term benefit – both to businesses and the state economy overall. But he questions the timing.

"Given that we're still in an economically uncertain time, many economists would argue that it would be better to let the unemployment benefits continue and pay back that money later on, but there's a debate about that," he said. "Given that we still have the fifth-highest unemployment rate in the country as a state, it's not clear whether this was the best time to make this kind of decision."

Those on both sides of the issue agree, there is no easy solution. 

"When the bills come due, we have to pay the debts," said Rep. Edgar Starnes, R-Caldwell. 

Cuts hurt local communities 

Chatterji points out that the 71,000 people who will lose their federal extended unemployment benefits next month will no longer have that income to spend in their local economy. He estimates the cost at about $20 million per week in consumer spending that will stop. Jobless, unemployed generic June 2013: County-by-county unemployed

Lee Creighton is dependent on his weekly unemployment check. He has degrees in math, statistics and French literature, but has been out of work or underemployed for the past four years.

"I applied to work for the lottery, GlaxoSmithKline, LexisNexis, Red Hat, The Pantry, Kangaroo Express," he said.

The high unemployment rate actually makes it harder for job seekers to find something, Chatterji said. 

"These folks aren't just any unemployed individuals. They are people who have been unemployed for six months or more. They tend to be older workers, less educated workers. So the chance of them finding a job after the benefits are cut are quite lower than the typical unemployed individual," he said.

"Our focus and our intention is to get folks back to work," said Sharon Decker, state Secretary of Commerce. She is the state's top job recruiter. 

She pointed to training programs and community colleges as a way for the unemployed to learn new skills.

Patricia White is taking courses at Wake Tech. A mother of two whose husband is also out of work, White said she is reliant on her federal extended unemployment benefits to get by.

"As of June 29, I have no income," she said. I still have all my bills, house note, car payment, insurance, utilities, to eat. I don't know how I'm going to make it."

Creighton's savings are depleted, and he is starting to worry.

"I've started looking at bridges. That one, I can get under there, and they won't see me.  I've started thinking like a homeless person," Creighton said.

"It does not have to be this way. The safety net has suddenly been pulled from us."

The federal unemployment benefits are slated to expire across the country at the end of the year. In North Carolina, the new law means that change comes six months earlier.


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  • read_a_little Jun 26, 2013

    The GOP kicks the defenseless while their down. Medicaid, unemployment benefits, medicare, health care, on and on. The real issue is character, leadership, and a vision for the future. This is a future I don't want and neither do many. The message is clear, if you have money you can buy influence and change the direction of law and policy. This is not democracy.

  • WRAL_USER Jun 21, 2013

    @ junk
    That is no solution, just people following along with the "red" team blindly...

  • junkmail5 Jun 21, 2013

    It was the Democratically controlled state that made the mistake of lowering what the state charges companies for unemployment and made us borrow from the feds.- FairPLay

    you're RIGHT.

    It was.

    But explain how the solution to what the Dems did wrong should be to make UNEMPLOYED people pay it back- instead of making the employers who got the artificially low payments for years pay it back?

  • junkmail5 Jun 21, 2013

    "The GOP now wants to change it to cut taxes for the richest 5% "and RAISE them for everyone else."

    This is patently false -djhartm

    No, it's not.

    It's math.

    Try it sometime.

    Everyone making less than $169,00, which is 95% of everyone in NC, will pay MORE under the new tax system.

    The 5% richest pay less.

    Seriously, math, it's useful stuff!

    Also amusing is your assertion that employers were to blame as well.- djharm

    Again- math... they underpaid into the fund for YEARS.

    That's why the fund needed to borrow to cover benefits.

    So instead of making THEM pay it back, the GOP moved the payments to the unemployed.

    Because to heck with anyone who isn't rich is basically their motto.

    Then found out that instead of being laid off they could get unemployment checks while they worked if they took one week off every month! And he made more money! Really??

    No, not really, since that's not even possible.

    Please stop making stuff up folks.

  • junkmail5 Jun 21, 2013

    Well if Obama did not take his $100,000 tax paid vacation to Africa and did not pay the IRS a $300 million bonus there would be more money for benefits!

    what if you didn't just make up numbers?

    It's 70 for the IRS... and the Obamas, like ALL presidents, pay their own personal expenses on vacation... (and he's taken vastly less of it than Bush did).

    Nobody is taking away unemployment benefits. They are simply returning them to the standard after a period of extensions-Red Dragon

    Utterly false.

    The extended benefits are FEDERAL.

    Those are going away entirely thanks to the GOP.

    The STATE benefit of 26 weeks, the "standard" is ALSO being drastically cut by the GOP- down to 12-20 weeks instead of 26, and reduced by about 30% in payment amount.

  • jdupree Jun 21, 2013

    Well if Obama did not take his $100,000 tax paid vacation to Africa and did not pay the IRS a $300 million bonus there would be more money for benefits!

  • rexchex Jun 21, 2013

    Wealth: For the few
    Prestige: For the wealthy
    Power: Gone from your average American.

    Now get back to work on the line. Those burgers are not going to cook themselves.

  • WRAL_USER Jun 21, 2013

    @ jd
    I will disagree, using an much supporting information for my opinion as you have provided for your own...0...

  • geosol Jun 21, 2013

    Great picture of CarpetBagger Bob for this story! A perfect example of today's REPUBLICAN party that makes money off of giving more tax breaks to their rich buddies while making the rest of us PAY MORE!

  • geosol Jun 21, 2013

    Poor millionaires! They have it so bad these days. But it's OK, they have the REPUBLICANS to give them even more tax breaks while they stick it to the rest of us. Sorry if your right wing boss decided to make more money by shipping your job overseas. You should have been smart enough to have been born rich like them. Thanks wingers!!!