Raleigh, N.C. — The state's largest business lobby and advocates for workers are squaring off over how to fix North Carolina's bankrupt unemployment system.

North Carolina owes the federal government a staggering $2.8 billion for borrowing to cover unemployment checks to workers statewide during the recession, and the debt continues to grow.

Lawmakers are looking for solutions to the problem, and a new report commissioned by the North Carolina Chamber recommends cutting the size and length of weekly benefits.

The state pays a higher percentage of former salary than the national average, and its maximum weekly benefit is much higher than other Southeastern states. North Carolina pays up to $506 a week, while Virginia, which is second in the region, pays no more than $378 a week.

The N.C. Chamber report calls for capping the weekly check at $350 and cutting the number of weeks of benefits from 26 to 20.

"We're just trying to bring them in line with the Southeast and be competitive there," said Gary Salomido, vice president of government affairs for the state chamber.

Salomido said the problem with the state's unemployment insurance trust fund dates to the 1990s, when lawmakers lowered state unemployment taxes and expanded benefits.

"Things were really good. No one thought this bad day would ever come," he said. "For a long time, all of us just didn't pay as close attention as we should have to making sure that, when things really get bad, the trust fund is there for them."

North Carolina's business community needs a solution soon, he said, because federal taxes on employers automatically increase every year until the state pays off its debt.

Legislative leaders say they're planning to take up a massive unemployment overhaul early next year.

Advocates for workers said employers are now simply trying to get out of paying their fair share for laid-off workers.

"When the economy was flush and unemployment was low, businesses got a tax break," said Mary McMillan, state director for the AFL-CIO. "Now, they want to rebuild the trust fund on the backs of the unemployed, which we think is unjust and shouldn't happen."

McMillan said a recession is no time to cut unemployment benefits.

"There's one job for every three job seekers," she said. "We feel like, in this tough labor market, we still need to provide support to these families who are struggling to pay bills and put food on the table."

Salomido said the proposed changes wouldn't take effect right away, so the jobless wouldn't be affected immediately. Also, he said, employers would pay more under the N.C. Chamber's plan, and the group is calling on the state to issue bonds to pay off what's owed to the federal government more quickly.

"It's a comprehensive solution," he said. "Not one piece can be done in isolation, and it's for future benefits. It's not for anybody that's affected right now."