Bill for jobless benefits is hidden deficit for NC

Posted February 22, 2011 5:51 p.m. EST
Updated February 22, 2011 6:24 p.m. EST

— The state owes the federal government almost $2.6 billion for jobless benefits paid over the past two years to unemployed North Carolina residents, and lawmakers aren't sure how they will pay the bill.

The state Employment Security Commission had to borrow money from the U.S. Labor Department on several occasions to keep benefits checks flowing during the worst recession in decades, and the bill is now larger than the projected 2011-12 budget deficit.

"I'm very concerned about it," Senate President Pro Tempore Phil Berger said Tuesday. "We have a real problem in the Employment Security Commission."

About 30 states borrowed money to cover their unemployment benefits, but North Carolina's bill is among the largest. The state must repay millions of dollars in interest on the loans by Sept. 30.

The pro-business, Republican-led General Assembly might actually have to raise unemployment insurance rates on employers to pay the bill.

"That comes directly off of our bottom line," said Jennifer Dunleavy, who owns Accuro Group, a professional staffing company. "If we're looking at the prospect of increasing those costs even more, certainly that really eats into our ability to grow as a company. That cuts into our ability to hire."

Berger said he wants to do everything possible to keep rates low while returning the state's Unemployment Insurance Trust Fund to the black.

Sen. Debbie Clary, R-Cleveland, co-sponsors Senate Bill 99, which calls for hiring an outside consultant to recommend changes to the ESC's policies and the unemployment insurance tax structure.

"I think it's time to look for outside help," Clary said.

Businesses might pay more and the jobless receive less to help the state deal with the growing debt, she said. The bill, which was filed Tuesday, notes that the state paid out $1.9 billion in jobless benefits in 2010 while taking in only $955 million in unemployment taxes.

"It's the monster in the room standing off to the side threatening you," Clary said of the outstanding loans. "We know it's there. It's looming, and it has to be fixed."

Lawmakers said they hope the federal government extends the loan and puts off payment until the economy improves and employers are better able to pay higher unemployment insurance rates.

Employers like Dunleavy argue, however, that a burden on them weighs on everyone.

"That money has to come from somewhere. So, they will either increase their prices or they will have to eat into their own profitability," she said. "They'll have to make up that money somewhere."