State may need to borrow money for jobless benefits
Posted February 3, 2009 5:38 a.m. EST
Updated February 3, 2009 4:36 p.m. EST
RALEIGH, N.C. — North Carolina has paid out so much in unemployment benefits that it may have to borrow from the federal government as early as next week to keep checks flowing, an official said.
David Clegg, deputy chairman of the state Employment Security Commission, said the unemployment insurance fund had dropped to little more than $16 million Monday because a growing number of people can't find jobs.
North Carolina has nearly 400,000 unemployed workers. The jobless rate was 8.7 percent in December, the highest since June 1983.
The value of the ESC's unemployment insurance fund varies daily, based on payments coming in from companies and benefits paid out to jobless workers, agency spokesman Larry Parker said. That makes it difficult to calculate when any borrowing would be needed, he said.
North Carolina has a $540 million credit line with the federal government. The state would have until October to repay the money without paying interest.
"We're making the same type of decisions that any large corporation on this planet makes," Clegg said. "You just have to make these decisions. This is not a time to get squeamish. You just forge ahead."
The state paid $160 million in unemployment benefits in December.
Clegg says that not only are more people without jobs, but it's taking them longer to find work.
State officials are processing $100 million in quarterly unemployment tax payments from about 200,000 businesses that will be used to pay benefits. Clegg said the state still may need to borrow from the federal credit line, however.
North Carolina last tapped the credit line in 2002.
If the state can't repay the loan by fall, it would issue special tax anticipation notes to borrow money. Clegg said the state also will get more tax payments in April and July, noting that April usually is the largest.
Federal economic stimulus payments also may help the unemployment fund, he said
"I think they're going to enhance unemployment insurance benefits because it's the fastest way to get money into the economy," Clegg said.