A bill moving through the North Carolina General Assembly is seeking a remedy to this state’s unemployment insurance problems.
Right now, North Carolina owes the federal government $2.8 billion for loans from the federal government to help the state cope with a shortfall of funds during “The Great Recession.”
The Revenue Laws Study Committee crafted a proposal to enable the state to repay the federal government loans by the end of 2015, be solvent in the future, and build a reserve of $2 billion to prepare for the next economic downturn.
In addition, the proposal strives to restore the North Carolina Employment Security System to its role as employment agency instead of benefit agency, according to proponents.
The current shortfall and debt stems from two basic problems. In the 1990s, when the economy was booming along most of the time, North Carolina cut the amount of unemployment insurance taxes employers had to pay into the system.
North Carolina had built a healthy reserve fund, and lawmakers decided the reduction of this particular tax would help stimulate job growth.
Please keep in mind that employers pay 100 percent of the unemployment insurance taxes. Employees themselves contribute nothing from their paychecks.
Since unemployment was low, the General Assembly thought its reserve fund was sufficient to handle an upswing in unemployment. However, since the recession has afflicted the state economy for more than four years, unemployment benefits paid outstripped revenue. Benefit payments also exhausted the reserve fund — and then some.
To remedy this situation, employers faced a $21 increase per full-time employee in the unemployment tax in 2012 and will face another $21 increase in 2013.
For an employer with 50 employees, that figure amounts to $2,100 in extra taxes — just for unemployment insurance.
This same tax is set to increase another $21 in both 2013 and 2014. In 2014, the same employer will see unemployment taxes cost an additional $4,200 over the 2011 rates.
The most surprising bit of information I learned while researching this issue was generosity of unemployment benefits this state paid compared to surrounding states.
The maximum weekly benefit payment North Carolina provides is $506, some sources even say $525. Virginia’s max is $378, Georgia’s max is $330, and South Carolina’s maximum weekly benefit is $326.
Florida and Tennessee offer a $275 maximum weekly benefit, a little more than half of North Carolina’s.
For many people receiving unemployment, $506 a week may be far below what they earned when working, but $506 a week translates to $26,000 over a year. Of course, our state pays benefits for a maximum of 26 weeks. But other states in this region average a maximum benefit of $348 for only 23 weeks.
Senate Bill 99 has already passed the state Senate and is in committee in the state House. Under this bill, the maximum benefit would fall to $350 per week.
The bill also reduces the benefit period from 26 weeks to 20 weeks in times of high unemployment and restricts benefit payments to between five and 12 weeks in times of low unemployment.
If this bill becomes law, the debt to the federal government for unemployment insurance would be paid in full by 2015. Without this plan, or some other plan, by 2019 unemployment insurance rates would increase by 56 percent over current rates.
Critics on one side contend employers do not need to pay higher taxes in a period of recession and slow recovery — during a time we need to be stimulating job growth. Critics on the other side allege the state is trying to pay this debt by placing a disproportionate burden on the backs of the unemployed.
Both sides have raised good arguments, but our state, unlike the federal government, must often make tough decisions in order to keep its programs solvent.
Mike Parker is a columnist for The Free Press. You can reach him at mparker16@suddenlink.net or in care of this newspaper.