NC Chamber wants $150 per week cut in unemployment benefits
Published 12:00 am Wednesday, May 16, 2012
RALEIGH (AP) — North Carolina’s main business lobby wants legislators who opened their annual session today to cut future unemployment benefits and issue taxpayer-backed bonds, a move it says would save employers money while closing a debt to the federal government.
North Carolina’s chamber of commerce wants the General Assembly to cut the maximum unemployment benefit from about $506 a week to $350 weekly, The News and Observer of Raleigh reports. The North Carolina Chamber also wants to cut the period of state-provided benefits from 26 weeks to 20 weeks.
Any benefits that unemployed workers now receive beyond 26 weeks are funded by the federal government. Extended federal benefits are set to expire at the end of this year, although Congress could extend them.
If North Carolina’s maximum unemployment benefit were cut to $350 a week, it would still be higher than the top benefit in Georgia, South Carolina, Tennessee and Florida, said North Carolina Chamber lobbyist Gary Salamido. Virginia’s maximum benefit is $378.
The influential business lobby also wants North Carolina to issue bonds to pay off the $2.4 billion that the state borrowed from Washington to pay jobless benefits. The idea is that the state can borrow money cheaply, and the bonds could be repaid with taxes collected from the state’s employers. Employers could save more than $200 million because of lower interest rates and by eliminating the extra tax they pay as long as the state is in debt to the federal government.
More than 20 states owe money to the federal government for unemployment benefits, but just California, Pennsylvania and New York have a debt higher than that in North Carolina. That debt means employers are paying more in federal unemployment taxes this year, and they’ll face annual increases amounting to $21 per worker until the debt is paid off.
Those annual increases would be eliminated because North Carolina would owe bondholders instead of the federal government.
North Carolina’s current unemployment compensation system is a “jobs killer” because of the higher unemployment taxes that employers must pay, Salamido said.
“It’s just not sustainable,” he said.
But the Chamber’s agenda would unfairly punish unemployed workers to fix a problem originating with a series of unemployment tax cuts for employers, said Harry Payne, a former chairman of what is now the state Division of Employment Security, which handles unemployment claims in North Carolina. Those cuts were approved by state lawmakers during the 1990s economic heyday, when the unemployment compensation fund was flush.
“The basic rule is, when employees didn’t get the benefit of the tax cuts, they shouldn’t be the ones who pay for it,” said Payne, now senior counsel at the nonprofit North Carolina Justice Center, a liberal advocacy group.
Payne suggested that the Chamber may be overreaching as a political ploy designed to win the best legislation possible for its members.
Like many states, North Carolina began borrowing from the federal government after the state’s high unemployment rate caused it to run out of money for jobless benefits in February 2009. The amount of the debt fluctuates as the state continues to borrow while also making payments to the federal government.
Texas and other states have issued bonds to pay off their federal government debt. North Carolina went with the bond option after the last recession, but its debt then was just $270 million.
The state Treasurer’s office said the Chamber’s bond proposal has problems. While a state bond would result in lower financing costs, it would result in higher payments for employers in the early years of the debt, the office said in a statement.
The Treasurer’s office also said the state is “very limited” in how much more it can borrow. The Treasurer’s office added that it is waiting for the General Assembly to complete its study of the state’s unemployment system, which may provide additional information.
North Carolina’s chamber of commerce wants the General Assembly to cut the maximum unemployment benefit from about $506 a week to $350 weekly, The News and Observer of Raleigh reports. The North Carolina Chamber also wants to cut the period of state-provided benefits from 26 weeks to 20 weeks.
Any benefits that unemployed workers now receive beyond 26 weeks are funded by the federal government. Extended federal benefits are set to expire at the end of this year, although Congress could extend them.
If North Carolina’s maximum unemployment benefit were cut to $350 a week, it would still be higher than the top benefit in Georgia, South Carolina, Tennessee and Florida, said North Carolina Chamber lobbyist Gary Salamido. Virginia’s maximum benefit is $378.
The influential business lobby also wants North Carolina to issue bonds to pay off the $2.4 billion that the state borrowed from Washington to pay jobless benefits. The idea is that the state can borrow money cheaply, and the bonds could be repaid with taxes collected from the state’s employers. Employers could save more than $200 million because of lower interest rates and by eliminating the extra tax they pay as long as the state is in debt to the federal government.
More than 20 states owe money to the federal government for unemployment benefits, but just California, Pennsylvania and New York have a debt higher than that in North Carolina. That debt means employers are paying more in federal unemployment taxes this year, and they’ll face annual increases amounting to $21 per worker until the debt is paid off.
Those annual increases would be eliminated because North Carolina would owe bondholders instead of the federal government.
North Carolina’s current unemployment compensation system is a “jobs killer” because of the higher unemployment taxes that employers must pay, Salamido said.
“It’s just not sustainable,” he said.
But the Chamber’s agenda would unfairly punish unemployed workers to fix a problem originating with a series of unemployment tax cuts for employers, said Harry Payne, a former chairman of what is now the state Division of Employment Security, which handles unemployment claims in North Carolina. Those cuts were approved by state lawmakers during the 1990s economic heyday, when the unemployment compensation fund was flush.
“The basic rule is, when employees didn’t get the benefit of the tax cuts, they shouldn’t be the ones who pay for it,” said Payne, now senior counsel at the nonprofit North Carolina Justice Center, a liberal advocacy group.
Payne suggested that the Chamber may be overreaching as a political ploy designed to win the best legislation possible for its members.
Like many states, North Carolina began borrowing from the federal government after the state’s high unemployment rate caused it to run out of money for jobless benefits in February 2009. The amount of the debt fluctuates as the state continues to borrow while also making payments to the federal government.
Texas and other states have issued bonds to pay off their federal government debt. North Carolina went with the bond option after the last recession, but its debt then was just $270 million.
The state Treasurer’s office said the Chamber’s bond proposal has problems. While a state bond would result in lower financing costs, it would result in higher payments for employers in the early years of the debt, the office said in a statement.
The Treasurer’s office also said the state is “very limited” in how much more it can borrow. The Treasurer’s office added that it is waiting for the General Assembly to complete its study of the state’s unemployment system, which may provide additional information.
