I cannot fathom what it’s like to be unemployed for weeks on end, trying to support myself and a family. Like many I’ve been lucky. I’ve had steady employment all my adult life.
But I learned over the last couple of years what it’s like to go without a paycheck. As the newspaper industry tackles changes in the business model and the economic downturn, many media companies – mine included – have downsized. Behind noticeable changes in the paper have been employee layoffs, pay cuts and furloughs.
I’ve felt the sting of a pay cut and a few furloughs (weeks off without pay). I’m lucky to have a good paying job that allowed me to sock away some savings. But I was relieved that after the first unpaid week off I qualified for unemployment benefits. So with the second furlough within a year I got a check. It was a fraction of my pay yet it still helped pay the bills.
My experience pales next to those of thousands of North Carolinians who’ve been unlucky enough in a bad economy to lose a job, and not be able to find another one. North Carolina has the 5th highest jobless rate in the nation at 9.3 percent. Residents scour for work for months and come up empty. Unemployment checks are lifelines to many.
So, jobless residents will feel pain if a plan unveiled by N.C. lawmakers Wednesday to cut the maximum weekly state unemployment benefit from $506 to $350 – a 30 percent reduction – gets passed by the legislature next year. The plan would also reduce the maximum weeks of benefits from 26 to a sliding scale of between 12 and 20 weeks. By contrast, the maximum unemployment tax rate for employers would rise just slightly – from 5.7 percent to 5.76 percent on employee wages up to $20,900. Most – 70 percent of businesses – won’t see any change in their taxes.
State lawmakers are right to tackle this issue. The N.C. unemployment insurance system is broken and in debt. The system had to borrow $2.5 billion from the federal government to pay benefits to a growing jobless population.
North Carolina had company. At the end of July, 30 states were borrowing a total of $40 billion from the feds to continue paying unemployment benefits. According to the National Employment Law Project, that figure is expected to grow to $65.2 billion in 2013.
N.C. lawmakers put the state in this hole, though. In the 1990s, they cut the unemployment insurance taxes employers pay to cover jobless benefits. And when the economy turned sour during recent recessions, they did nothing as claims rose dramatically and people were out of work for longer periods.
Would that N.C. lawmakers had Maryland’s foresight. Maryland was one of the few states that didn’t need loans from the federal government to pay unemployment benefits. Its unemployment system is solvent and strong, with the fifth highest unemployment trust fund balance in the nation.
And because elected leaders worked “closely with business, labor and community” to ensure tax rates were adequate and officials worked with employers on payments, Maryland Gov. Martin O’Malley announced recently that most Maryland businesses will see their unemployment insurance taxes drop. At the same time Maryland continues to pay a maximum of $430 weekly in jobless benefits and provides them for up to 26 weeks.
Said O’Malley: “This doesn’t happen by chance, but by the choices we’re making together to build a strong, growing and resilient economy.” Added Ronald Adler, chair of the Maryland Chamber of Commerce’s unemployment insurance subcommittee and a member of the state’s Unemployment Oversight Committee: “This is the direct result of prudent decisions made by Maryland business leaders, labor, the legislature and the O’Malley administration. Maryland is well-positioned to seize new economic opportunities.”
N.C. leaders might want to pay attention to the collaborative way Maryland has tackled this issue. Complaints have been raised about the secretive way in which Republican leaders developed this proposal. Reportedly no labor or community people were involved, though there was input – some say guidance – from business leaders, in particular the N.C. Chamber of Commerce.
It’s no surprise to hear those labor and community leaders complain that the proposal places a disproportionate share of the burden for addressing the problem on the struggling jobless. Bill Rowe, director of advocacy for the N.C. Justice Center, told the Joint Revenue Laws Study Committee, which produced the bill, that the plan was “crafted to keep taxes as low as possible for businesses.” Republican Rep. Julia Howard, co-chair of the panel noted that “there is a limit to how much employers can continue to be taxed and remain in business.”
A balance is needed, which Rowe seemed to acknowledge when he said Wednesday that he understood the need for some adjustments in benefits. But he said the proposed bill goes too far.
Others think so too. National Employment Law Project officials have cautioned against balancing unemployment system trust funds “on the backs of unemployed workers largely by reducing benefits” which many states with bankrupt funds have been favoring.
In a report last year, NELP provided this crucial insight: “Unemployment insurance payments are a powerful source of stimulus to local economies – families spend their benefit checks quickly and directly on basic needs, saving and creating jobs. By fostering weak unemployment insurance programs during a fragile recovery, state legislators are harming unemployed families. Equally important, they are depriving states’ economies of strong consumer spending. This weakens states’ long-term fiscal health and increases the chances that they will be unprepared for the next recession.”
Lawmakers should ponder that seriously when they take this up next year and decide what to do. They should also heed the Law Project’s push for a thoughtful plan that aims to restore long-term trust fund solvency by seriously addressing program financing. Maryland, and other states whose funds are solvent, might have some lessons to learn from.
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