Unemployment overhaul moves forward in legislature

Bill gets preliminary Senate OK Tuesday; final vote Wednesday

Posted: Tuesday, Feb. 12, 2013

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Proposed unemployment changes

• Cuts maximum benefits paid to unemployed workers by roughly one third, from $535 a week to $350.

• Reduces the maximum weeks of benefits from 26 to a sliding scale between 12 and 20 weeks, depending on the unemployment rate. A higher rate would increase the weeks of benefits.

• Cuts off extra federal benefits for unemployed workers, starting July 1.

• Raises the state unemployment tax rate for employers who pay the maximum rate from 5.7 percent to 5.76 percent on workers’ wages up to $20,900. Employers who currently pay 0 percent would pay 0.06 percent on taxable wages. After including the 20 percent surcharge currently assessed, an employer paying the maximum rate of $1,444.61 per employee, would pay an increase of $15.05 per worker.

• Employers who now pay no state unemployment tax would pay $15.05 per employee under the bill.

RALEIGH A top-to-bottom makeover of the state’s unemployment system took a major step forward Tuesday when the Republican-backed bill won preliminary approval in the Senate by a 36-13 margin.

The measure, which was approved by the House last week over the objections of Democrats who complain it hurts jobless workers by significantly cutting their benefits, is scheduled to get its final vote by the Senate on Wednesday.

Gov. Pat McCrory has said he will sign it into law.

Backed by the politically potent N.C. Chamber, the bill was inspired by the $2.5 billion the state owes the federal government, money it began borrowing to cover the first 26 weeks of jobless benefits when unemployment soared during the recession. The state continues to borrow money, about $25 million a week, to cover those benefits.

That debt has triggered higher federal unemployment taxes for businesses, which are rising at a rate of $21 per employee each year until the debt is erased. Individuals don’t pay unemployment taxes; businesses pay both federal and state unemployment taxes.

The bill would accelerate paying off the debt by slightly raising the state unemployment taxes for most businesses, adding to the pool of employers that pay into the state unemployment trust fund and significantly cutting benefits for workers.

Republicans portray the bill as necessary to prevent “deadbeats” from taking advantage of unemployment benefits that are higher than surrounding states and to minimize the escalation of the unemployment taxes businesses pay. They say those higher taxes are hurting the private sector’s ability to create jobs and are a deterrent to companies seeking to relocate to North Carolina.

“We surely don’t want ... to add to the unemployment rate by having them let go some of their employees to pay for the tax,” Sen. Bob Rucho, R-Mecklenburg County, said during Tuesday’s debate.

Democrats and advocacy groups for the poor counter that the bill’s formula for paying back the debt places the brunt of the burden on jobless. They also contend that the current benefits aren’t out of line with the national average and that cutting them will hurt the state’s economy when the unemployed can’t pay their bills.

“I have reached the conclusion that there are those in the state that don’t want people to have these benefits,” said Senate Minority Leader Martin Nesbitt.

There has been no middle ground where the two sides were willing to compromise. On Tuesday, Democrats offered five amendments, four of which were defeated and one which was withdrawn by its sponsor, Sen. Floyd McKissick of Durham.

Among other things, the amendments would have lessened the reduction in unemployment benefits and restored benefits to their current level after the federal debt is repaid.