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McCrory signs cuts as agencies predict pain for the unemployed

By Elizabeth Leland
eleland@charlotteobserver.com

Gov. Pat McCrory signed a law on Tuesday sharply cutting North Carolina’s unemployment benefits as agencies that deal with jobless workers predicted hard times to come.

The law, which takes effect July 1, makes sweeping changes. It reduces the maximum unemployment benefit by one-third, from $535 to $350 per week. It reduces the length of benefits from 26 weeks to a sliding scale of 12 to 20 weeks, depending on the state unemployment rate. It also eliminates benefits for workers who have to leave a job for health or family reasons.

North Carolina currently has the fifth-highest unemployment rate in the nation, at 9.2 percent, or more than 430,000 workers.

The overhaul, pushed by Republicans in the General Assembly, is designed to repay $2.5 billion the state owes the federal government for past benefits.

Just hours after McCrory signed the changes into law, Kevin Schiffer was among a steady stream of men and women seeking help at Charlotte’s Division of Employment Security office off Nations Ford Road.

Schiffer, 39, understands why some Republican legislators believe “deadbeats” have taken advantage of the system. But he believes the law will hurt hard-working people who through no fault of their own lose jobs and need help.

People like Schiffer.

Two weeks ago, he said, he learned that Source Technologies, where he worked as a quality assurance manager for five years, is relocating to Florida. He hopes to land another job before his severance runs out. But just in case, he went to the employment security office.

Could Schiffer, who is married with three children, one in college, survive on $350 a week, the maximum benefit under the new bill?

“Absolutely not.”

‘A drastic effect’

Bill Rowe of the N.C. Justice Center predicted the law “will have a drastic effect,” cutting unemployment payments by 60 percent. “The cuts are unprecedented.”

The changes will also affect organizations that help the unemployed, said Louise Mack, president of Prosperity Unlimited, a Kannapolis-based nonprofit that has a foreclosure-prevention program.

“We’re going to have to deal with it, too,” Mack said. “It will jeopardize more families and they could go into foreclosure a lot quicker.”

According to the National Employment Law Project, North Carolina is the eighth state to cut the number of weeks of benefits, but the first to lose federal emergency benefits.

The federal benefits, extending payments past 26 weeks of unemployment, were awarded as part of the “fiscal cliff” deal in Congress. But the federal law requires states to maintain their existing benefit structure. The U.S. Department of Labor said 170,000 people will lose an estimated $780 million in benefits in North Carolina because of the new law.

The state law also raises unemployment taxes paid by businesses, partially through the elimination of a zero-percent rate that about 30,000 businesses were paying. Federal taxes will continue to rise by $21 per employee per year until the debt is repaid and a 20 percent state surcharge will continue a little while longer. By paying off the debt sooner, the fee per employee that businesses bear will end sooner.

Sen. Tommy Tucker of Union County, who voted for the law, said he has heard from “a lot of people that we were insensitive to reduce benefits at a difficult time – that we’re doing it on the backs of the unemployed.”

“The pain,” Tucker said, “goes both ways, for the unemployed and for the businesses who have to pay the bill.”

Tucker owns a mechanical contractor company that employs 77 workers. He said that under the new law his unemployment insurance payment will triple to $110,033.

“We have to sacrifice … because of the amount of debt and the interest on the debt and the urgency to pay it off,” Tucker said. “It’s a double-whammy effect on employees and also on businesses.”

The state’s debt will be repaid by late 2015 – three years earlier than if nothing had been done – and will put more than $2 billion in reserve by the end of the decade to pay future claims in the next economic downturn.

‘Shame on our governor’

Dozens of business groups, led by the North Carolina Chamber, backed the overhaul.

Media members couldn’t attend the signing ceremony. But in a statement, McCrory said: “This bipartisan solution will protect our small businesses from continued over-taxation, ensure our citizens’ unemployment safety net is secure and financially sound for future generations, and help provide an economic climate that allows job creators to start hiring again.”

MaryBe McMillan with the state AFL-CIO reacted strongly: “As one of the first laws under his tenure, these cruel cuts will forever mar any legacy that Gov. McCrory hopes to leave behind. Only bullies kick people while they are down. Shame on our governor and our legislature for turning their backs on unemployed workers.”

Natalie Suggs, 33, hopes to find a full-time job before the changes take effect. Suggs, who was at Charlotte’s Division of Employment Security office on Tuesday, said she was laid off in October 2011 from her job as a team leader in Wells Fargo’s corporate call center. She received a seven-month severance, she said, and has gotten by since then on unemployment benefits and a part-time job.

“People who are receiving unemployment insurance did not ask to be on unemployment,” she said. “It’s not a benefit we sought out, and I feel like it’s one of the benefits that shouldn’t be cut.”

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