Unemployment insurance payments to more than 70,000 North Carolinians are set to run out in four weeks, one result of an overhaul in North Carolina’s unemployment system that takes effect on June 30.
Those affected include anyone receiving federal extended unemployment payments, or most people who started drawing benefits before January 1. The N.C. Employment Security Commission has begun notifying people through its website and over the phone when they file required weekly claims.
The state legislature’s unemployment system overhaul, which both raised taxes on employers and cut the length and amount of benefits, makes the state ineligible to receive federal unemployment funds intended for those unemployed longer than 26 weeks. Federal law cuts off aid to states that don’t maintain their current benefit system.
The U.S. Department of Labor estimates 170,000 people in North Carolina could ultimately lose extended federal benefits for which they otherwise would have qualified.
North Carolina’s unemployment rate in April was 8.9 percent, the fifth-highest in the U.S. In Mecklenburg County, with an 8.5 percent unemployment rate, the state said 42,575 people were unemployed in April. That figure doesn’t include people who’ve stopped looking for work.
Brian Springs, 46, said he has been collecting unemployment while looking for jobs since last fall, when his contract in a training and development position with a bank ended. He’s searched for work since then, without luck. He said the news that his extended unemployment benefits will end in four weeks – which he found out when he logged into the ESC’s website – took him by surprise.
“I’m frustrated with the way it was handled. I was thinking I was good, and all of a sudden I’ve got one month left,” said Springs, who lives in Charlotte. “I’m scrambling around trying to figure out what I’m going to do. No one said, ‘Hey, this is going to happen.’”
Losing the benefits will hurt, said Springs. “No one lives off it. You just survive off it.”
Efforts to push back the deadline for unemployment reform – which would keep the federal funds flowing – have foundered so far in the state legislature. Now, groups that work with the unemployed are bracing for a surge of people seeking help.
“I’m not sure that the clients we’re working with understand or realize what’s coming,” said Michael Elder, chief executive of Goodwill Industries of the Southern Piedmont. His organization helps unemployed people receive job training and find new work. “This is in some respects unprecedented.”
Supporters of the reform plan say the state needs to quickly pay back the $2.5 billion it owes the federal government for past unemployment payouts. North Carolina will pay back the federal money it owes by the end of 2015 under the reforms, three years earlier than the state would have otherwise.
The plan will also allow the state to bank a $2 billion reserve for future payouts. The reforms will cut maximum unemployment benefits to $350 per week, from $535, and reduces the duration of benefits from 26 weeks to a sliding scale of between 12 and 20 weeks, depending on the state’s unemployment rate.
The N.C. Chamber was among the groups that supported the reform bill. Gary Salamido, the chamber’s vice president of government affairs, said the reforms are an imperfect but necessary compromise.
“There’s really nothing good about what’s happening with our (unemployment) system,” Salamido said. “People losing benefits. Nothing good comes of that.”
But he said it was time to fix the system before the debt got larger. “It had gone so long and become so broken that waiting any longer was more of a disservice to people,” Salamido said of the unemployment deficit.
The debt triggered higher federal unemployment taxes for businesses, rising at a rate of $21 per employee per year until the debt is satisfied.
“Every year the federal government extended unemployment benefits put the employers in a difficult spot because it triggered higher debt,” he said. “It put us deeper and deeper in the hole.”
Salamido said many businesses are unhappy with the reform plan as well, because it raises their taxes and adds 20,000 businesses who formerly didn’t have to pay unemployment insurance taxes to the state tax rolls.
Critics have noted that the state wound up with inadequate unemployment reserves when the recession hit because it cut businesses’ unemployment taxes in the 1990s.
“That was a mistake we all made before,” Salamido said.
Josh Ellis, a spokesman for the ESC, said the agency has been reaching out to people who might be affected. There is a recording about the changes that people hear when they call the ESC, and a list of frequently-asked questions and answers is posted on the ESC website. “We want to let folks know, so they can know these changes are coming and plan accordingly,” Ellis said.
He said the state is prepared to help unemployed people with free services at local workforce offices, including Internet access, career counseling and job training.
As of May 18th, approximately 70,000 of the state’s more than 163,000 unemployment claims were for federal extended benefits, Ellis said. That’s about 43 percent of the state’s unemployment claims, and all of them will lose benefits after the last week in June.
Advocates say the lost unemployment payments will have spillover consequences for the rest of the state’s economy. James Andrews, president of the state AFL-CIO, said the federal money would have otherwise been spent locally on things such as rent and groceries.
The U.S. Department of Labor estimates that the lost extended federal unemployment payments will total $780 million.
“It’s much deeper than the unemployed individual,” Andrews said. “When folks get their unemployment check, they don’t invest it overseas or stash it in a bank. They spend it right away.”
Portillo: 704-358-5041 On Twitter @ESPortillo
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