On backs of jobless, N.C. saves money

Gov. Pat McCrory announced remarkable news last week: North Carolina has turned around its bankrupt unemployment insurance fund. The program went from a $2.8 billion debt to a $1 billion surplus in less than three years.

What McCrory neglected to say was how it happened: through dramatic cuts in help for the unemployed.

McCrory’s short press release referred six times to how employers and businesses will benefit. It did not refer once to helping those laid off through no fault of their own.

Dale Folwell, the assistant secretary of the Division for Employment Security, is right that McCrory inherited a broke and broken system. We sounded the alarm in this space a year before the legislature tackled reform.

“This crisis is a bit under the radar still,” we said. “But at stake is the state’s financial stability, the level of taxes companies pay and the livelihoods of the tens of thousands of North Carolinians…”

The state had gotten to that point primarily through cutting unemployment tax rates on employers during the good times of the 1990s, then getting socked by two recessions. Failing to save for that rainy day was worsened by other system flaws. Some workers were given benefits who shouldn’t have qualified. Others turned down jobs because they were getting by on their benefits.

We laid out several elements of a solution, but said: “Drastic benefit cuts are not the answer. … Cuts that balance the books would be so large as to harm the program’s mission: providing a safety net for those laid off.”

The legislature’s solution the next year? Drastic benefit cuts that harmed the mission.

Consider these undeniable figures from the U.S. Department of Labor, comparing the second quarter of 2013, right before benefits were cut, to the second quarter of 2015, the most recent available:

▪ Average number of weeks an N.C. claimant received benefits: Dropped from 15.9 (31^st in the country) to 12 (50^th).

▪ Percentage of N.C. unemployed who were receiving benefits: Dropped from 39 percent (24^th in the nation) to 13 percent (49^th).

▪ Average weekly benefit: Dropped from $301.06 (25^th) to $233.69 (47^th).

▪ Percentage of the average weekly wage that the benefits represented: Dropped from 36.5 percent (25^th) to 27.2 percent (43^rd).

▪ North Carolina spent $1.24 billion in unemployment in fiscal year 2013, and a little over a quarter of that, $355.8 million, in fiscal year 2015.

Clearly, the deficit was made up mostly on the backs of the unemployed. Now N.C. businesses will get a further unemployment insurance tax cut starting Jan. 1.

The legislature and the governor should have enacted a more balanced package. Now that the system is solvent again, they have another chance to do so. Otherwise, we know what to expect the next time the economy swoons.

This story was originally published November 19, 2015 at 4:21 PM with the headline "On backs of jobless, N.C. saves money."