Plan to lessen state unemployment benefits moves foward
by Kellen Moore
A plan to reduce state unemployment benefits moved forward in the General Assembly this week, but recent changes in federal law could conflict with parts of the proposal.
In December, a draft plan was unveiled to the Revenue Laws Study Committee as a method for eliminating the roughly $2.5 billion that North Carolina owes to the federal government.
The debt began accumulating in February 2009 after the state exhausted its reserves for unemployment payouts and began borrowing federal money to assist out-of-work residents.
The draft plan proposes a variety of measures aimed at accelerating how quickly North Carolina pays back what it owes.
Those measures include:
— Reducing the maximum weekly benefit for unemployed workers from $535 to $350.
— Reducing the maximum duration of benefits from 13-26 weeks to 13-20 weeks. The range varies based on the state’s overall unemployment rate. With 5.5 percent unemployment or less, the range would be only five to 12 weeks
— Changing the calculation of weekly benefits to an average of the wages for the last two quarters worked, rather than the highest quarter wage.
— Raising state unemployment tax rates on employers by .06 percent and requiring nonprofits and governmental entities to pay a surcharge from which they were previously exempt.
— Defining any work as “suitable work” after 10 weeks of unemployment benefits.
Those and other program changes are expected to pay off the full amount by 2015, fiscal analysts determined. If the state does nothing, the debt is expected to be repaid by 2018.
On Tuesday, the committee approved the draft plan with only minor policy changes, according to legislative staff. That opens the door for a legislator to introduce the plan as a bill soon after the General Assembly reconvenes Jan. 30.
If enacted as currently written, the changes would apply only to claims submitted on or after July 1.
But the matter is far from settled, according to legislative analyst Cindy Avrette.
In 2008, Congress enacted a temporary program of federally funded Emergency Unemployment Compensation to help those who had used up their state-provided unemployment benefits.
EUC provides up to 47 additional weeks of compensation on top of the maximum 26 weeks offered by North Carolina.
The program was extended several times, and during one of those extensions, Congress added a “non-reduction rule,” Avrette said. The rule requires that a state that wants its residents to receive federal EUC benefits cannot reduce the way it calculates weekly benefit amounts — one of the very measures included in the draft plan, she said.
When the draft plan was first proposed in December, the conflict didn’t exist, because the EUC was set to sunset at the end of 2012, Avrette said. The same Congressional act that warded off the “fiscal cliff” again extended the EUC through the end of 2013.
To account for the change, the committee added an amendment to the draft plan noting that federal law had changed and that legislators would need to consider that as they debated and considered options.
One option legislators have is to postpone implementation until after the EUC expires again on Jan. 1, 2014.
“I’m sure there will be amendments on many different parts offered,” Avrette said.
The plan seems destined to get attention early in the General Assembly’s upcoming session.
On Wednesday, Gov. Pat McCrory voiced support for the draft plan, telling a Greensboro crowd that it was “the only plan I know of that will work,” the News & Record reported.
McCrory has said in other venues that addressing the unemployment debt is among his top priorities.