More cuts coming to NC unemployment benefits

Jobs unemployment

RALEIGH, N.C. — It’s official. The number of state unemployment benefit weeks will be reduced significantly for people who begin their claims after July 6.

A calculation formula used in the state law covering UI benefits drops the number of weeks available on July 6 from a maximum of 19 weeks to 14 weeks and a minimum of 12 weeks to seven weeks.

House Bill 1069 introduced Thursday into the state House, co-sponsored by Rep. Julia Howard, R-Davie, would eliminate the minimum week criteria.

The bill also sets a standard weekly benefit that operates on a sliding scale, but the benefits would not drop below 12 weeks even if the state jobless rate fell below 5.5 percent.

Because Bill 1069 would become law July 1 if passed, it could replace the existing sliding-scale provision before the next changes takes effect.

Howard could not be reached for comment Friday on her sponsorship of Bill 1069, which contains six sections of proposed changes to the state’s UI law.

She championed the sliding scale for weekly benefits contained in House Bill 4 that became law July 1, 2013. That bill also cut the maximum weekly benefit amount from $535 to $350.

Rep. Harry Warren, R-Rowan and a co-sponsor of Bill 1069, said Friday the main factor in the proposed change is that the calculation formula used in Bill 4 “proved not to be compatible with the goals of the sliding scale.”

Proposed bill is short-term fix

Bill 1069 provides what Warren calls a “short-term fix” to the sliding scale formula he believes will require the 2015 long session to fully resolve. “We don’t have enough staff time to devote to this issue given the priorities of coal ash, teacher pay, Common Core,” Warren said.

The sliding scale doesn’t take into account factors contributing to the rate decline, such as discouraged workers exiting the labor force. Because those individuals aren’t counted as unemployed by federal and state labor officials, it lowers the rate.

When Gov. Pat McCrory signed Bill 4 into law, he provided the first measuring stick for whether his conservative approach to running the state economy would create jobs. McCrory said the benefit reductions would “protect our small businesses from continued over-taxation and help provide an economic climate that allows job creators to start hiring again.”

Bill 4 supporters said they were trying to bring the N.C. jobless benefits, which some considered too generous, in line with the maximum provided in eight Southeastern states.

Before Bill 4 was passed, the maximum benefit amount was 26 weeks — the same level that 44 states still maintain. The lowest current maximum benefit limit is 18 weeks in Georgia, while Florida also is at 19.

The sliding scale aspect of the law works like this. The law allows for the number of benefit weeks to be adjusted every Jan. 1 and July 1, based on the average jobless rate of the first three months of the previous six-month period: July, August and September for the first six months of the year and January, February and March for the second half.

Every half-percentage point drop in the rate lowers the maximum and minimum week levels by one week.

With the average rate in January, February and March being 6.47 percent, the sliding scale takes the maximum and minimum benefit weeks down by five weeks beginning the week of July 6.

McCrory and Republican legislative leaders say the tough-love UI benefits approach has made individuals more willing to take available jobs, even at lower wages and potentially below their skill level, because their benefits run out.

Howard said in February 2013 that Bill 4 represented “the best fix I can come up with for an ugly scenario we have to resolve.” She said the benefit reduction will spur some claimants to take whatever job they can find now, and “hopefully find a better job as the economy improves.”

“This (unemployment insurance) is becoming a welfare-dependent program in a lot of cases,” Howard said at that time.

John Quinterno, a principal with research firm South by North Strategies Ltd., said the reasons the jobless rate is declining and the reforms initiated by the legislature “have effectively decoupled the unemployment insurance system from actual conditions in the labor market.”

Debt reduction a factor, too

Dale Folwell, assistant secretary for the N.C. Division of Employment Security, has stressed that the sizable reduction in the state’s debt to the U.S. Labor Department shouldn’t be overlooked in discussing factors behind the recent drop in the unemployment rate.

States with high jobless rates, such as North Carolina, have borrowed money from the federal agency over the past 12 years to pay for state unemployment insurance benefits as their own UI trust funds were depleted.

The state’s borrowing reached a peak of $2.8 billion in April 2012.

Since then, the state has paid down more than $1.7 billion to a debt level of $1.1 billion as of Wednesday.

But North Carolina still has the fourth-largest debt of the 18 states with outstanding debt.

The debt to the federal government was created in part because N.C. employers received a series of UI tax cuts in the 1990s when the state jobless rate was well below 5 percent, which economists consider full employment.

Legislators in 2011 not only rescinded the tax rate cut, but began raising it by $21 per employee per year. The per-employee rate currently stands at $104, and will go up to $125 in 2015.

The goal of Folwell and the legislature is to repay the federal loan debt by November 2015 to keep the tax rate from increasing another $21 in 2016.

If that goal is achieved, then the rate drops back to $42.

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