NC unemployment debt fix backed by House panel

RALEIGH, N.C. (AP) -- A Republican effort to overhaul North Carolina's unemployment system and speed up repayment of $2.5 billion owed to the federal government cleared a House panel Thursday, despite Democratic and worker advocate complaints the proposal was skewed against the jobless.

The measure, influenced heavily by the state's business industry, passed along party lines after the House Finance Committee turned back Democratic amendments that sought to ease proposed cuts in jobless benefits for future recipients.

The measure would require higher state and federal unemployment business taxes, but the maximum weekly state benefits for unemployed workers also would fall from $535 to $350 starting July 1, and the maximum number of benefit weeks from 26 to 20. The benefit period could range from five to 12 weeks during very low unemployment.

"Nobody likes this bill. There are no giveaways in this bill," said Rep. Julia Howard, R-Davie, one of the primary sponsors.

The bill now heads to the House floor Monday evening for the first of two required votes.

GOP members said the new maximum benefit level largely will be in line with what other states offer and would put the state's unemployment insurance trust fund on sounder footing. North Carolina's maximum benefit is the highest in the Southeast. The proposal would pay back the debt by 2015 — three years earlier — and put $2 billion in reserve by 2019.

Howard and other supporters said the debt was an impediment to recruiting companies to the state and encouraging current firms to expand. Now businesses have certainty and there will be more incentives for unemployed workers to more actively seek work, other lawmakers said. The proposal makes several changes recommended by the North Carolina Chamber.

"We need to emphasize putting unemployed people back to work rather than compensating people for being unemployed," said Rep. Jeff Collins, R-Nash.

North Carolina businesses would continue to see their federal unemployment insurance taxes go up by $21 per employee — it's currently $84 — with every year the debt isn't been paid off. The companies also would continue to pay a state unemployment tax surcharge until the trust fund exceeded $1 billion. Minimum and maximum state contribution rates go up slightly — eliminating the zero rate as many as 30,000 top-rated companies now receive.

Still, Democrats said the proposal was being rushed and placed too much of the burden on the unemployed. Reductions in the duration of benefits and their amounts would comprise nearly three-quarters of the $3.6 billion in the cumulative changes required by the bill through 2017, the General Assembly's fiscal research office estimated in a document.

Enacting the changes July 1 also would mean ending an extra year of emergency jobless benefits approved by Congress in January after six months, possibly cutting off about 80,000 workers receiving $25 million a week, the liberal-leaning North Carolina Budget & Tax Center said. The center said it's the worst possible time to make changes as the state unemployment rate is among the nation's highest at 9.2 percent.

"It is a hit on the unemployed with no sense of fairness, so that one could infer the problem is being used as a way to hurt the unemployed," said Rep. Paul Luebke, D-Durham.

Committee co-chairman Rep. Robert Brawley, R-Iredell, said the plan, which also includes administrative changes to the system, will put the unemployed in a better position to get a job. "I don't feel mean-spirited," he said.

Workers would receive $225 million in fewer benefits during the first six months in which the plan takes effect, fiscal research analyst Rodney Bizzell told the committee. That means less money for the unemployed to pay their mortgage, their health insurance and their children's college bills, said Rep. Deborah Ross, D-Wake. Someone needs an annual salary of $55,640 to receive the current maximum benefit.

"We also have to think about the human costs, and I don't see it as a balanced package because the rate increases of business only go up until the debt is paid off, and they are temporary," Ross said. "But the changes to our unemployment compensation system become permanent."

Republican committee leaders refused to consider two amendments and the committee defeated two others, including one that would have reduced the maximum weekly benefits cap to $425 and required business to pay higher state unemployment taxes to pay for the change.

The bill also must go to the Senate, where support also is expected. New GOP Gov. Pat McCrory has said an unemployment debt fix was one of his early priorities but he hasn't said publicly whether he supports starting July 1 and ceding the federal benefits.