N.C. Enacts Harshest Cuts to Unemployment Insurance, Shutting Off Federal Extension Benefits

Share    

In a display of shocking disregard for the hardships facing the four hundred thousand unemployed job-seekers in North Carolina, where the state’s 9.2 percent jobless rate is the nation’s fifth highest, state lawmakers have passed sweeping changes to unemployment insurance (UI) that deeply slash benefits, cut back available weeks, and severely restrict claimants’ eligibility.

Newly-elected Republican Governor Pat McCrory has said he wants the bill to be one of the first that he signs into law.  UPDATE - Feb. 19: Governor Pat McCrory signed the bill today.

On a vote of 36-12 the North Carolina Senate gave final approval to the bill Wednesday, it having passed the House last week.

Amendments offered in both chambers to postpone implementation of the cuts were defeated on party-line votes.  As a result, when the law takes effect July 1, all federally-funded extension benefits under the Emergency Unemployment Compensation (EUC) program will shut down abruptly in North Carolina.  A provision in federal law prohibits states from reducing UI benefit amounts while receiving EUC benefit funds.  By knowingly flouting that provision, North Carolina lawmakers voted to cut off EUC benefits as of July 1, immediately cutting off benefits to an estimated 80,000 unemployed workers still seeking work after their state benefits run out.  The U.S. Department of Labor estimates a total of 170,000 North Carolinians will lose access to those benefits in the last half of 2013.

The loss of EUC benefits will take an estimated $780 million out of the state’s already-struggling economy in the last half of 2013, causing a substantial decrease in overall economic activity of as much as $1.5 billion.

Among the numerous, harmful cuts imposed on new claimants for state UI benefits starting July 1 are:

  • A one-third cut in the maximum weekly benefit amount to $350 per week
  • A cut in the available weeks of state UI benefits from a maximum of 26 to a sliding scale of 12-20
  • A cut in benefits for many claimants based on a new calculation formula not used elsewhere
  • A cut in benefits availability for many claimants based on more restrictive eligibility rules

The legislation was based on a plan released last year by the North Carolina Chamber of Commerce, and Chamber lobbyists and employer representatives worked with Republican lawmakers, who have controlling majorities in the legislature, to write the bill.  It was put on a fast track at the opening of the 2013 legislative session – without public hearings or comment, and with no input from advocates for unemployed workers, employees or labor groups.

North Carolina’s UI finances have long been hampered by a series of substantial business tax cuts enacted in the 1990s, which reduced the flow of funds into the state’s UI trust fund, leaving it woefully unprepared to deal with a surge in benefit payments such as the one caused by the recent deep recession and persistently sluggish job market.  As a result, like some 30 states, North Carolina’s UI fund borrowed heavily from the federal government and now owes $2.5 billion on those federal loans.

The bill passed by the legislature this week is ostensibly designed to allow the state’s UI fund to pay back that debt at a faster pace, and be debt-free by 2016.  But once the debt is retired, the drastic cuts to unemployment benefits would remain permanent under the new law.

Republican legislators who pushed the plan through and beat back all attempts to amend it continuously labeled it as a “balanced” package.  But the costs to unemployed North Carolinians stemming from the severe benefit cuts are only partially offset by minimal tax increases for some businesses, while taxes would actually be reduced for others.  Overall, 75 percent of the debt repayment burden falls on jobless workers through unemployment benefit cuts.

Last year, the average unemployed worker’s job search in North Carolina lasted more than 40 weeks.  But the loss of federal EUC extensions combined with the cutback to a maximum of 20 weeks of state UI benefits would reduce the current up-to-73 weeks by 53 weeks – all 47 weeks of EUC in Tiers 1 through 4 and 6 weeks less in state benefits.

As of July 1, North Carolina, the state with the fifth highest unemployment rate in the nation at 9.2%, will offer HALF the total weeks of benefits available in North Dakota, the state with the lowest jobless rate at 3.2%.

Ahead of the final Senate vote, Bill Rowe, director of advocacy for the North Carolina Justice Center, told Reuters that the legislature’s plan “makes dramatic changes to our unemployment benefits that no other state has ever done.  It just puts a huge hurt on a lot of people."  The Justice Center is part of a broad coalition that has strongly opposed the plan.

A policy brief from the National Employment Law Project (NELP) this week detailed how seven other states have already cut back their available weeks of state benefits, and triggered reductions in weeks of federal EUC benefits as well.  But no other state has gone as far down the draconian path as North Carolina, cutting not only state UI weeks and benefit amounts as well as shutting off federal EUC extensions to those whose state benefits run out.

“Unemployed job-seekers are facing a one-two punch, with state cuts triggering federal cuts too—a real double-whammy hitting families whose needs remain great,” said Christine Owens, executive director of the National Employment Law Project. “It doesn’t take much imagination to realize just how critical every week of unemployment insurance is to the unemployed, especially those who experience longer spells of joblessness. Unemployment insurance is indispensable to the families who are hanging on by a thread, but it’s also crucial for the economy because it delivers a big boost in consumer spending directly to local businesses. Pulling the rug out from under the unemployed is the wrong thing to do on so many levels.”

“It was bad enough when legislators in high unemployment states like Michigan and Florida made drastic cuts to their unemployment insurance programs, while so many remained out of work,” said Owens. “But the situation in North Carolina—cutting state benefits and rejecting federal aid—is beyond the pale. Roughly one in ten North Carolinians is still unemployed, and the state’s recovery remains fragile. Refusing available aid under these circumstances is simply unconscionable.”

The extent to which lawmakers incorporated other mindlessly harsh provisions in the bill, squeezing even more benefit dollars away from jobless workers to pay off the debt owed by businesses, is evidenced by changes to some key eligibility provisions.

Workers who lose their jobs due to health issues, or who must leave a job, even temporarily, to care for other family members in need, would no longer be eligible for benefits under a revised definition of “good cause” for leaving an employer.

Also redefined are the “suitable work” provisions governing continued eligibility.  Under the new plan, after 10 weeks of benefit payments claimants are required to accept any “suitable” job offer where the pay amounts to 120% or more of one’s benefit amount or be disqualified from further eligibility.

That provision, in the context of the newly-established maximum weekly benefit of $350 would mean that someone receiving that top weekly amount would be required to accept a job offer of as little as $420 per week – which translates to $21,840 a year, less than the 2013 federal poverty level of  $23,550 for a family of four.  Someone receiving even the current average benefit of $299 in North Carolina would be required to accept a job offer of $18,658 a year, which is less than the poverty level for a three-person family.  And with the new benefit formula, the average weekly benefit will be far less than it is now.

Slashing unemployment insurance benefits, cutting off federal aid to 170,000 unemployed jobseekers, driving down wages, increasing severe financial distress and exacerbating poverty – all to protect low business tax rates in North Carolina.  One wonders how some of these lawmakers sleep at night.

 

See all blog entries »