The wrong veto to override

July 26, 2011 

— It's tempting to assume that vetoes and attempted veto overrides are a power struggle owing to ideology and politics. Sometimes they are. But in North Carolina, there is a very real danger presuming that is always to be the case.

For example, Gov. Beverly Perdue recently vetoed a bill passed by the legislature that deals with the Employment Security Commission. However, she promptly transferred the agency to the state Department of Commerce.

She did it by executive order and in a manner which conforms to the federal law. Most of the basic rules that define how our Unemployment Insurance system works are federal matters, and we simply cannot be out of conformity. Like it or not, the Feds have the first and last word.

The General Assembly had passed Senate Bill 532, its own version of the ESC transfer, but it added, in more than 90 pages, many more provisions that violate federal standards regarding matters of eligibility, process and structure.

Normally, bills of such a substantial nature affecting a federal program in a state agency would first be vetted with both the state and federal agencies. Because the final terms weren't known until the passage of the measure at the end of the legislative session, those steps could not happen in this case.

As soon as possible, the new law was sent to the U.S. Department of Labor for consideration as to whether the provisions were lawful. Soon after the request and within the time to veto the measure, North Carolina received formal notice from the Labor Department of a very real problem.

This notice, called a "conformity letter," included four pages of specific issues which would put placed the state program out of compliance if they were implemented. At issue was not the fact of the ESC transfer, but the other changes included in the bill. We were at immediate risk for sanctions if the law was implemented.

Perdue quickly vetoed the measure, stating her reasons and referencing the warning letter and the sanctions the program was facing.

The question of what the possible consequences are if the state ignores the warnings was asked and answered by legal counsel from the U.S. Department of Labor's Atlanta office in a message excerpted here:

All employers in the state required to pay Federal Unemployment Tax (FUTA) will see their FUTA tax rate rise from 0.8 percent to 6.2 percent, because they will lose the credit against the FUTA tax for paying state unemployment insurance tax.

North Carolina could also lose federal grants for its Unemployment Insurance and Employment Service programs. That would be an increase in North Carolina taxpayers' FUTA taxes of 775 percent.

In a brief discussion before a veto override vote in the state Senate, the sponsor of the bill attempted to reference a state law as possible protection from federal sanctions. That state law, which can only affect our state agency, simply allows our ESC to suspend enforcement of problem provisions until the legislature can meet and make changes in the law in light of the problems. It merely defines steps by which North Carolina may minimize damages and demonstrate its good faith to the Labor Department. It cannot affect our liability, and only gives us ways to show good faith.

Showing good faith here would be a tall order if, after the legislature passed the law, received notice of violations and the governor vetoed it, the legislature then chose to reinstate the exact same provisions it was warned about. Four pages of "You can't do this" and "Here is what will happen if you" do are very clear.

Think about the cost of spinning wheels and burning rubber away from the law officer who just gave you a warning ticket.

There appears no good reason for re-enact the exact same provisions that caused the warning in the first place. Any override of a veto may be a partisan victory for a legislative majority, but this one will be very expensive to North Carolina employers.

Harry Payne, now senior counsel for policy and law at the N.C. Justice Center, has served as a state legislator and as N.C. labor commissioner. He was chairman of the Employment Security Commission from 2001 to 2009.

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