RALEIGH — Business leaders standing in front of a banner that proclaimed “think jobs” voiced their support for an extensive overhaul of the state’s unemployment system that they consider long overdue.

Their Wednesday morning news conference coincided with the introduction of identical bills in the state House and Senate that have drawn criticism from advocates for the poor who argue that the brunt of the changes would hurt those who can least afford it.

The business leaders, however, praised Republican legislative leaders for taking a “fair and balanced” approach to a problem they portray as untenable. The House Finance Committee is expected to take up the bill Thursday.

The proposed overhaul was inspired by the $2.57 billion the state owes the federal government, money it began borrowing to cover the first 26 weeks of jobless benefits when unemployment soared during the recession. The state continues to borrow money, about $25 million a week, to cover those benefits.

That debt has triggered higher federal unemployment taxes for businesses, which are rising at a rate of $21 per employee each year until the debt is erased. Individuals don’t pay unemployment taxes; businesses pay both federal and state unemployment taxes.

“We can’t create more jobs if jobs cost too much,” said Lew Ebert, president and CEO of the N.C. Chamber. “Right now, in this state, jobs cost too much.”

In order to accelerate paying off the debt, the legislature is considering cutting the maximum benefits paid to unemployed workers by roughly one third, from $535 a week to $350. The bills also would reduce the maximum weeks of benefits from 26 to a sliding scale of between 12 and 20 weeks, depending on the unemployment rate.

Because the bill calls for a cut in state benefits starting July 1, it also cuts off extra federal benefits for unemployed workers. Currently federal emergency benefits kick in after state benefits expire, but a recent federal relief package cuts off the extra benefits to states that don’t maintain their weekly benefit amounts.

“Our benefits situation was probably too luxurious, and our tax structure was not sound,” said Andy Ellen, president and general counsel of the N.C. Retail Merchants Association. “The only way we get out of this is we get out of it together by restructuring the system.”

Ellen said postponing a cut in benefits until 2014 in order to maintain the emergency benefits could put the state in the same situation all over again if Congress decides to extend the benefits once more.

Ebert stressed that the emergency benefits ultimately are paid by the state’s employers through their federal unemployment taxes.

“The whole notion that somehow this free money is showing up from Washington is simply not true,” he said.

A view opposed to slash in benefits

After the news conference, held at the N.C. Museum of History, Bill Rowe, the director of advocacy for the N.C. Justice Center, presented the opposing viewpoint to reporters.

Although the business executives stressed that the bill calls for their state unemployment taxes to increase, Rowe said those increases were “minimal.”

“Our state taxes are still some of the lowest in the country, and that’s not being addressed in the bill,” he said. “The way this debt is being paid back is by slashing our unemployment insurance system.”

That’s particularly unfair, he said, because the groundwork for the current situation was laid in the 1990s when state unemployment taxes were cut significantly.

N.C. might stand alone in this

Rowe said he knows of no other state that has taken action that ended federal emergency benefits, nor has any other state slashed weekly benefit amounts to the extent that the legislature is contemplating.

Advocacy groups point out that the current system includes what amounts to a built-in cost-of-living increase because the maximum benefits are adjusted annually based on a formula – two-thirds of the average weekly wage. But the bill calls for a cap of $350 that doesn’t change from year to year.

That means even after the federal debt is repaid, unemployed workers will still suffer, Rowe said. Passage of the bill would enable the state to pay off the debt in 2015, compared to 2018 if the state does nothing.

Although Rowe has many complaints about the bill, he’s worried legislators may not get to hear any of them.

“We’re worried it is going to be rushed through rapidly without there being much opportunity for the public, and even the members (of the General Assembly), to have a say or even ask questions about the bill,” he said.

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