Democrats rail against law ending extended unemployment benefits

dranii@newsobserver.comJune 26, 2013 

The top Democrats in the state legislature say they will continue to fight a new law that ends unemployment benefits for 70,000 people on July 1 – even though the odds are stacked against them.

At a news conference Wednesday, Democratic legislators railed against their Republican counterparts, who control the General Assembly, for heartlessly “punishing” the long-term unemployed at a time when the state’s unemployment rate of 8.8 percent is the fifth highest in the nation. They also complained that North Carolina is the only state in the nation that has taken action that will prevent workers from receiving extended, federally funded unemployment benefits that kick in after jobless workers exhaust their state-funded benefits.

“This is getting to be a mean, mean place for people at the bottom and working families in this state,” said Senate Minority Leader Martin Nesbitt of Asheville.

The new law cuts the maximum unemployment benefits paid to the jobless by roughly one-third, from $535 a week to $350, and reduces the maximum weeks of benefits from the current 26 to sliding scale of between 12 and 20 weeks.

Because federal law requires states to maintain current benefit amounts in order to qualify for extended federal benefits, implementing the new law will halt benefits for an estimated 70,000 workers who have exhausted their state benefits but still don’t have a job. Workers who started receiving unemployment benefits before Jan. 1 will be affected.

“Why is that necessary when this benefit is 100 percent federally paid?” asked Rep. Larry Hall of Durham, the House Democratic leader.

$475 million forgone

The state estimates the extended federal benefits have been pumping about $20 million a week into North Carolina’s economy. Estimates of the overall impact on the state economy of eliminating the federal benefits start at about $475 million and rise from there.

For the unemployed, “this is critical income,” said Rep. Paul Luebke, a Durham Democrat. “This is income that in some instances is the difference between losing a house, foreclosure, losing a car, repossession, or getting along a little bit.”

When the legislation was debated this spring, the Democrats tried to amend it so it wouldn’t go into effect until January in order to preserve the extended federal benefits, but their arguments went nowhere. This week, House Republicans spurned another Democratic effort to extend the benefits.

“We will continue to fight for this even though it looks, sadly, as if the program is going to be eliminated,” Luebke said.

Hall said he is seeking the support of 61 legislators in the House to resurrect House Bill 922, which has been buried in committee. That bill would delay the effective date of the new unemployment law until Jan. 1, keeping extended federal benefits intact through the end of the year as well as delaying the cuts in benefits that will otherwise go into effect for workers laid off beginning in July.

$2 billion debt to feds

The starting point for the new law was the more than $2 billion the state owes the federal government – $2,144,184,708.62 as of June 24. That money, which was borrowed to cover state-funded unemployment benefits after unemployment soared beginning in 2008, triggered higher federal unemployment taxes for businesses. Those taxes will rise $21 per employee per year until the debt to the federal government is erased.

The new law – which in addition to reducing benefits also raises the state unemployment tax paid by businesses and expands the pool of employers that pay that tax – is expected to enable repayment of the debt by late 2015 or early 2016. Doing nothing would have meant that the debt wouldn’t be repaid until 2018.

Nesbitt said that although the state couldn’t afford a bond issue this year to pay off all that debt, that by 2015 the situation will be different. At that point, he said, the debt should be low enough for a bond issue to be feasible. When the bill was originally debated, state Treasurer Janet Cowell said that borrowing that much money at that time was beyond the state’s capacity and would jeopardize its coveted AAA credit rating

Nesbitt is proposing a tit-for-tat: Delaying implementation of the new law until Jan. 1 in exchange for a guarantee that, one way or another, the legislature will make sure the debt is extinguished in 2015. (To be sure, a bond issue would still have to be repaid, but eliminating the debt to the federal government would avoid further increases in employers’ federal unemployment taxes.)

Those affected by the law should receive their last check next week. Since unemployed workers actually file claims a week behind, they’ll file their final claims for extended federal benefits beginning Sunday – Sunday, Monday and Tuesday are the busiest days for claims – and should receive their final benefits within 48 hours.

Ranii: 919-829-4877

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