NC needs a more stable unemployment fund

08/18/2014 7:46 PM

08/19/2014 4:10 AM

Some of the most brazen claims about conservative policies and economic gains involve the state’s unemployment insurance system.

North Carolina was the only state to turn away extended federal benefits and then sharply curtailed eligibility and benefits under the state program. When the state’s unemployment rate dropped, conservatives crowed that cutting benefits was driving more people to find work. Most of the drop, however, reflected a shrinking labor force.

Now Gov. Pat McCrory is touting another benefit of the state’s hard line on unemployment benefits: the unemployment fund’s shrinking debt to the federal government. The debt peaked at $2.8 billion as the state borrowed to meet a surge in claims during the recession and the slow recovery. Now it’s down to $574 million thanks to lower payments to the unemployed and a surcharge the federal government imposes on employers to get back what it loaned the state fund.

Paying off debt early sounds good, but it doesn’t mean much except to the unemployed who lost benefits. The extra federal tax on employers would have paid the debt off eventually without any changes in benefits.

What the governor and other Republicans are missing about the changes is unemployment is that they failed to change the system’s vulnerability to overruns. The changes should have focused on making the system sound enough to stand another big recession.

North Carolina shouldn’t be cheering its early payoff to Uncle Sam. It should be worried about whether it will be able to meet its obligations to future unemployed workers.

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