“Our leaders have balanced the books on the backs of jobless workers.” — MaryBe McMillan
Wealthy, powerful legislative leaders and Gov. McCrory celebrated forcing jobless workers to pay off the debt North Carolina owed to the feds since the Great Recession – and years of tax cuts for employers during better times – left our unemployment trust fund without enough money to pay unemployment insurance claims.
A key element of a controversial decision to lower the state’s unemployment insurance benefits came to fruition Tuesday when North Carolina paid off the final portion of a $2.8 billion debt to the federal government.
Gov. Pat McCrory hailed the accomplishment, of which $2.5 billion in payments occurred since he took office.
“This will give employers certainty about the cost of doing business in North Carolina,” McCrory said.
The General Assembly passed legislation in 2013 that targeted the elimination of the debt to the U.S. Labor and Treasury departments. The state borrowed money to pay extended state UI benefits from 2008 to 2011, having at one time one of the largest borrowing totals in the country.
The debt settlement presents employers with the first of two projected breaks on their UI payments for each worker.
However, it doesn’t appear likely that another part of the law — which drastically cut the maximum weekly benefit amount and amount of benefit weeks — will be altered anytime soon.
The N.C. chapter of the AFL-CIO called the extinguishment “a Pyrrhic victory.”
“Our leaders have balanced the books on the backs of jobless workers,” said MaryBe McMillan, the chapter’s secretary-treasurer. “This is as callous as it is counterproductive.”
Employers are going to save a lot of money – about $700 million less a year beginning in 2017, reports WRAL.
However, paying off the debt more quickly came at a cost to workers. Changes to North Carolina’s unemployment insurance system triggered cuts to long-term federal benefits in the state. Roughly 71,000 workers who had been among the long-term unemployed lost benefits immediately on July 1, 2013, while another 100,000 unemployed workers lost access to long-term benefits that would have otherwise begun later than year. Funding for federal long-term benefits ran out nationwide on Jan. 1, 2014.
Longer term, North Carolina’s benefits became less generous, shorter in duration and forced unemployed workers to take jobs that paid less or required fewer skills than they were used to.
Worker advocates argue businesses got a tax break on the backs of workers.
“The reality is that the vast majority of the debt was repaid not by employers but by jobless workers,” said Alexandra Sirota, director of the North Carolina Budget and Tax Center, a liberal-leaning policy think tank.
Cuts to benefits, she said, weren’t mirrored by commensurate increases in SUTA taxes. She added that $1 billion is not enough of a cushion to prevent future shortfalls in the trust fund.
Unacceptable double standard and “Shameless cheering”
“Now that the UI debt is paid off, it’s unconscionable to give employers automatic tax cuts while asking workers to continue to sacrifice. Such a double standard is unacceptable,” said MaryBe McMillan, secretary-treasurer of the NC State AFL-CIO, in a statement to the press.
“Lawmakers should take action this session to reverse the draconian cuts they made to benefits and eligibility in the 2013 session.”
By relying primarily on harsh benefit cuts for jobless workers who became unemployed through no fault of their own, lawmakers have harmed workers across our state. Rather than sit in the middle of the pack in terms of various benefit policies, North Carolina now has some of the lowest numbers of jobless workers receiving benefits and their benefit amounts are also among the lowest. These outcomes are also part of the reason that the debt has been paid off so early.
Our leaders have balanced the books on the backs of jobless workers. This is as callous as it is counterproductive. Real reform would have made sure that employers contribute to the system that they also benefit from and certainly wouldn’t have allowed them to receive tax cuts earlier, as they will now under the 2013 changes.
The Raleigh News & Observer blasted the announcement as “shameless cheering” in an editorial on May 6:
North Carolinians can be forgiven if they don’t applaud the payoff of the state’s unemployment insurance debt a year early, which the governor and the self-satisfied architects of the GOP agenda in the legislature celebrated Tuesday with big smiles on their faces and disgracefully over-the-top rhetoric by McCrory. Said he, “It took visionary leadership, it took courage and it took fortitude to make it happen.”
That’s insulting and ridiculous. Courage? Whose courage? The people who needed courage here were the ones victimized by Republican policies cutting their benefits for their families. Fortitude? The fortitude came from those whose hills got a little steeper thanks to the Republicans.
The cuts in unemployment benefits represented one of the low points of a Republican administration in the governor’s office and in the GOP-led General Assembly, and given their cuts to public education and extreme social agenda, picking a low point isn’t easy.
So we can do without the posing and pontificating on the payoff of a debt one year early that could have been paid off without hitting so many families in need. The governor and legislators are backslapping in the legislature, but those who lost their jobs through no fault of their own have received a different sort of slap.