House Bill 4 on its way to the governor for approval.
A bill introduced in the North Carolina House of Representatives will make drastic changes to the state's unemployment benefits as well as cause business owners to pay higher taxes. The unemployment overhaul bill, known as House Bill 4, passed in the House last Tuesday along partisan lines in a 77- 42 vote. The bill passed its third reading in the Senate on Wednesday, Feb. 13.
According to Republican House Representative Roger West, who presides over Macon, Clay, Graham, and Cherokee counties, the main objective of the bill is to begin paying off the $2.7 billion debt N.C. owes to the federal government. “We have to repay the $2.7 billion we owe the federal government, it has to be paid off,” said West on Monday. “In order to do that, we looked at cutting the number of weeks, the amount given out as well as raising employers’ contribution to the program.”
House Bill 4 outlines cutting Unemployment Insurance (UI) from 26 weeks, which is the amount of time 43 states give UI, to a sliding scale of 12 to 20 weeks. In addition to fewer weeks, the bill also decreases the maximum benefits allowance from $535 per week, to $350 per week. This amount will make North Carolina the second highest paying state in the Southeast. According to Sen. Thom Goolsby, by comparison, the top benefits in surrounding states are as follows: Georgia $330, South Carolina $326, Tennessee $275, Virginia $378.
The bill also mandates that the employers’ contribution to be increased in order to pay off the debt more quickly. If House Bill 4 is approved, businesses would see their federal unemployment insurance taxes go up by $21 per employee for each year the debt hasn’t been paid off. The tax had been at $42 per employee before 2011, but has been increased since then to $84. By 2015, the tax is expected to increase to $126 per employee. Minimum and maximum contribution rates would go up slightly – eliminating the zero rate that top-rated companies now receive.
Republican Gov. Pat McCrory backs the legislation, arguing that it would put the state on par with neighboring states and help people find jobs.
"We've been implementing the current system for a long time, and North Carolina remains the fifth-highest unemployment rate in the country," McCrory said. "So, I'm not going to continue to implement strategies that don't work. We're going to try new strategies to get people to work. That's our goal."
Republican Senator Jim Davis and his colleagues got their first look at the bill on Tuesday. On Monday, Davis said that he believes the bill is a balanced approach at paying back the federal government. “Our primary goal is to take a balanced approach to repaying the state's debt,” said Davis. “The bill looks at raising the unemployment tax on business owners while cutting back on the number of weeks and the money dished out. The interest alone on the $2.7 billion debt is $70 million a year. We have to look at a way to pay it back as quick as possible.”
The Senate Finance Committee scheduled a hearing on a companion unemployment bill for yesterday. On Monday, Davis was confident that the bill would pass in the Senate without many changes. “I think House Bill 4 is already pretty close to what it is going to be in the Senate,”said Davis. “I think it is a balanced approach and does what it is intended to do.”
The Obama Administration’s federal labor department has reported that the bill will kick 170,000 jobless residents off of benefits this summer, and have the state’s economy miss out on $780 million in federal funds.
Additional estimates put the number of residents who will be immediately affected at 80,000. Late Monday, acting U.S. Labor Secretary Seth Harris released a statement explaining that while the federal government can not prevent the bill from becoming law, he emphasized the number of people it would adversely affect.
Acting U.S. Labor Secretary Seth Harris released a statement late Monday saying that the federal agency doesn’t have the power to stop the N.C. General Assembly from moving forward with the plan, but cautioned that families stand to be hurt by it.
“The North Carolina legislature is considering legislation that would reduce state Unemployment Insurance benefits,” said Harris in the statement. “If enacted, the legislation also would cut off all federally funded Emergency Unemployment Compensation ?that is, benefits after 26 weeks of unemployment ?to 170,000 unemployed North Carolinians. This cutoff is automatic under federal law. I have no discretion to stop it. As a result, families struggling to secure their place in the middle class will suffer a grievous blow, and the state’s economy will lose $780 million in federal funds that are vital to reducing North Carolina’s high unemployment rate.”
As the bill becomes law, North Carolina will stand as the only state in the country that voted to forego $650 million in federal funds provided through unemployment expansion program. The U.S. Labor Department states that it doesn’t allow a state to cut its own weekly benefit amounts and still qualify for federal extended benefits.
The reduction in the number of weeks of benefits does not disqualify a state from the federal extended benefits. Since January 2012, Florida and Georgia have reduced the maximum number of weeks from 26 to 19, and Michigan from 26 to 20. North Carolina would become the fifth state to reduce its maximum number of weeks to 20 or fewer.
Democratic House Representative Joe Sam Queen, who represents Haywood, Jackson and Swain counties was in the minority of politicians who voted against the bill. "It really is a sad day for the people of North Carolina," said Queen of the bill's passing in the House. "The bill cuts unemployment benefits by about two-thirds. Since 1935 unemployment insurance has been just that, insurance offered to the workforce in the event of losing a job. House Bill 4 redefined that and will add 170,000 people to those without income, without adding a single job.
Queen explained that the bill, which House Republicans referred to as a jobs bill, will put thousand of people off of benefits and fighting for jobs that just aren't there. "The bill did not create a single job, but took benefits away from those who were looking to bridge the gap from losing one job and starting another," said Queen.
According to Queen, his biggest objection to the bill is timing. "What I don't understand is if we still plan to implement all the things put forth in the bill, just wait to do it later this year, we will not exempt ourselves from the $650 million in federal funds that are set to be given to unemployed workers in July," said Queen. "It just makes no sense to do it now and forfeit those desperately needed funds.
Western North Carolina's jobless rate is higher than the state's average, which Queen attributes to the having fewer jobs to choose from.
With the entire intention of the bill being to pay back the federal debt, which is a debt owed by employers not by the state, Queen said, if lawmakers took no actions to change the current laws, the debt would still be paid back in full in six years, while House Bill 4 expedites the debt pay period by three years. "We all want to pay back the debt and recognize the need to do so," said Queen, "The debate is just about when and how long it takes to pay it back."
At the end of 2012, Macon County's unemployment rate was holding at 11.1 percent, with neighboring Jackson County at 9.6 percent and Clay at 9.5 percent. Macon's unemployment rate is down slightly since December 2011, when the average was at 11.3 percent or 1,723 individuals.
With the bill passing both the House and Senate, it will now be sent to the governor’s desk for final approval.