Reform prevented sharp increase in taxes for state businesses
Like many other states, North Carolina was hit hard by the 2008 recession. Rising unemployment rapidly drained the state’s unemployment fund, and North Carolina borrowed from the federal government to cover the shortfall. Going into 2013, the state had the fourth-highest unemployment insurance debt in the nation, more than $2.5 billion. The state faced a difficult decision on how to proceed.
Ultimately, the state legislature passed legislation in February 2013 that cut benefit payments, reduced the length of time the unemployed could receive benefits, and marginally raised taxes on businesses. In doing so, the state lost its ability to participate in a federal program providing funding for extended unemployment benefits, which weren’t to be paid out to any state that cut benefits. However, the changes averted potentially much higher unemployment fund taxes for businesses and will allow the state to pay off its debt to the federal government in 2015, three years earlier than planned. Going into 2013, NFIB backed the reform effort in order to spare small businesses from huge hikes in unemployment taxes.
The plan met with serious opposition from Democrats at the time, and a number have continued to campaign against the issue. Notably, Sen. Kay Hagan (D) has made her opposition to the benefits reform a key plank in her reelection campaign this year, criticizing the GOP-controlled state legislature for the changes, calling them “irresponsible.” The issue has been particularly important in the contest, as Hagan’s likely challenger is Rep. Thom Tillis (R), Speaker of the state House when the reform was passed.
At the time of passage of the reform, Tillis and other Republicans criticized Hagan for not getting a waiver for the state from the federal government to allow the state to continue to participate in the extended unemployment benefits program. Hagan has been pushing for a waiver, attaching it to Senate legislation to extend the emergency unemployment benefits, which expired at the end of last year. That legislation cleared the Democratic-controlled Senate on March 27. However, its fate in the GOP-controlled House is far from certain.
A New York Times piece from last year provides a history of the changes, while WRAL-TV has a guide to the state’s unemployment benefits program. The Jacksonville Daily News and the Charlotte Observer cover various efforts by Hagan to pass a waiver, both the current one and the previous attempt in December.
Learn more about NFIB in North Carolina.