As a candidate for governor, Pat McCrory offered mostly glittering generalities about the glories of business, but he did make one surprisingly specific claim: that the state budget wasn't balanced—as it is constitutionally required to be—because of the red ink in our unemployment insurance account with Washington.
McCrory's claim was surprising for a couple of reasons. First, it wasn't true. By federal law, unemployment compensation is the responsibility of employers and their employees, not state government. You'd have thought McCrory would have known the difference.
But the second reason was, if anything, even more telling about the man who is now our governor. Unemployment fund debt is w-a-y-y down the list of problems facing North Carolina—so far down that the only people who bring it up are chamber of commerce speakers looking for something to grouse about.
Clearly, McCrory was spending too much time at chamber luncheons and not enough talking with working people—or people who used to work but now depend on unemployment checks in order to eat.
It came as no surprise, however, that after McCrory won, a radical bill to slash unemployment benefits was trotted out, the product of a private deal between the N.C. Chamber of Commerce and Republican legislative leaders. The bill sailed through the Revenue Laws Study Committee, so it will be one of the first taken up by the new General Assembly.
The bill (so far unnumbered) is described by George Wentworth, senior staff attorney at the National Employment Law Project, as a "parade of horribles," meaning that it encapsulates the worst anti-worker provisions ever dreamed up in any state.
It's been denounced by the state AFL-CIO, the N.C Justice Center and other progressive and labor groups.
The point is, if McCrory heard only one side of the unemployment insurance story before, then he's hearing the other side now. It should give him more than pause. The question is, will it? Will our Republican governor push back against this one-sided measure that seeks to punish the jobless to save their former employers some coins? Or will he give the bill the old olé—from ignorance or a lack of spine to tell other Republicans they've gone too far?
So what is unemployment insurance? In simple terms, it's money paid into a fund when people are working that they can draw on if they're terminated in a company layoff or shutdown. The more money you earned, the higher your unemployment check, because the goal is to replace a substantial part of your pay while you search for a suitable replacement job.
It's insurance, not welfare.
In addition to providing a cushion for individual workers, unemployment insurance protects states and the nation against the impact of widespread layoffs in a recession or depression. Think what happens when large numbers of people lose their jobs and stop spending. The economic downturn becomes self-perpetuating—a spiral that unemployment checks can help to stem.
That's why a few states, at the outset of the Great Depression, created the first unemployment insurance systems, and why the federal government, in 1935, required every state to have one.
Different states pay different benefits. But they all rely on payroll taxes, which are supposed to be high enough to build reserves in good times to be ready when the bad times strike.
If state funds run short, they can borrow from Washington; but then Washington levies a small payroll tax of its own—a surtax—until the debt is retired.
At this point, you may wonder whether the payroll tax is a tax on workers or employers? The answer is, it's a tax on workers that employers pay, which causes employers to view it as a tax on them. However, if you think an employer doesn't take the tax out of a worker's wages, I have a campaign committee for beleaguered business owners I'd like you to support.
In North Carolina, the average payroll tax is $340 a year per worker, well below the national average. (The tax rate vary by industry and by how frequently a company lays people off.) That figure is well below the national average of $417 per worker. And therein lies the problem. Starting in 1990, the General Assembly reduced payroll taxes six times in nine years, adopting the PAYGO (pay as you go) policy that employers wanted, instead of building reserves while times were good.
A recession in 2001–02 and the Great Recession of 2007–10 drained the state's fund, exposing PAYGO and forcing North Carolina to borrow $2.5 billion from Washington. That debt is now being repaid with a $42-per-year federal payroll surtax, which will increase by $21 each year until the debt is retired—probably in 2018.
This is where things would stand, except that the business community, having caused a mess with PAYGO, wants to use the debt as an excuse to cut benefits for the jobless. Starting in July, maximum benefits would be slashed by one-third, from $525 a week to $350, and average benefits from $296 to (by Wentworth's estimation) about $230.
Also, the maximum duration of benefits would be slashed from 26 weeks to 20 or fewer (the number would go down when unemployment rates drop), which would trigger a proportionate cut in the number of weeks an unemployed North Carolinian would be eligible under the federal emergency unemployment insurance program. The emergency program currently provides up to 47 weeks of additional eligibility, beyond the state's 26, because North Carolina's unemployment rate remains above 9 percent.
For someone who just lost her job, this bill is pure poison. But if served with shrimp in the right business setting, its nasty taste is easily disguised—even enjoyed. But will Pat McCrory swallow it?
This article appeared in print with the headline "The parade of horribles."