GOP legislators show little interest in raising jobless benefits in better economic times
http://www.greensboro.com/business/local_business/gop-legislators-show-little-interest-in-raising-jobless-benefits-in/article_44ae2a8b-6c0a-5aa7-b4e6-9a034198fedf.html
GOP legislators show little interest in raising jobless benefits in better economic times
By Richard Craver BH Media
17 hrs ago
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Source: The Urban Institute
Cassandra Sherrill/BH Media
Source: The Urban Institute
Cassandra Sherrill/BH Media
It was a pointed question, with a tinge of exasperation, that symbolized how Republican legislators view the necessity of unemployment insurance benefits for the jobless and how they affect their former employers.
The Urban Institute, a nonprofit research group, gave a presentation Wednesday about unemployment insurance benefits to the General Assembly’s Joint Oversight Committee on Unemployment Insurance in Raleigh. The committee has seven Republicans among its eight members.
Wayne Vroman, a senior economist with the institute, methodically explained the socioeconomic consequences of North Carolina having a record $3.17 billion in its UI trust fund while continuing to pay the nation’s lowest level of UI benefits — a maximum of $350 in weekly benefits and for a maximum of 12 weeks.
It’s a dichotomy that many Republican legislators, including Howard, have expressed satisfaction in defending after first retiring a $2.8 billion debt to the U.S. Labor Department in May 2015.
Those legislators say the state’s UI benefits had been “too rich” before 2012, deterring unemployed people from pursuing new work, including part- and full-time jobs that would leave them underemployed for their skill sets.
Drawing from the nation’s lowest UI benefit levels is the cold dose of reality that more than 700 Triad employees face as they have, or are about to enter, an unemployment scenario in which they will receive an average of $247 a week for an average of nine weeks.
Included are as many as 130 production workers at Rockwell Collins Inc., 90 production and other employees with Krispy Kreme Doughnuts Inc., 200 employees with Cone Denim, 169 production employees with Flowers Foods and several dozen with the former Bank of North Carolina.
Most of those jobs likely paid more, if not significantly more, than $247 a week.
Vroman summed up his talk by saying the current UI program represents “a radical reduction in the generosity of your (UI) program to claimants, people who are unemployed by no fault of their own, but their employer chose to end their job.”
Rep. Dana Bumgardner, R-Gaston, responded during a question-and-answer segment with Vroman by saying, “I think where we are is a good thing.”
Bumgardner then raised the question, “What is the point of your presentation?”
Debt to surplus
It has been more than three years since the state erased a $2.8 billion debt to the U.S. Labor Department for the money it borrowed to pay extended state benefits to unemployed North Carolinians during the heart of the Great Recession.
According to the left-leaning N.C. Justice Center, employers bore about 22 percent of the repayment burden through a temporary increase in the unemployment insurance tax they pay, while beneficiaries have contributed 73 percent through reduced benefits that remain in place. The center invited Vroman to speak to the committee.
Although some conservative groups would dispute the exact accuracy of those figures, there is little argument that reduced benefits — going from a maximum of $530 a week to $350 and from a maximum of 26 weeks to 12 weeks — have made the largest impact.
Vroman said the UI trust fund is projected to increase to $3.5 billion by the end of 2018, in part because of projections that the state will need to pay just $118 million in jobless benefits.
The lower increase to the trust fund for 2018 is also a byproduct of the unemployment tax going down again for employers.
Sen. Paul Newton, R-Cabarrus, said the sharp decline in North Carolina’s UI benefits would not have been so noticeable if the state had been paying what its neighboring states had been all along.
Since the law went into effect, the average weekly UI benefit for North Carolinians went from $298 in 2012 to $247 in 2016 — the biggest drop in the country.
In the meantime, the average weekly jobless benefits have increased since 2012 in South Carolina, up $10 to $252, and in Virginia, up $17 to $302.
Taxes
Sen. Andy Wells (R-Catawba) followed Vroman’s presentation by expressing concern about employers “being crushed” with taxes, citing the UI tax as a contributor to their reasoning for eliminating jobs.
Employers pay $195.05 in UI tax per employee, according to The News & Observer of Raleigh. Employers can pay a higher rate based on their history of job cuts and layoffs.
Since 2013, North Carolina’s Republican-controlled legislature has reduced the state’s corporate tax rate from 6.9 percent in 2013 to 3 percent in 2017 — the lowest in the country for states that tax corporations. There are plans to reduce the rate to 2.5 percent by 2019.
“This is the absolute worst time to raise taxes on business,” Wells said.
It’s a claim that not only Republican legislators have made about the UI tax since the Great Recession began in late 2007 but also conservative analysts and pundits.
They made the same argument when the UI tax on employers was not raised for most of the 2000s during the administrations of Govs. Mike Easley and Bev Perdue, both Democrats.
Without the extra employer contribution to the UI trust fund during those years, it didn’t take long for the state to deplete the trust fund’s $1 billion surplus early on in the Great Recession.
“I would like to see us look at (the UI trust) as an insurance trust,” Wells said.
He asked Vroman, “Where do we have to be” with the trust fund “to be able to extend benefits in the next recession without raising the (unemployment insurance) tax on employers?”
Vroman responded by saying that the $3.17 billion in the fund more than meets that measure.
Ted Brinn, an assistant secretary for N.C. Commerce Department, said federal Labor Department guidelines are for $2.3 billion to $2.4 billion in the trust fund for a state with the population level of North Carolina, which is at more than 10 million residents.
However, some unemployment advocacy groups say the trust fund should be at least $4.2 billion for state officials to be comfortable with the amount.
Little movement
Sen. Paul Lowe (D-Forsyth) acknowledge there has been little to no talk about changing the UI benefit level. He said North Carolina should not be proud to have “one of the least generous and most restrictive unemployment insurance programs of any state despite the ($3.17 billion) surplus.”
“Those who are unemployed have not benefited from the surplus,” he said. “I have not heard of an effort to raise the payout but will look into restoring the benefits to previous levels.”
During the recovery from the Great Recession, some UI beneficiaries in North Carolina, particularly those in manufacturing, received as much as 99 weeks of state and federal regular and extended benefits.
Those levels of benefit weeks, coupled with North Carolina paying more than its neighboring states, convinced Republican legislators, including Howard, by the spring of 2013 that the UI benefits were too generous.
At that time, committee co-chairwoman Rep. Julia Howard (R-Davie) said the UI benefitsare “becoming a welfare-dependent program in a lot of cases.”
When the legislature approved the drastic UI benefit reductions in February 2013, it meant forfeiting up to $650 million in federal benefits that could have helped 85,000 unemployed North Carolinians, including 15,000 in the Triad. North Carolina was the only state to pas on those.
“In part, I believe the state had such a significant liability and interest payment to the federal government that the UI experts who worked on this plan are more than a little cautious before they start recommending adding benefits, or making other changes,” Lambeth said last week.
Former Republican Gov. Pat McCrory said in his 2016 re-election campaign that the UI benefit cuts and retirement of debt were one example of “giving employers certainty about the cost of doing business in North Carolina.”
Appeals ignored
Appeals to increase the benefits have been ignored even though some Republican legislators said in 2013 that they would consider it once the economy improved.
“Our economy has certainly improved with new jobs and new people moving into North Carolina,” Howard said last week. “The objective is to get unemployed folks back to work as soon as possible.”
“We are currently in a good position with $3 billion in the trust fund,” he said. “We are prepared to pay benefits without having to borrow from the federal government.”
Bill Rowe, a policy analyst with the Justice Center, said that before the drastic benefit reductions, North Carolina “was solidly in the middle of the pack when looking at the other states’ systems.”
“In fact, the Tax Foundation ranked North Carolina’s UI system fifth-most favorable to business in the nation before the law was passed,” Rowe said.
In April, the Democratic-sponsored Senate Bill 580 was introduced that would raise the minimum number of unemployment benefit weeks from 12 to 16, as well as a maximum of 20 weeks.
The bill would retain the sliding benefit scale that moves up and down with the unemployment rate.
However, rather than being set by the statewide unemployment rate, the bill would let the number of benefit weeks be determined by individual metropolitan statistical areas, such as the five-county Winston-Salem MSA and the three-county Greensboro-High Point MSA.
That way, jobless individuals in rural parts of the state could receive more benefit weeks if their MSA jobless rate is higher than urban MSAs.
“We submitted what we thought was realistic, to see what is possible,” said one of the bill’s co-sponsors, Sen. Ben Clark, D-Hoke. “We didn’t want to press it too much with other colleagues, even though this may be too much for many legislators to go from 12 to 16. But, we’re back in good position with the fund now.”
The bill was never acted on by the Committee on Rules and Operations of the Senate.
The Justice Center said that by not raising at least the number of UI benefit weeks, the legislature is allowing “workers to lose a critical support even while jobs are not out there.”
“The UI is failing to fulfill its function of keeping jobless workers connected to the labor force in a tough market,” it said.
Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University, said the state’s UI benefits program “has ceased to be effective insurance against unemployment.”
“This is clear from the fact that our state has the highest percentage of recipients in the nation (47.5 percent) who exhausted all of their benefits” before they found a new job, Madjd-Sadjadi said.{span class=”print_trim”}
He said that having a record trust fund level won’t provide as much of a Band-Aid as legislators project when the next recession arrives.
“When benefits are exhausted and there is a lack of jobs, as would be the case when we enter a recession, underfunding UI and providing poor levels of benefits will merely transfer more people to other safety net programs, which have higher administrative costs associated with them,” he said.
“It can make other societal problems worse, such as increase the level of foreclosures as families hit by unemployment are unable to pay mortgages.”
