NC repays $2.5B debt to feds early after unemployment compensation cuts, higher company taxes

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RALEIGH, North Carolina — North Carolina officials said Tuesday they've met their goal of repaying early a $2.5 billion federal debt, a milestone reached largely by cutting unemployment benefits for jobless workers but which saves businesses money that could go into added hiring.

Gov. Pat McCrory and fellow Republicans in the General Assembly celebrated their 2013 decision to accelerate by about three years repaying money a pinched state government borrowed from Washington during the Great Recession to cover unemployment compensation payments.

The state became the first to be disqualified from a federal compensation program for the long-term jobless when it slashed weekly payments and cut the length of time a jobless worker could collect. To spur employment, GOP leaders said, it was necessary to cut benefit amounts from the highest in the Southeast to levels comparable with neighboring states.

"We had some people who were not taking jobs that they needed to take," McCrory said. The governor credited the added pressure on the jobless to find new employment as driving down the state's unemployment rate from near the worst in the U.S. when he took office in 2013 to better than the national average.

The early repayment means businesses will be freed sooner from temporarily higher unemployment taxes. Businesses were seeing unemployment insurance taxes rising by $21 per employee every year the federal debt wasn't paid.

Compared with 2014, companies will save $280 million next year and pay a total of $700 million less into the unemployment system starting in 2017, state Division of Employment Security head Dale Folwell said. The state's chamber of commerce applauded the development.

The thousands of dollars a year businesses of all sizes were spending to pay down the debt was "money that could have been invested in new jobs or raises for productive employees," McCrory said.

McCrory ignored a reporter's question about how workers benefited from early repayment.

McCrory spokesman Josh Ellis later said in a subsequent email sent to The Associated Press that paying off the unemployment debt means employers will have more money to provide raises and hire additional employees.

The director of the Budget and Tax Center at the North Carolina Justice Center, a liberal think tank in Raleigh, said state leaders "have made the system in North Carolina less able to deliver on its core mission of stabilizing the economy and in the meantime have harmed many jobless workers."

Unemployment benefits help workers pay for necessities, so the permanent benefit cuts will mean that demand for goods and services during a future recession will crater when businesses most need money circulating through the economy, Alexandra Sirota said.

"The fact that we've paid down the debt has largely been due to the cuts that were made to benefits," she said.

The General Assembly's fiscal research office estimated that benefit cuts for the jobless would make up about three-quarters of the cost of accelerated repayments.

The changes made qualifying for unemployment benefits more difficult. Maximum weekly compensation of $535 in mid-2013 dropped to $350. Unemployed workers now can only collect for up to 15 weeks, among the shortest periods in the country and down from six months before the cuts took hold.

More than half of those unemployed in North Carolina last year were jobless for more than 15 weeks, according to survey data analyzed by the state Commerce Department. That delay in finding work is also true for about half the country's unemployed workers, according to Bureau of Labor Statistics data.


Emery Dalesio can be reached at http://twitter.com/emerydalesio

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