Starting next week, North Carolina—which has the fifth highest jobless rate in the country—will become the only state in the union with no safety net for the long-term jobless. Thanks to reforms in the state's unemployment insurance laws, North Carolina's 71,000-plus long-term unemployed residents will lose access to the federally funded Emergency Unemployment Compensation (EUC) program.
North Carolina is losing eligibility to the federal program because of a new law, signed by the governor in February of this year, which reduces the number of weeks that unemployed people are eligible for state-funded benefits and cuts the maximum weekly benefit amount by roughly one third, from $535 to $350. It is the latter provision that has cost North Carolina workers its eligibility: States looking to receive federal EUC money are forbidden from cutting weekly benefits. The federal government granted a special exemption from that rule to four other states last year, North Carolina's request for a similar exemption was ignored.
"I would call these cuts obscene," said Michael Leachman, director of state fiscal research for the Center on Budget and Policy Priorities.
As of Monday, July 1, North Carolina's jobless will be able to collect state unemployment benefits for up to 19 weeks, but not the 26 weeks that is the national standard. And after that, they won't have access to the federal funds available in every other state.
"Nineteen weeks is very much an outlier across the country," said Leachman. "It's less than half of what's available in any other state, including states with much better economies. It comes at a time when more than one half of unemployment claimants in North Carolina are already exhausting their state-funded benefits before they can find a job."
Republicans in the state have defended the cuts as a necessary measure to reduce the state's $2.5 billion debt to the federal government. The state originally borrowed that money in order to fulfill its unemployment insurance obligations to jobless residents. Under the conditions of the loan, the federal government has been gradually reducing tax credits for North Carolina businesses over the past few years, effectively increasing their tax burden. Local business interests such as the North Carolina Chamber of Commerce hope that repaying the loan will make it possible to once again lower taxes on private industry.
“This bipartisan solution will protect our small businesses from continued over-taxation, ensure our citizens’ unemployment safety net is secure and financially sound for future generations, and help provide an economic climate that allows job creators to start hiring again," Republican Governor Pat McCrory said of H.B. 4 in a statement released on the day of its signing.
But in sacrificing EUC eligibility, the state is leaving about $600 million in free federal money on the table, said Leachman. That's money that "would have gone into the state economy and mostly be spent locally," he said.