The state’s Revenue Laws Study Committee met again this morning, primarily to discuss the state’s unemployment insurance debt to the federal government.
As most of you already know, many states (including NC) had to borrow billions of dollars from the federal government to cover expanding unemployment insurance benefits during the great recession. During a presentation to the committee, a member of the legislature’s fiscal research staff discussed the current state of NC’s UI fund. The findings included:
- NC still owes $2.5 B to the federal government, along with an estimated $500 million in interest payments
- Under the current repayment plan, the debt will be paid off in 2019, and will be financed by increasing UI insurance rates on employers
- The repayment plan already cost employers an additional $80 million last year, another additional $160 million this year (above and beyond previous UI insurance tax rates)
- If no changes are made to the repayment plan or UI benefits, it is projected the extra cost to employers would rise to $718 million in 2019 alone
- There is also the concern of ensuring an adequate amount of reserves in the UI trust fund, even after the federal debt is paid off. For instance, if NC would want to be eligible for interest free borrowing from the Feds in the future, it would have to establish a reserve of $2.4 B in the UI fund – no easy task
Fiscal policies will certainly be front and center for the incoming governor and legislature – the unemployment insurance program needs to be among them.