I’ve written here before about the massive debt North Carolina owes to the federal government for money it loaned NC to cover our unemployment benefits over the last couple of years.
Thus far, the General Assembly’s response has been to hope the feds forgive the loan. A senate bill, however, would authorize a study to be conducted by an independent consultant to examine ways to reform the state’s unemployment insurance structure in order to best repay this loan.
Senate Bill 99 has passed the Senate and just yesterday was approved by the House Finance Committee. Hopefully this measure isn’t a case of “too little, too late,” but at least it takes the matter seriously and sets out to find some alternatives to address this substantial debt.
According to the bill’s language, NC is indebted to the Feds to the tune of $2.5 billion as of Dec. 31, 2010. In 2010 alone, unemployment benefits paid out exceeded unemployment insurance taxes collected by nearly $1 billion. Interest payments on that loan is scheduled to begin in September of this year (with $100 million reportedly due at that time), with no clear payment schedule yet provided for the principle of the loan.
Some estimates suggest that the federal unemployment tax levied on NC employers will rise substantially if the loan is not paid back. Such a substanial rate increase will make employing workers more expensive and discourage job growth. North Carolina’s unemployment insurance debt owed to the federal government ranks 4th highest in the nation when measured on a per worker basis.
As we hope for economic recovery in the coming years, failure to address this sizeable liability will result in significant increases on the costs to employ workers – which will serve to dampen the prospects of economic and job growth.
Let’s hope SB 99 become law quickly and results in some proactive and sensible measures to free NC up from this financial burden and allow for a more robust and rapid recovery.