Since mid-March, over 445,101 workers in North Carolina have filed for unemployment insurance and the sobering reality of how limited unemployment benefits are, is a challenge the state must face.
North Carolina’s broken unemployment insurance system plagued by the GOP’s 2013 restructure of the system, has been stripped of its capabilities to deliver adequate aid to jobless individuals and to stabilize the state’s economy.
The passage of House Bill 4, ratified by GOP-led legislature and signed by Former Republican Gov. Pat McCrory, created a devastating domino effect, starting with the state losing out on $780 million in UI benefits for the second half of 2013. Changes made to the UI benefit laws by the GOP without congressional approval, resulted in the state being disqualified from federal benefits.
Instead of receiving the $780 million in federal funds that was vital in reducing North Carolinians’ high unemployment rate, lawmakers chose to move forward in leaving thousands of workers without financial assistance over the years in a bid to reduce debt.
The stated rationale was that changes were needed to repay as much as $2.8 billion in advances taken from the federal government to keep paying benefits during the “Great Recession.” The state did exhaust its trust fund and needed federal help, but that exhaustion stemmed from the scale of job losses that accompanied the 2008 and 2001 recessions combined with a series of ill-advised tax cuts in the 1990s that undercut the fund’s long-term solvency.
Even without state action, the federal advances would have been repaid through gradual increases in the federal unemployment insurance tax. The repayment issue was simply an excuse to cut business taxes significantly by radically restricting benefit eligibility, amounts, and durations. By restricting payouts, the state was able to slash taxes and amass a trust fund balance of $4 billion.
At the end of 2007, some 38 percent of unemployed Tar Heels received unemployment insurance payments, with the average benefit totaling $282/week; claimants also could have received payments for 26 weeks.
At the end of 2019, in contrast, 10 percent of unemployed Tar Heels received unemployment insurance, with the average benefit totaling $277/week while the maximum benefit duration had fallen to 12 weeks.
The legislature also made it harder for individuals to qualify for unemployment benefits. Imposing four restrictions that have limited the number of unemployed workers to receive any aid.
According to a National Employment Law Project report released in June, legislatures looking to reduce the number of people eligible for UI have cut benefits through four primary methods:
– Increasing the amount of earned wages needed to qualify;
– Redefining who qualifies;
– Reducing duration of benefits; and
– Imposing stricter ongoing eligibility requirements.
The nonprofit group’s report found that 25% of UI benefit claims nationwide were denied for reasons unrelated to the cause of their unemployment, in particular the job-search requirements and online claim procedures.
The N.C. legislature has imposed all four restrictions, including requiring recipients to wait multiple weeks to receive benefits, as well as raising the number of required weekly job search contacts from two to five for people who receive UI benefits.
Recently, Gov. Roy Cooper has used executive authority to remove those restrictions and implement positive reforms in an effort to provide UI benefits for the thousands of workers without jobs due to the pandemic.
The state will be able to claim more than $30 million in federal funds to provide financial assistance during the current surge in claims.
Seven years later, Republican’s eligibility restrictions and limited benefits for all unemployed workers has left a significant mark on North Carolina’s unemployment insurance system. The system designed for providing needed assistance could potentially leave hundreds of thousands financially vulnerable as the system strains from years of inadequate funding.
The time is now for lawmakers to fix the broken system in order to provide relief for the hundreds of thousands of North Carolinians needing help.