As we first reported here a month or so ago, thanks to significant reforms made by the state’s Republican leadership, North Carolina was on track to finally paying off a
$2,600,000,000 $2,750,000,000 debt (that’s two point seven five billion) owed to the federal government. (For what it’s worth, that staggering debt was accumulated under Democrat control.)
Today, in a joint press conference, Governor Pat McCrory, Senate Leader Phil Berger, House Speaker Tim Moore and Assistant Secretary of Commerce Dale Folwell announced that — as of last Friday — the state has paid off its debt. In its entirety.
“This will give employers certainty about the cost of doing business in North Carolina,” said Governor McCrory. “Getting more North Carolinians jobs and fixing our broken unemployment system was a top priority when I entered office. Thanks to quick action and tough decisions, North Carolina’s unemployment system is more efficient, more customer friendly and the time needed to settle appeals has been dramatically reduced. These steps, along with paying off this debt, are helping get more people back to work.”
Senator Berger said the reforms put into place in 2013 have paid off for North Carolina workers and job creators: “In just two short years, North Carolina has successfully paid off a massive federal debt that was threatening our ability to keep existing jobs and making it harder to create and recruit new ones.”
The debt was incurred when the state’s unemployment trust fund ran out of funds in February 2009. North Carolina had to borrow from the federal government to pay for regular unemployment benefits and racked up the debt.
“With this debt paid off, our state will be more attractive to employers who want to move here and create jobs,” said North Carolina Secretary of Commerce John E. Skvarla, III. “This gives North Carolina a level playing field with 42 other states.”
Department of Commerce Assistant Secretary for the Division of Employment Security Dale Folwell noted that North Carolina is paying this debt off early, which will result in savings to employers.
“Had the debt not been paid by November 2015, employers in this state would have been subjected to an additional $282 million in additional FUTA (Federal Unemployment Tax Act) penalties,” Folwell said. “These monies can now be used by the employer community to assist with the expansion of their business and workforce.”
If a state has an outstanding loan with the federal government for two consecutive years, employers are penalized on their FUTA taxes annually until the debt is paid. North Carolina employers began paying this penalty in 2011. Since the FUTA penalty was imposed, employers have paid almost $700 million in FUTA penalties. Since 2011, North Carolina has had to pay interest on this debt. Employers will have paid nearly $262 million in interest payments alone over the past four years.
How much is $2.75 billion? Roughly about 13% of the entire state budget. $2.75 billion is more than what we spend on all 17 campuses in the state university system (Professor Gene Nichol’s salary included) — and more than twice what we spend on all of North Carolina’s 57 community colleges. If every dollar of state debt were measured in seconds (one, one thousand…two one thousand) it would take 85 years to count that high. And, for good measure, a stack of 2.75 billion one dollar bills would reach over 170 miles high, approaching the orbit of the International Space Station. So it’s really quite a lot.