Yesterday we reported that the General Assembly passed a very important (but little-noticed) fix this year to the state’s unemployment compensation system that protects the privacy of those receiving jobless benefits.
But that’s only a small part of the story. With last year’s passage into law of House Bill 4, supported by Representative Bell, significant strides have been made to fundamentally reform North Carolina’s unemployment compensation system, which was $2.5 billion in debt before Republicans assumed control of the legislature in 2011. As a result, that debt is now expected to be retired entirely by mid-2015 — four years ahead of schedule. The reforms saved taxpayers hundreds of millions of dollars in interest payments and the system will have a built-in $1 billion reserve fund that is restricted to the direct payment of benefits to the unemployed.
Problems at the Division of Employment Security (DES) were legion under the Democrat administration of former Governor Beverly Perdue. The U.S. Department of Labor found that on her watch, only 12 percent of folks in North Carolina who were cashing unemployment checks actually qualified for them (yes, you read that right) and an independent investigation found that the DES’s accuracy rate had been one of the worst in the entire nation. The program was plagued by extensive fraud that included an inmate receiving unemployment checks in prison and an employee of the agency itself cashing unemployment checks — at the same time he was collecting a state paycheck.
That’s all changed. Even the agency’s response rate has dramatically improved; the call center now answers 97 percent of its calls — up from an embarrassing low of 3 percent just two years ago.
We received another piece of related good news yesterday from the Governor. North Carolina’s employers will save an additional $180 million this year — thanks to the reforms contained in HB4.
From the Governor’s Office:
Governor Pat McCrory announced today that the U.S. Department of Labor (USDOL) has approved the state’s application for a waiver of additional Federal Unemployment Tax Act (FUTA) penalties. That means North Carolina employers, who have shouldered the unemployment insurance debt, will save approximately $180 million for tax year 2014 thanks to reforms that have reduced the state’s federal unemployment insurance debt from a high of $2.8 billion (in 2012) to a current $465 million.
Governor McCrory signed the reforms contained in House Bill 4 in early 2013.
“Restructuring North Carolina’s unemployment insurance system and aligning it with those of our neighboring states has set our unemployment program on a path to sustainability,” Governor McCrory said. “By demonstrating to the federal government that we have cut up the federal unemployment insurance credit card, North Carolina employers will avoid paying penalties and be able to invest those funds in job creation.”
Governor McCrory applied for a waiver of additional debt penalties and USDOL has granted the request after North Carolina worked hard to reduce the $2.5 billion debt and set in place a foundation for sustainable funding by the state’s employers.
“This is great news for the employers of North Carolina,” said Division of Employment Security Assistant Secretary Dale Folwell. “This waiver of the penalty is a direct result of the policies, processes and people who have helped pay down the unemployment debt owed to the federal government.”
“It is our goal to pay off this debt in 2015,” Folwell said. “Once the debt is paid off, employers will begin receiving their full Federal Unemployment Tax Act (FUTA) credit. This will be a tremendous burden lifted from the employers of this state. It will give them certainty about the cost of doing business in North Carolina. It will also encourage new businesses to come to this state, driving unemployment even lower.”