Along with its efforts to opt out of the Medicaid expansion, the Republican-led North Carolina General Assembly seems poised to score another own goal against the state's economy through its ill-considered plan to impose unprecedented, draconian cuts in workers' unemployment insurance benefits. The cuts are intended to speed the repayment of $2.4 billion in unemployment insurance debt that the state incurred during the Great Recession.
The legislation is punitive and removes important protections from NC's workers. But in addition, the legislation will substantially slow the already under-performing economy.
First, the state will forfeit hundreds of millions of dollars in federal extended unemployment benefit payments. Currently, state unemployment funds cover the first 26 weeks of unemployment insurance payments, and federal funds cover an additional 47 weeks in states with unemployment rates above 9 percent. Provisions in the federal program require states to maintain their programs in order to receive the extended benefits--the goal is to keep states from shifting unemployment insurance costs from themselves to the federal government. The upshot of this provision is that if NC cuts its unemployment insurance program, it will lose the federally-funded extended benefits. The loss will be devastating to the long-term unemployed, but it will also affect the broader economy by removing hundreds of millions of dollars.
Second, the state is setting itself up to pay off the unemployment insurance debt faster than it needs to. The early repayment of that debt removes hundreds of millions of additional dollars from the NC economy. The debt needs to be repaid, but by stretching out the payments, the state would push more of the "pain" into future years where hopefully the economy will be performing better and the payments would be easier to make.
The Republicans' plan will hurt vulnerable, struggling households in the state, but it will also hurt the state as a whole.