The reduction in benefits has another dire consequence for North Carolina’s unemployed. Unless they collect at least 26 weeks of unemployment checks from the state, they are disqualified from getting jobless benefits from the federal government, which add up to an additional 47 weeks of aid.
An estimated 170,000 people would be thrown off federal jobless benefits in the state, according to the federal Labor Department.
“This cutoff is automatic under federal law. I have no discretion to stop it,” acting Secretary of Labor Seth D. Harris said.
Supporters of the measure say North Carolina had little choice after falling heavily in debt to finance these benefits. Seven other states have also rolled back aid for the unemployed in the wake of the recession.
“Unemployed job-seekers are facing a one-two punch, with state cuts triggering federal cuts too — a real double-whammy hitting families whose needs remain great,” said Christine Owens, executive director of the National Employment Law Project. “Pulling the rug out from under the unemployed is the wrong thing to do on so many levels.”
Most of the states that have reduced jobless benefits in the past two years have unemployment rates that higher than the national average of 7.9 percent. They are: Michigan, Florida, South Carolina, Georgia, Illinois, Missouri and Arkansas. In North Carolina the rate is 9.2 percent.
Advocates for the unemployed say the reductions harm families on the brink while robbing the larger economy of a particularly efficient form of stimulus. But business leaders say the cuts are needed to improve the economic climate and help states rebuild unemployment insurance funds that fell deep into debt because of the downturn.
Since 2008, 35 states borrowed more than $50 billion from the federal government to keep jobless benefits flowing. The loans were needed because many states had neglected their unemployment funds during the economic expansions that preceded the bust, cutting taxes on businesses and reducing balances. Consequently, states had less money on hand to pay jobless benefits as demand for the aid skyrocketed during the recent recession compared to the milder economic slowdown that occurred in 2001.
As a sluggish job market continues to grip much of the country, more than half of the money states borrowed from the federal government is still outstanding. The debt has confronted states with a stark choice: either raise taxes to pay off the debt, cut benefits, or some combination of the two.