The reason is the way North Carolina — which at 9.2 percent has the nation’s fifth-highest jobless rate — went about slashing its benefits.
Not only did the state reduce the maximum number of weeks someone could collect state benefits from 26 to 20, it also reduced the maximum weekly benefit from $535 to $350. On top of that, North Carolina is reworking how unemployment benefits are calculated, which advocates say will reduce the average weekly benefit from about $296 to the low $200s.
“It is a self-inflicted wound,” said George Wentworth, senior staff attorney of the National Employment Law Project.
States are forbidden from cutting jobless benefits if they want to remain eligible for extended federal aid. Congress put the so-called “non-reduction” rule in place in 2009 when it added $25 a week to jobless benefits as part of the stimulus bill. The idea was to ensure the federal help flowed to the unemployed, rather than to state coffers.
Since then, the measure has been renewed each time Congress has extended funding for federal unemployment aid.
Before the recession, virtually every state offered workers up to 26 weeks of jobless benefits. But that standard, which dates back to the 1950s, has been eroded by the extreme fiscal challenges confronting states enduring years of high unemployment.
During the economic slowdown, at least 35 states have exhausted their unemployment insurance funds and turned to the federal government for loans. With those loans now due, at least eight states have moved to trim benefits — although they did not run afoul of federal law.
Some reduced maximum benefits during brief windows when emergency jobless benefits expired as Congress fought over renewing them. That allowed them to be grandfathered in.
Others simply scaled back the number weeks the jobless could collect benefits without reducing maximum weekly aid. Those changes often led to a reduction in the amount of time workers could collect federal help, rather than a total elimination of federal help.
In Georgia, for example, lawmakers cut 8 weeks of state benefits, which triggered an 11 week cut in the maximum length of federal benefits. In Michigan, legislators trimmed maximum state benefits from 26 to 20 weeks, causing an eight-week reduction in the maximum amount of time a jobless worker could collect benefits there.
North Carolina officials could have averted the federal reduction by simply delaying benefit changes until Jan. 1, 2014, when the current extension of federal benefits are scheduled to expire.
But officials there — concerned about the mounting red ink in the state’s jobless fund — decided to move more quickly, passing a law that would trim benefits in July. As a result, the state will forfeit as much as $780 million in federal funds, baffling both advocates for the unemployed and federal officials who say the cuts will harm the economy.
“Unemployed workers and their families spend these benefits in local grocery stores and small businesses, and use them to stay current on mortgage or rent payments and utilities,” said acting Labor Secretary Seth D. Harris. “For these reasons, UI programs are vital to economic growth in difficult times.”