On July 1, 70,000 people in North Carolina will lose federal long-term unemployment benefits after the state's legislature passed a bill that drops its residents out of the program. The legislature did this in part to avoid increased business taxes stemming from the debt it owes the federal government — debt incurred thanks to the state's endemic unemployment.
Over the course of the economic downturn, unemployment in the state has consistently been higher than that of the country on the whole. The graph at right (which uses data from the Federal Reserve) shows unemployment rates for both; North Carolina is in blue. In May, the state had the country's fifth-worst unemployment rate.
Over the course of the recession, the state has racked up a bill of over $2.1 billion to the government, according to the Raleigh News and Observer — money used to help cover the cost of state unemployment benefits. In February, state legislators voted to increase unemployment taxes on businesses and cut benefits for recipients starting July 1. By reducing those benefits, the state breaks a condition of receiving support for the long-term unemployed from the federal government.
In North Carolina, that means 70,000 people will lose that long-term support. As will the state economy, as the News and Observer reports:
The state estimates the extended federal benefits have been pumping about $20 million a week into North Carolina’s economy. Estimates of the overall impact on the state economy of eliminating the federal benefits start at about $475 million and rise from there.
The move was meant, in part, to reduce the tax burden for businesses, which would see a $21 per employee increase each year until the federal debt is paid off. By enacting this new policy, the state estimates it will be able to pay off its debt to the Feds by 2015 or 2016 — as opposed to 2018. With about 4 million employed people in the state (again, according to the Fed), that's a savings of about $250 million for those businesses.
A number of advocacy organizations have joined the legislature's Democrats in asking that the start date be moved to January 1. Earlier this week, a number of groups joined a rally in protest of the cuts (an image from which appears at the top of this article.) “This is income that in some instances is the difference between losing a house, foreclosure, losing a car, repossession, or getting along a little bit," one legislator told the News and Observer.
The Associated Press spoke with one of those slated to lose the support.
Lee Creighton, 45, of Cary, said he's been unemployed since October, and this is the last week for which he'll get nearly $500 in unemployment aid. He said he was laid off from a position managing statisticians and writers amid the recession's worst days in 2009 and has landed and lost a series of government and teaching jobs since then - work that paid less half as much. His parents help him buy groceries to get by.
"I'm just not sure what I'm going to do," said Creighton, who has a doctorate. "What are we to do? Is the state prepared to have this many people with no source of income?"
The AP also reports on the organization that "primarily assembled" the legislation curtailing the benefits: the state's Chamber of Commerce, members of which presumably stand to see substantial tax savings.