Unemployment Benefits Yet Another Wave in NC’s “Fiscal Tsunami”

Depending on a forthcoming vote by the U.S. Senate, extended unemployment benefits may soon run out. According to the N&O:

The federal government’s phase-out of emergency unemployment benefits could halt unemployment checks for more than 164,000 out-of-work North Carolina residents over the next seven weeks, according to the state Employment Security Commission.

The House of Representatives voted at the end of last month to extend the emergency benefits through Nov. 30, but the Senate has not yet voted on the measure. Congress has allowed the emergency benefits to lapse several times in the past but eventually extended them.

Emergency unemployment benefits were enacted by Congress during the recession to supplement regular, 26-week unemployment benefits.

The phase-out of emergency unemployment benefits began last week. Unemployment recipients in the middle of a tier of emergency benefits, which can last from six weeks to 20 weeks, will continue to receive their remaining benefits. But they won’t be eligible for a new tier of emergency benefits unless Congress extends them.

As I wrote in my “Fiscal tsunami” article, North Carolina has already borrowed $2.3 billion from the federal government to pay for unemployment benefits, and is on pace to borrow roughly $3.5 billion by the end of this calendar year. On top of that will be an estimated $153 million in interest payments that North Carolina may be forced to begin paying to the feds this coming fiscal year.

In other words, the federal government loaned money that they don’t have to North Carolina to extend unemployment benefits the state has no money to pay for. Now, North Carolina has no money to pay back the loaned money the feds didn’t have in the first place.

Most likely, if the feds do expect NC to repay this loan, the state will have to pay it back using unemployment insurance (UI) tax revenue. For sake of comparison, in the month of April the state collected $71.3 million in UI taxes. At that pace it would take the equivalent of more than four years worth of UI tax collections just to pay back the $3.5 billion federal loan.