To pay off the debt North Carolina racked up paying unemployment benefits throughout the recession, businesses across the state might soon face much higher employment insurance taxes.
The state owes the federal government $2.6 billion for the benefits, and that figure continues to grow. The first payment is due this fall, and a Morgan Stanley analysis of the state's payback options shows major increases in the per-employee tax that businesses pay to replenish the unemployment trust fund.
That analysis shows the yearly tax potentially going from $56 currently to $77 per employee in 2012. Then it would increase each year, up to $182 in 2017. If it takes longer than that to repay the debt, the tax would top $200 per employee, according to the state treasurer's office.
The state could avoid some of those increases by borrowing money from banks to pay back the federal government. That would save money, because the federal government charges more than 4 percent interest, and banks would likely charge about 2.35 percent, the analysis shows.
But even then, the annual tax would be a steady $147 per employee over the next seven years, the analysis shows.
State leaders acknowledge a lack of pleasant options and say they're studying the issue. The Republican leader in the Senate, President Pro Tem Phil Berger, said last month that the tax might have to increase, despite the GOP majority's goal of avoiding increases during the continuing budget crisis.
Legislative leaders said they've had trouble getting answers about the debt from the Employment Security Commission of North Carolina, which manages the state's unemployment benefit system.
"We're having difficulty getting information on what we can do, what we can't do," said state Rep. Harold Brubaker, senior chairman of the House Appropriations Committee.
The Winston-Salem Journal repeatedly asked the ESC for help understanding the debt and the state's options. Most of those questions went unanswered Monday, Tuesday and Wednesday.
"We're still digging this out," said state Sen. Bob Rucho, co-chairman of the Senate Finance Committee. "The Employment Security Commission hasn't shared a lot of information with us."
This week, during a joint news conference with Speaker of the House Thom Tillis, Berger said the legislature plans to hire a consultant to "look at the overall situation." Until the consultant makes a recommendation, the Senate leader said there's no legislative game plan to deal with the debt.
Gov. Bev Perdue also didn't take a firm position on the issue this week but said that she hoped the state won't have to borrow more money to make the payments. The governor was in Washington last week and said leaders there are "very cognizant" of the problem. At least one bill has been introduced to delay required payments on the debt, but it remains to be seen whether Congress will do that.
Of the 31 states that owe the federal government money, North Carolina has the sixth-highest balance, according to figures from the National Conference of State Legislatures. The debts vary widely; from $5.7 million for New Hampshire to more than $10 billion for California, the figures show.
North Carolina businesses are starting to worry about the issue, N.C. Chamber of Commerce President Lew Ebert said, but it's not a well-understood problem.
"We're in the middle right now of trying to understand our options and find the best way forward," Ebert said Wednesday. "Right now that's just not a clear path."
ctfain@yahoo.com
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