When North Carolina Republicans rejected Dale Folwell as their nominee for lieutenant governor in 2012, the veteran lawmaker didn’t lose ambition to wield influence in the state capital. He jumped at the chance when Gov. Pat McCrory’s administration offered him a job as assistant secretary of the Division of Employment Security. The Commerce Department post grew in importance after legislators passed the nation’s most sweeping reform of unemployment insurance in March 2013. The General Assembly acted in response to a $2.8 billion debt owed to the federal government, which stepped in when the state’s unemployment insurance fund became insolvent in 2009. When former Commerce Secretary Sharon Decker hired Folwell, he recalls,“she said, ‘Don’t rest until every penny of this debt is paid off.’”
As of mid-May, the debt will be erased, and Folwell, 56, can take a siesta. Payouts have declined because the state is stingier and the rebounding economy has sliced its jobless ranks by 47% since 2012. McCrory says the changes will boost business investment. “Our system has been sticking out like a sore thumb,” Folwell says. “Employers haven’t been listened to.”
But the changes kick at people going through hard times and cheapen North Carolina’s progressive image, says Rick McHugh, an Ann Arbor, Mich.-based labor lawyer and adviser to the Economic Policy Institute, a Washington, D.C., research group partly funded by labor unions. After years of offering the South’s most generous benefits, North Carolina now cuts off compensation for job seekers after 15 weeks, the shortest payout of the 50 states. Forty-six states pay at least 20 weeks. Maximum weekly benefit is $350, down from $535 in 2012. “Instead of saying, ‘We had the best unemployment insurance program in the South,’ now they can say, ‘We got on the low road with South Carolina, Florida and Georgia,’” he says.
Folwell says North Carolina’s debt stemmed from years of mismanagement, which earned the state the worst quality scores in the U.S., based on studies by federal labor regulators. Overly lenient policies encouraged bad behavior, or what Folwell calls “pay and chase,” in which the state provided benefits before checking eligibility and then reclaimed money from recipients who were later deemed ineligible. In some cases, North Carolina was loading money onto a debit card for an unemployed worker before the company that dismissed him or her could explain the reasoning, he says. “Now we wait for employers to respond within 14 days.” Blaming the jobless and bureaucrats for the debt misses how the General Assembly, controlled by Democrats for a century before Republicans took charge in 2010, refused to ensure the fund’s stability by requiring higher contributions from employers, McHugh says. “It was like Chicken Little and no one was listening,” says state Rep. Steve Ross, a Burlington Republican elected in 2012. North Carolina’s tax rate for unemployment insurance was less than the U.S. average, leaving it unprepared for a slump.
Whether North Carolina restores jobless benefits is up to state lawmakers, says Folwell, who is noncommittal. The 2013 law requires that the state build a $1 billion fund surplus, which could be accomplished within a year. “The job market is tighter than hell in Mecklenburg and Wake and some other counties, and there’s less money going out to the unemployed.”
