The state House approved Thursday a Republican-led effort that would compel North Carolina’s withdraw from a federal extended unemployment-benefit program with a $300 weekly payment.
Senate Bill 116 passed by a 71-36 vote.
The renamed “Putting North Carolina Back to Work Act” has been subjected to the gut-and-replace strategy by House sponsors.
The bill now returns to the Senate, where members can accept the changes or reject them, which likely would lead to a concurrence conference.
The latest version of the federal Pandemic Unemployment Compensation program provides a $300 weekly benefit to eligible unemployed and furloughed North Carolinians. The program is scheduled to expire Sept. 6.
Rep. Jason Saine, R-Lincoln, added language to SB116 that would bar the N.C. Division of Employment Security from authorizing or administering the $300 payments. The legislation would not go into effect until 30 days after it becomes law.
The perceived worker shortage “is probably one of the more critical issues that we are now dealing with,” said House speaker Tim Moore, R-Cleveland, who took a rare speaking role on the House floor in support of SB116.
“This bill is the way to restore strength in our economy, and finally move forward, to put this pandemic in the rear-view mirror.”
Democratic opponents of SB116 said that ending North Carolina’s participation would cost the state about $500 million in federal UI benefits.
People eligible to draw up to 16 weeks of regular state UI benefits are getting on average about $235 a week along with the $300 federal benefit.
For most claimants who have exhausted their regular state UI benefits, the federal benefit may be their only source of income.
“The bottom line is if we want to truly get our economy back on track and thriving again, we cannot continue punishing businesses in the name of helping individuals,” Moore said. “We need a more holistic approach.”
Democratic Gov. Roy Cooper has signaled he has no plans to end participation in the federal program.
The governor’s office has said there are more than 245,000 North Carolinians listed as unemployed or furloughed.
Cooper spokesman Ford Porter said May 26 that “North Carolina has among the stingiest and shortest unemployment benefits in the country, and many families are dealing with issues, such as lack of affordable child care and finding jobs with livable wages.”
Republican bill sponsors countered that NCWorks currently lists more than 200,000 job openings.
Pivotally, SB116 received the support of seven Democrats, none from the Triad or Northwest North Carolina.
There also were five House Republicans with excused absences who did not vote.
Cooper can afford only two of those House Democrats sticking with the bill, given it takes 72 votes to override a veto.
Republican bill supporters cited there are 25 states — all with Republican governors — who have withdrawn their participation in an effort to encourage and/or push the unemployed back into the workforce.
On May 26, North Carolina’s two GOP senators — Richard Burr and Thom Tillis — sent a joint statement to Cooper in which they said that “the employment shortage caused by exorbitant federal unemployment benefits is a real and serious threat to North Carolina’s recovery.”
On the other side of the political spectrum are Democratic legislators and liberal advocates who say the best potential solution to the perceived worker shortage is to raise the state’s minimum wage from $7.25 an hour to a living wage of between $13 and $15 an hour.
“A false narrative is being pushed that North Carolinians are lazy and don’t want to work. That’s simply not true,” Sen. Wiley Nickel, D-Wake, said Tuesday.
Burr and Tillis say employers have offered higher wages without success. They also charge that even $15 an hour wouldn’t be enough to lure back unwilling workers.
Child care funding
Democratic supporters may have been persuaded by two sweeteners added to SB116.
The second was submitted during Thursday’s debate by Moore.
Moore agreed to transfer $250 million in federal American Rescue Plan Act child-care block grant funding to the N.C. Division of Child Development and Early Education “to be used for subsidized child care for eligible children.”
Moore said the transfer is designed to address concerns that some individuals, in particular single parents, are not working because they can’t afford child care on the minimum- to low-wage salaries offered by some retail, hospitality and restaurant employers.
“If someone needs child care, they can have it,” Moore said.
“That appropriation eliminates the wait list entirely in one swoop,” Moore said while waving his left hand in horizontal dismissal motion.
Moore said the inclusion of the child care support funding should have gained a unanimous show of support.
Some Democrats, however, chided Moore on the child-care sweetener, saying he is redirecting the federal child-care funds from other needs.
Other Democrats pointed out that every Republican member of the N.C. congressional delegation voted against the American Rescue Plan Act, but now state GOP legislators want to take credit for the funding.
“It’s not clear that this addition will help surmount all objections to ending the extra federal unemployment benefits,” said Mitch Kokai, senior policy analyst with Libertarian think tank John Locke Foundation.
“It does show that House leaders are willing to respond to concerns about their initial proposal.”
Another potential sweetener to SB116 is legislation that would exclude unemployment compensation payments from state taxable income, similar to how the federal American Rescue Plan Act of 2021 excluded payments as federal taxable income.
Individuals who paid federal taxes on their federal unemployment benefits have or will receive a refund from the IRS.
SB116 would allow for an income exclusion of up to $10,200 per person in unemployment compensation received during tax year 2020. The provision applies to those taxpayers whose federal adjusted gross income is less than $150,000.
According to a legislative fiscal staff note, excluding those state taxes would cost about $250 million to the state’s General Fund.
DES estimates that 950,000 claimants received 1099-G’s for tax year 2020 with an average benefit of $9,600.
SB116 also would keep N.C. businesses that received a federal Payroll Protection Program loan from paying state income taxes on expenses funded from the loan if they also received an income exclusion.
That state income tax exclusion would reduce state tax revenue by about $600 million.
Rep. Deb Butler, D-New Hanover, said the exclusion of the state income tax on expenses represented what she called a “double dipping” for employers while employees would get “no dip at all” from SB116.
“It’s patently unfair,” Butler said.
Some N.C. GOP House members on Thursday cited concerns that neighboring South Carolina and Georgia could gain short- and long-term summer vacation market share from North Carolina beaches if a labor shortage leads to fewer tourism and hospitality services in North Carolina.
“Right now, we have a (federal) system in place that is essentially incentivizing not working,” Moore said. “Employers can’t find people to work.
“That is not right. That is not good for people. That is not good for this state. It doesn’t make sense.”
Porter said that Cooper “is concerned about the shortage of workers in the hospitality industry has been caused by numerous problems, and he is working with government officials and businesses to fix it.”
North Carolina has recent history with the withdrawing of federal UI benefits.
In 2013, the Republican super-majority slashed the UI weekly benefit amount and weekly amounts to among the lowest in the country, going from $535 to $350 and from 26 to 12 weeks.
The legislature, with Republican Gov. Pat McCrory’s blessing, also cut off North Carolina’s access to $780 million in federal extended UI benefits in July 2013.
Affected were at least 70,000 North Carolinians, including about 12,000 in the Triad and Northwest N.C.
North Carolina was the only state to take that step.