Accepting large sums of money from the federal government often carries negative consequences. In 2009, North Carolina began borrowing federal money in order to extend unemployment insurance benefits. The amount owed by the Tar Heel State piled higher and higher – until North Carolina Governor Pat McCrory decided to take some proactive, bold steps regarding both debt and taxation. Now, those steps are yielding impressive and encouraging results. This week Governor McCrory announced that his state’s $2.75 billion debt to the national government has been paid off (and, notably, $2.5 billion of that daunting sum was paid off during McCrory’s time as governor).
McCrory made the strategic decision to cut weekly unemployment payments and decrease the amount of time a jobless worker could receive these payments. Maximum weekly compensation dropped to $350 from $535, and the allowable timeframe for collecting payments went from six months to fifteen weeks. This decision disqualified North Carolina from a federal compensation program for the long-term unemployed – a move that proved crucial to spurring employment. No longer compensated to stay out of the job market, unemployed North Carolinians sought work, and the state’s unemployment rate (nearly the worst in the U.S. when Governor McCrory took office in 2013) fell lower than the national average.
Senate President Pro-Tem Phil Berger (R-Rockingham) underscored the importance of this accomplishment, noting that each year the state didn’t pay off the debt, North Carolina businesses would suffer the ramifications of incrementally higher taxes. Berger explained that “the debt to the federal government was a tax on jobs, pure and simple.”
By paying off this nearly $3 billion debt four years earlier than required, the McCrory administration is helping business owners save a serious amount of money. (For every year the federal debt remained unpaid, business were seeing unemployment insurance taxes rise by $21 per employee.) The thousands of dollars being spent to pay down the debt, McCrory noted, “could have been invested in new jobs or raises for productive employees.”
With the debt paid off, North Carolina businesses will save $280 million in penalties this year alone. Rather than being thrown at an ineffective government program, those dollars can be invested in new jobs, new equipment, and new opportunities. North Carolina Secretary of Commerce John E. Skvarla, III, said this week that the early repayment makes North Carolina “more attractive to employers who want to move here and create jobs.” McCrory’s strategy provides more than early exit from the heavy burden of debt – it provides businesses the opportunity to thrive in North Carolina.