McCrory signs unemployment bill into law

North Carolina Gov. Pat McCrory delivers the State of the State address at the Legislative Building in Raleigh, N.C., Monday, Feb. 18, 2013. (AP Photo/Ted Richardson)
North Carolina Gov. Pat McCrory delivers the State of the State address at the Legislative Building in Raleigh, N.C., Monday, Feb. 18, 2013. (AP Photo/Ted Richardson)

RALEIGH (AP) — Gov. Pat McCrory signed into law Tuesday changes to North Carolina's unemployment insurance system that supporters say puts the plan on firmer footing and gives businesses more certainty. Critics say it will devastate the jobless with decreased benefits or none at all.

And one local small business owner says it will hurt her business, not help as lawmakers say.

McCrory signed the bill in his state Capitol building office, a governor's spokeswoman said. The media wasn't invited to the signing, which was attended by several legislators who shepherded the bill quickly through the General Assembly in the first two weeks of this year's work session.

Those legislators included two who represent Rowan, Rep. Harry Warren and Sen. Andrew Brock. Warren was one of the bill's primary sponsors.

The unemployment plan repays $2.5 billion owed the federal government for jobless benefits paid since the Great Recession by cutting maximum weekly jobless payments from $535 to $350 on new claims beginning July 1 and the maximum number of weeks from 26 weeks to 12 to 20 weeks, depending on the state unemployment rate.

The bill also raises state unemployment taxes, partially through the elimination of a zero-percent rate that about 30,000 businesses have been paying. Federal taxes will continue to rise by $21 per employee per year until the debt is repaid and a 20-percent state surcharge will continue a little while longer.

McCrory, a Republican, announced during Monday night's State of the State address he would sign the bill, saying the state is going to stop borrowing money from the federal government without knowing how to pay it off.

All told, the changes will repay the debt by late 2015 — about three years earlier than if nothing had been done — and will put more than $2 billion in reserve by the end of the decade to pay future claims in the next economic downturn.

A handful of Democrats voted for the bill.

“This bipartisan solution will protect our small businesses from continued over-taxation, ensure our citizens' unemployment safety net is secure and financially sound for future generations, and help provide an economic climate that allows job creators to start hiring again,” McCrory said Tuesday in a statement.

One Rowan business owner disagreed. Judy Ludwig, owner of Ludwig's Linoleum and Carpet in Spencer, said she recently learned the new law results in an additional $1,600 in taxes for her, due immediately.

“How will it protect us when they're going to make us pay more money?” she asked.

Ludwig, who started the business with her late husband Wayne in 1966, said she's only had one employee over the years who drew any jobless benefits. That was last year, and it was so little that her business was listed as having no impact on the unemployment benefits system.

Even so, she has to retroactively pay increased taxes on what her employees made last year, she said, resulting in the bill now due and higher taxes going forward. Added to what she already pays in workers' compensation insurance and other expenses, she said, “I don't have the money right now to pay that.”

“That just means it's going to be harder yet to pay our bills until we get all this caught up,” she said.

“We have a hard enough time. The last three years have been really tough, and now they're telling me I have to pay $1,600 more? ... That's not fair. It's not right.”

Ludwig said she's called the offices of Warren and Rep. Carl Ford in Raleigh but gotten no response.

Federal emergency jobless benefits also will stop July 1 because the state changed its benefit structure, which isn't allowed under the “fiscal cliff” agreement last month. The U.S. Department of Labor said the decision by North Carolina to refuse the extra year of benefits after six months will affect 170,000 people and hold back $780 million in weekly benefits.

Critics accused McCrory and Republicans of supporting an imbalanced solution to the debt, whose origins go back 20 years after a series of employer tax cuts began but were never restored when benefit reserves ebbed. Unemployed workers will be hurt permanently with benefit cuts while many of the taxes will expire, most Democrats and their labor allies argue.

“As one of the first laws under his tenure, these cruel cuts will forever mar any legacy that Gov. McCrory hopes to leave behind,” said MaryBe McMillan with the state AFL-CIO. “Only bullies kick people while they are down. Shame on our governor and our legislature for turning their backs on unemployed workers.”

Dozens of business groups, led by the North Carolina Chamber, backed the overhaul.

McCrory's bill signing is his second as governor. He signed his first bill Monday on high school diplomas and vocational education in a public event in Asheboro.

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