State officials are celebrating a $1 billion surplus in the North Carolina unemployment trust fund. The Wednesday announcement represents a significant swing from just two and a half years ago when the state owed the federal government $2.8 billion. This past May, the state paid down its debt a year before the due date. The savings have continued.
"Today I am very proud to announce the following - that we have built up our unemployment reserve fund to more than $1 billion," said Governor Pat McCrory before a crowd at the Employment Security Commission.
The state legislature cut unemployment benefits - both in amount and length while employers had to pay more due to the debt incurred under a federal law. The debt spiked in spring of 2013 for unemployment claims paid out following the recession. Critics say there was no need to pay the federal government back early and that the drop in benefits unnecessarily took away support from people who were out of work.
"We need to make sure that we never get back into this situation again and that we have enough surplus to get us through the next economic downturn," said Dale Folwell, the Assistant Secretary of Employment Security and a former Republican member of the North Carolina House.
Because the state is out of the red, businesses no longer face a 20-percent penalty. Combine that with the effects of a full federal tax credit and employers will save employers an estimated $600 million this fiscal year. He says employers have two clear options for the newfound savings.
"Number one, they can put it in their pocket and pay more tax on the profit to the Department of Revenue - or they can use it to hire more people which puts more people back to work which helps the general fund also," he explained.
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This marks the first time the state has had a $1 billion surplus in the fund in 14 years.