RALEIGH, N.C. (AP) -- North Carolina legislators agreed Wednesday to cut payments to future jobless workers and raise business taxes to hasten repayment of $2.5 billion owed to the federal government because the state couldn't keep up with benefit requests during the recession.
The Republican-controlled Senate's 36-12 vote in favor of the state unemployment system overhaul sends the changes to Gov. Pat McCrory for his signature. Several liberal-leaning groups have urged McCrory to veto the bill, but he has said he supports the plan.
"We're going to pay down that debt, make the system solvent and provide an economic climate that allows businesses, large and small, to put people back to work," McCrory said in a statement after the final vote.
Maximum weekly benefits would fall more than one-third — from $535 to $350 — for new jobless claims starting July 1. The maximum number of benefit weeks would fall from 26 weeks to a sliding scale of 12 to 20 weeks.
The bill, which already passed the GOP-controlled House last week, also means federal emergency extended benefits approved by Congress in January are poised to expire in North Carolina six months early, in July. The federal law directs extended benefits be canceled in states that modify benefits.
The U.S. Department of Labor entered the debate, pointing out that 170,000 people won't qualify for $780 million in total federal benefits. North Carolina's unemployment rate, 9.2 percent, is the fifth-highest in the country.
"The decision to shut down federal unemployment insurance is without precedent nationally and is basically a self-inflicted wound to the state's economy," said George Wentworth, a senior staff attorney with the liberal-leaning National Employment Law Project. Lawmakers supporting the measure said they wouldn't let Washington prevent them from fixing the system as soon as possible.
The state's business community spearheaded the effort with Republican legislators to change the system they say is discouraging companies from creating jobs or moving into the state. "We all believe the best thing we can do is for someone unemployed is to help them find suitable employment," said Sen. Tom Apodaca, R-Henderson.
The measure will require higher federal and state unemployment taxes — some temporary and others permanent — while an estimated 30,000 business will no longer have a zero percent state rate.
The overhaul will help North Carolina pay off the debt by the end of 2015 — three years earlier than if no changes were made — and set aside more than $2 billion by 2019 for future benefits. The measure also would tighten benefit rules and encourage getting people back to work, supporters say.
"This legislation will more effectively connect North Carolina's unemployed citizens with jobs, shifting the focus from unemployment to reemployment," North Carolina Chamber CEO Lew Ebert said.
Democrats and labor groups say the bill puts too much of a burden on workers.
"We all agree that this is a big hole and it's essential that we get out of it," said Senate Minority Leader Josh Stein, D-Wake, but "the bill that is before us is not balanced."
The new maximum benefit amount is about average with the rest of the Southeast. North Carolina's current maximum is the highest in the Southeast.