NC has no plan for billions it owes Washington

October 14, 2011 2:18:53 PM PDT
More than half of all U.S. states have borrowed heavily from the federal government to pay unemployment benefits as the economy dipped.

North Carolina ranks fifth on that list. So far, we've borrowed $2.5 billion and there's no plan for how to pay it back.

Just last week, the first interest payment came due. It was $78 million.

"Just on the interest, oh yeah, we haven't even touched the principle," explained Sen. Bob Rucho (R) Mecklenburg.

If nothing is done, the debt will automatically trigger a tax on North Carolina businesses.

"It's going to require additional taxes to pay the debt back," said Harry Payne with the NC Justice Center.

Payne was the NC Employment Security Commission Chairman for seven years and also ran the Department of Labor.

"There are several clear answers, all of them unpleasant," he offered.

Payne says everyone knows it, and he may be right.

"I think that everyone going into it understands the realities," said Gov. Bev Perdue.

Some Republicans seem to agree.

"We need to broaden the base of companies that are paying for it," said Rucho.

But the idea of raising taxes and fees has touched off a blame game amongst politicians.

"Unfortunately, there's been foot dragging and no action," said Rucho.

From Republicans in the General Assembly, the Governor, the Employment Security Commission, the Department of Commerce, they're all pointing fingers.

"Only the General Assembly can decide how to repay the debt. We have three proposals for them to consider," Perdue claimed.

"We want to engage a study to determine what the best way to do it is comprehensively," said Rucho.

"The Department of Commerce does not have the money for the study," offered Tim Crowley at the NC Department of Commerce.

"There's money available. That's a bogus answer. That's a bogus excuse," said Rucho.

On Friday, Rucho sent Commerce a letter telling them where to find that money in the Special Employment Security Administration Fund.

He signed off telling Commerce to do the study saying: "Too much time has already been wasted by these exchanges while the debt continues to climb. It's time to act."

But Payne says all the finger pointing - and for matter, the study itself - is just delaying the inevitable.

"You don't need a consultant … to tell us what we already know," he offered.

Payne says there's no way around the fact you have to raise taxes and some insurance premiums in order to pay for the cost of the unemployment insurance program.

The longer the state waits, the more the interest on the debt piles up, and the bigger the potential tax bill will likely be.

Experts say there are a couple of ways around some of the problem.

The state could go borrow money on the private market, but that also has potential drawbacks.

The federal government could also step in and help - waiving the interest for example - which it has done in the past.

But the question is when and if that might happen. Meanwhile, North Carolina's debt continues to add up.

Classifieds | Report A Typo |  Send Tip |  Get Alerts | See Click Fix
Follow @abc11 on Twitter  |  Become a fan on Facebook


Load Comments