North Carolina must pay back $7M to federal government for extended unemployment benefits

(The Center Square) – The federal government has ordered North Carolina to repay $7 million in extended unemployment benefits, state officials said.

Federal law requires reductions in the federal Extended Benefits (EB) program to avoid a national deficit, which means the state has to cover the benefits overpayment. According to state law, the benefits must be retrieved from unemployed workers who received the benefits, North Carolina Division of Employment Security (DES) officials said.

“We seek your guidance and your comments to make sure we do the right thing for your constituents, our claimants,” DES Assistant Secretary Pryor Gibson told the Joint Legislative Oversight Committee on Unemployment Insurance on Wednesday.

During times of high unemployment, jobless workers can get EB after they have exhausted state unemployment insurance benefits.

The federal Budget Control Act of 2011 requires a nearly 6% reduction of the federal share of the claimant’s weekly EB benefit amount to maintain deficit control. Because of North Carolina’s COVID-19 shutdowns, the state’s unemployment rate skyrocketed, triggering the need for EB in May through Feb. 20. North Carolina’s unemployment rate rose from 4.4% in March to 12.2% in April.

States have been ordered to retroactively cover 5.9% of the 50% federal share of weekly EB payments from October 2019 to October 2020 and 5.7% of the 50% federal share of weekly EB from September 2020 to September 2021.

“So, anybody that received Extended Benefits from that point in time forward is looking at having their benefits reduced and an overpayment added on to their account, and that would be the way under current law,” DES General Counsel Glen Peterson said. “We would have to collect the money and to return it to the federal government.”

Gibson said North Carolina might need to decrease weekly EB payments for about 20,000 workers, but there are other options.

Under federal guidelines, states can dip into unemployment reserves to cover the cost. North Carolina currently has $2.59 billion in its unemployment reserve fund, officials said, but accessing the fund would require a change in state law.

Seeking federal relief also is an option, Gibson said. North Carolina is among other states that have asked for help, but Gibson said there are “no guarantees.”

If North Carolina seeks the payment recovery route, DES will retrieve about $35 from each EB claimant in small increments. Gibson said that would lead to high administrative costs for the state.

Lawmakers now must pick the best solution.

“We do have the money because we’ve been very conservative with putting money into the reserve fund,” said Rep. Julia Howard, R-Davie, committee co-chair. “But I certainly don’t think it’s even feasible to try to reduce the benefits and go after the folks. … But I am very reluctant to give broad, broad, broad approval that we tap into that reserve funds and automatically send it to the federal government.”

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