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Senate | February 6, 2013 | Chamber | Finance

Full MP3 Audio File

Welcome to the first meeting on Senate Finance. First of all, I’ll introduce the Sergeant of Arms, Leslie Wright, Anderson Meadows, Donna Blake, Justin Owens, Billy Fritcher. Thank you very much for helping us organize, including you, Mr. King. Thank you. Secondly, pages. Ira Strickland, Brent Jackson. Ross, where are you? There you go, welcome. I’ve got Mark Moser, Senator Goolsby. Ok, thank you very much. Appreciate you being here. And Alex Brown, Senator Barringer. Thanks very much. We appreciate it and we hope your stay is rewarding. We’ve got a lot of work ahead of us today. We’ve got an important bill. House Bill for. Representative Howard has done a remarkable job with this bill and just for everyone to understand, the necessity and the importance of this since 2009, the unemployment fund has been insolvent according to the previous employment security commissioner. Chairperson. And under that circumstance, we have to find a solution to solving this $2.5 to $2.7 billion hole. That’s four times worse than its ever been in its existence, and it plays havoc with not having monies available for if another recession does happen to come. This bill that Representative Howard has introduced and has passed the House, will be discussed today and I believe that we do have some opportunity for a public hearing. If it goes long, we may end up coming back this afternoon and continuing it, but we want this bill to move forward so that it can go to the Senate. Do you want to explain anything… First of all, House Bill for UI fund insolvency and program changes. Representative Howard, welcome to Senate Finance. [SPEAKER CHANGES] Thank you, Mr. Chairman. As your chairman just stated, this bill did pass the House on the third reading reading yesterday with a very good bipartisan vote and we were thrilled. I’m going to try to be brief and give you the important pieces of the bill and then be prepared to answer any of your questions. The issue, as Senator Rucho just explained to you, is that we currently have a big debt with federal government. Actually, since I started doing the presentation in the House, I had to change the number. Opposed to $2.4 billion, we now owe $2.5, and this debt is pay is due the federal government and it is due from all the employers across the state of North Carolina. It is not a state debt. It has nothing to do with the general fund. It is something that is total administered through the division of employment security, but the state employers pay into this fund. So you want to ask the consequences of the debt. Currently, this debt puts North Carolina at a disadvantage with respect to our abilities to recruit and bring in new jobs into the state of North Carolina. The first question that new employers that are looking at North Carolina, one of the first questions that we’re being asked, if we relocate into North Carolina, do we become an immediate debtor, and the answer is yes. You can see why folks would be a little bit reluctant and it certainly does not make us competitive with the states that surround us because they do not have this type of debt, so we’re five steps backwards in the beginning. This is a proposal and it offers an alternative to the current repayment plan which has a final payment date, currently, of 2019 at best. I say that because we have no assurance that the interest rate that the federal government is currently imposing against this debt will remain stable, so it could fluctuate and it could be further. This puts tax increases on

the ?? is putting tax increases on all of the employers. This is the schedule for repayment of the debt to the federal government. They impose the addition feudal tax increases on all of our employers. It wasn’t our choosing. They put the numbers in place against each of the employers. So if you want to ask what does this bill do? This bill will achieve total repayment of the debt by the last quarter of 2015, it could move to 2016 but we believe we will have the debt, the 2.5 billion dollar debt paid in full and we will also a billion dollars in or pseudo benefit fund which makes us solvent and stable. We worked on the bill for many months and I’m going to stand here and tell you it’s not perfect but we did the very best that we could bringing all the moving parts together and every change, it’s like dominos, if you have a change it effects all the other pieces of the bill. Nobody loves this bill so it pretty much makes it a good bill because everybody hates it but we have had nothing but 100 percent cooperation from all of the players, all of the stake holders that have come to the table with us with few exceptions. The bill does a lot of things and I’m going to highlight the major components of the bill we have an employment security reserve fund is the dollars that go into that fund is the twenty percent surtax that all of your employers are paying and that's been pretty loosely managed for lack of a better word note, no fingers being pointed here, but we're now going to restrict the uses of that fund and the fund will cap at fifteen million dollars on amount of the interest paid the previous year, remember we are paying interest on the debt every year. We've paid for two years and so any excess funds in that security reserve account will immediately be swept to the federal government to help repay the debt. We also found that there's a worker training trust fund in training and employment account. We found several little accounts sitting in the division of unemployment and we eliminated those accounts and we are transferring all of the balances of those accounts to the ?? as soon as this bill is passed. We found as a special employment security administration fund that had sixteen million dollars in it, and we are moving ten million dollars out of that fund again to pay toward our debt. The financing charges and changes that you’re going to see with this bill. I want you to think of, I’m a semi farm person, three silos, pseudo tax, feudal tax and the surtax. Three silos of money. The feudal tax a federal tax should be forty two dollars per person per employee per year. This is where the federal government has come in and increases that twenty one dollars per year per employee until the debt is paid, That’s a feudal tax. That fund can only be used for one purpose and that is to administer the program all across the nation. We are a donor state. We send our money to Washington and we get a little piece of it back but again we can't change that we can't do anything about that. The second silo that

I want you to think about is the SUTA tax, that's the state tax. And this is the fund where the benefits are allocated from. This is the fund that we are in a deficit and we are being required to borrow $2.5 billion dollars. The SUTA tax they are increasing that contribution rate by .06 and moving that formula starting at .06 low end and it moves right on up to the high end. So employers are being asked to contribute more into the SUTA fund. Then there's that 20%, third silo, that 20% of that the, that's a surtax and that's the amount that each of your employers are paying in addition to the FUTA tax, the SUTA tax and the surcharge, that 20% surcharge has been in place for many years and again, we've used it for things that were maybe not correct but that stopped. That will be used for that one purpose only now. And once we have one billion dollars in our account to pay benefits and to pay interest, that surtax is going to come off. If we fall under the billion dollars, that surtax goes back on. There's an automatic trigger there. Business and industry everybody knows about this, everybody is in agreement. There's three groups that have a special federal cutout, it's the Cherokee Indians, the tribe, and let me say upfront, they're doing the right thing. They're paying everything that they're supposed to pay and I wish everybody was doing likewise. But the tribe, all your cities and your counties and the state of North Carolina uses a special option and the option being that they do not pay any SUTA tax, they are removed from that. And when they have claims against, their employees have claims, then they choose an option to reimburse the fund. We have changed that. Instead of using a credit card and riding on the backs of all of the employers across the state, and we're one of them, so it is what it is, they now will post 1% of their taxable wages in an escrow account for lack of a better word, that will be a withdrawal account. So they have money in their account when the claims are paid. They will true up that account once a year so they will always have 1% of taxable wages in their account. They will not be using a debit card opposed to a credit card for just simplification. Benefit changes, now I'm sure you all have gotten a couple of emails in the last few days about the changes in the benefits. That is a piece, one piece of a change that we are making. And it's a small piece. And I hope that at some point in time that folks will begin to look at the entire bill because it's much bigger than those benefit changes. We looked at other states and what they were doing and how they were operating, one of the changes that we made was to reduce the maximum duration of benefits from 20 weeks, currently it's 20 weeks, 26 weeks sorry, and we're going to 20 weeks. We understand that overall 16 weeks normally is the time that people need to be on the unemployment but things are different now because of the economy. That is on a sliding scale, it's attached to the other...

rate for this state and will be reviewed twice a year to adjust those number of weeks. Anywhere from a range from 5 to 12 to all the way to the 20 week max. Another piece of the, of the bill is the calculation of the weekly benefit amount. And in the past that formula was changed and it's based on the average of the last two quarters worked. That's was the bill will do. Currently we are calculating those benefits on the highest quarters. We're going back to the average, average wages in those quarters. The maximum benefit set will be $350 dollars opposed to the formula that is currently providing $535 dollars. North Carolina if you're looking at the bill curve we are well outside that curve. We are the highest maximum benefit state in the southeast. Somebody asked well how did you come up with $350. We simply took the seven surrounding southern sates, the states around us. You add them together and divide by seven and that comes out with an average. And that's where we came up with that $350. There's other pieces in the bill. There's some program changes, partially benefit we will have a disregard of 20% of the weekly benefit allowance rather 10%. There will be a waiting week for all new claims. We will remove the waivers on that waiting week provision. The extended base period has been repealed. The extended benefit triggers. We kept those triggers. We retained the two optional triggers, but we will only extend emergency benefits if they are 100% federally funded. Attach claims, if you haven't heard that word I'll quickly tell it what that means. Employers and I'm telling you that everybody's bought in to this and everybody knows what it is and if you think it's not pain and bleeding from the business community there is. Attached claims, many businesses use this as a business model. They have their best chef at a seafood restaurant and they, business gets a little slow and say they tell that chef you know business is slow I'm gonna let you have six weeks or eight weeks layoff, but I want you to come back, so I'm gonna keep myself attached to you as an employer to that employee. The employer files the forms for unemployment. The employer files it. He means, that means that the person, the employee, does not need to do a job search. He can not be compliant with all of the rules and regulations that everybody has to adhere to. He can go in six weeks and ask for an extension of another six weeks. There's been many cases where that has extended for three or four or five months continually with an extension. The other employers across the state are paying for those benefits to that for that employer. So we did make a provision for the employers. If you want to use attached claims we're putting in a provision. You must have a positive credit balance in your account and it's limited to one time per employee not more than six weeks. We believe that's fair. This qualification is based on each application for the benefits. We have substantial fault has been eliminated and there's a provision that talks about good calls.

how an employee can leave his employer and still draw unemployment benefits. We removed all of those provisions with 2 exceptions. We retained domestic violence, if a person leaves employment because of domestic violence, they're still eligible to draw the unemployment benefits. And under the spousal relocation, if it is due to a military reassignment, we retain that. That spouse can travel with their husband or wife, and draw the unemployment. The definition for suitable work has been clearly defined, and that definition is any work. Any work after 10 weeks of ?? benefits, that pays 100%, 120%, of the current unemployment benefit. Mr. Chairman, that is the summary , I'll be glad to try and answer any questions, or I can go further. [SPEAKER CHANGES] Rep. Howard, excellent job. You are- you've explained it very clearly, and definitely pointing out that this is designed as a re-employment fund and not an unemployment fund of course, and then another point you made, and I'd like to reiterate, there was a misconception but this is all paid for, every penny, by the employers of this state. And it's not like a employee benefit, so that being said, members of the committee, do we have any questions that we can help get the answer here? Sen. Brown. [SPEAKER CHANGES] Thank you Mr. Chairman. Rep. Howard, I want you maybe just to touch on real quick too about the amount per employee that the employer will have to pay at the end of the way the bill's structured and what that will be as well if the bill does not pass, then and just one other point I'll just mention as an employer, last year I had to send in a check for an additional $3000 and here a few weeks ago, I had to send in this year's check, it was an additional $6000 dollars. So as far as employers go in the state, I can tell you we're already feeling the impacts of what's going on. [SPEAKER CHANGES] Yes sir, and I hear that from all across the state. I will tell you quickly, that North Carolina businesses have paid, have paid in $126 million in 2011, and $189 million in 2012, in ?? tax, additional ?? tax. Now the strange part is, we still owe $2.5 billion. So what you could quickly calculate, we have paid these extra taxes of $126 million and also $189 million, we had made a dent in the principal, and that was to apply to the principal. In addition to that, we have paid interest payments on this debt of $162 million. And each day, when we open for business, we pay out more in benefits than we are taking in. So we're under water with the debt. It is necessary that we do some other adjustments other than just put the taxation totally on the business community. As Sen. Brown said, the normal amount of ?? tax should be $42. That $42 is escalating by $21 each and every year until this debt is paid. It goes to 63, 84, 105, all the way to 189, and that's where we stopped our chart, hoping that 2019 that that would be removed. But folks, that's each employer is paying this amount of money for each employee. So if you- even if you're a small company like I am, 5 times that amount, but what about 5,000 times that amount? Now that's getting really serious

The money for the employers across the state. And we believe that these are competing dollars we’re sending North Carolina employers’ dollars to Washington D.C. Not a dime of it is being spent in North Carolina. So, if the employers are relieved of this tax burden, this additional tax burden, they’re gonna be able to hire more people, create more jobs, but as long as they are continually paying out excessive taxation to repay the debt, they’re not going to be able to do that. And, Mr. Chairman, a very important part of the bill that I did want to focus on, was the division of employment security. That over in commerce we also have workforce development. And those folks are, have been at the table with us. They know our objective. We want to put people back to work. Now I’m be the first one to say, I know some of the deadbeats and you do too. They’re happy as a clam to sit at home and draw unemployment. But the majority of the people of North Carolina want a job. They want to go back to work. And that’s the focus of workforce development. You can no longer be incarcerated at central prison, and there was 131 of those folks over there, that had access to the public phone. And every week they used that public phone and called into the division to report themselves able and available for work. We’ve stopped that. This fraud, there’s abuse in the program. We have made provisions in the bill to recapture those fraudulent payments, those improper payments. To bring those dollars back into the state of North Carolina. But the workforce development is on board with us, and once you have filed your claim, there will be a face to face interview with a workforce development counselor. That counselor will assess your skills, and if you need training or retraining, we’re gonna put you over there and provide that. These opportunity of matching a job with a claimant is gonna be the objective of this, another objective of this bill. We want to put people back to work. When this fund was created in 1935, part of the definition said “short-term”. A short-term bridge from unemployment to re-employment. That’s the objective. It was never meant to be long-term, or to become a program that folks actually become dependent on. And that’s what this bill will do. There’s a lot of other pieces in the bill. And, Mr. Chairman I’ll be glad to ?? [SPEAKER CHANGES] Mr. Chairman I’ve got Senator Stein. [SPEAKER CHANGES] Thank you Mr. Chairman, Representative Howard. I think everybody knows anecdotes of people who may not be looking to get out, find that job as quickly as they could. But I agree with you, that the majority of people who are drawing unemployment don’t want to be doing that. They want to get back to work. They want to provide for their families. They want to have that pride that comes from work and be able to feel good about themselves when they’re at the dinner table with their families. And I guess the concern I have is that more than half of people who are unemployed, it takes longer than 26 weeks to find a job. 54% are unemployed beyond 26 weeks. And so if you’re cutting back the weekly benefit to 12 to 20 weeks on a sliding scale, we’re not recognizing the fact that it is hard for people to get a job. There are 3 unemployed people for every 1 position that’s open, and we also have very uneven unemployment. North Carolina is one of the highest unemployment states in

country 9.4%. But when you start going to some of the, you well know, you go out into the areas outside the cities, it starts getting into double digits, 12, 13, 14, 15%. My concern about this legislation is that it is too punitive on people who are out of work through no fault of their own and are working, doing everything can to find a job to support themselves. [SPEAKER CHANGES] Thank you. Senator Meredith. [SPEAKER CHANGES] Thank you, Mr. Chairman, Representative Howard, thank you for the presentation. On the attached benefits, is there a week waiting period on the six week attach benefits also? [SPEAKER CHANGES] Every claim has one week. [SPEAKER CHANGES] Yes, ma’am. And is it my understanding that $2 billion of the $2.5 billion is because of attached benefits? [SPEAKER CHANGES] Very close, yes sir. [SPEAKER CHANGES] Would it be a fair statement to say that some of the employers are gaming the system through attached benefits? [SPEAKER CHANGES] I would say they’re using it for a business model. [SPEAKER CHANGES] Okay, thank you. Also, on the surtax. The 20% once we get to a billion. Will it always be 20% or after we get the billion, will that percentage change based on looking at the model and seeing, or will business, like myself, once the billion goes down, surplus, will it become 20% again? [SPEAKER CHANGES] It is triggered to be 20, sir. That will remain constant until will build back up the billion dollars in the fund. It’s triggered to remain at 20. If I could… [SPEAKER CHANGES] Yes, ma’am. [SPEAKER CHANGES] Sorry, if you have a copy, a written copy of your bill, I want you to go to section 10 because I believe if you’ve got the same copy I have, this is something that I believe is critical for this bill. We know that things are going to change. Senator Stein, I understand what you just said. There is going to be, your President Pro Tempore and the Speaker of the House will appoint four members from the House and four members from the Senate to be on an oversight committee. This committee will work extremely hard, arm in arm with the Division of Employment Security. We will be looking at each of the changes, looking at ways to further improve the system. That is a critical piece, in my opinion, of this legislation. Don’t sign up if you don’t want to work because it’s going to take a lot of oversight to watch this progress through the state. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] One follow up. [SPEAKER CHANGES] Follow up, thank you. In reference to the current taxable wages of 1% that we’re going to ask some of the groups to start contributing instead of using a credit card, use a debit card, will they be contributing to the $1 billion surplus? [SPEAKER CHANGES] No sir. [SPEAKER CHANGES] Thank you, Mr. Chairman. [SPEAKER CHANGES] Thank you. Members of the committee, any additional questions? Senator Jackson. [SPEAKER CHANGES] Thank you, Mr. Chairman. Representative Howard, thank you very much. I appreciate you bringing this. [SPEAKER CHANGES] I don’t think Senator Brown actually got his question answered, or I didn’t get the part I wanted to hear out of that. You went through where we would be if we didn’t make the changes. Where would we be with these changes? [SPEAKER CHANGES] We will have the...we will be solvent by the last quarter of 2015, at worst, the first quarter of 2016. If we pass this legislation, this will accelerate our repayment of the debt and also establish our billion dollars in the fund. We can be out of this situation by the last quarter of 2015, opposed to 2019. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Senator Jackson, there was a email sent out explaining the schedule. [SPEAKER CHANGES] Okay, so what is the… [SPEAKER CHANGES] Follow up question please. [SPEAKER CHANGES] What is the actual number. That’s what I’m trying to get at. Is it going to be $120 or is it… [SPEAKER CHANGES] I understand what you’re asking me. Yes, sir. [SPEAKER CHANGES] I understand this is a complicated issue, I understand that. [SPEAKER CHANGES] Just give me one second to dig through my…105 will be the amount of the ?? The year that we are

Speaker Changes: OK follow up, Speaker Changes: follow up question after it is been solved ?? go back, Speaker Changes: $42, Speaker Changes: thank you , Speaker Changes: any additional questions, Speaker Changes: Senator Tucker, Speaker Changes: thanks sir Representative ?? i want to appreciate your hard work on this i have been fairly focal about my ?? or even the necessity for having do this bill this is bad medicine for business now we are still in a ?? economy enter and need more tax on this tax.You know i have been here for 3 years i would like someone just to give me brief explanation of why are we here why do we get here where did the men go in the U.S past and ?? that would help us through this situation i mean i don't like the bill at all not having any problems from reduction and benefits and fraud this ?? commission we relieved manager of someone responsibilities overtime and other is history how would you give here ?? whoever want to, Speaker Changes: Representative ?? Speaker Changes: i need one of us long to where we go here is the sheet we started back in 1991 session and to provide benefits for individuals relocation and have you ever heard the old saying list way ?? that's were we are since 1991 there is 2 pages of additional ad dons 1991 we changed the formula for calculating the benefits making them hire 1997 we changed the way that we looked at thee quarters with all the respect we gave the business respect and community years more ?? because we were flushed with ,one so there us plenty of of plan to go around all the way around in this senator tucker the ?? tax increase is not in this bill that's we go regardless if we don't pass the bill ?? tax increases the point to continue and we ave o assurance that the interest rate will remain stable is what it is now federal government can change that on ?? that's outside of our preview we are just trying to get the payments faster so we can get the ?? tax after 2015, Speaker Changes: ??, Speaker Changes: thank you mam just a follow up, Speaker Changes: follow up question , Speaker Changes: where were we in the solvency of the fund in the amount of money we have when we have precession the precession that we find ourselves in was there any money available had we put any money ?? we start doing the zero balance, Speaker Changes: ?? were we have i do have that the we have not put extra money back when there was nervous up ?? times we tried to we get one of two things we either expanded the global community that would be recovered one way or the other or we were changed the clear amount of the benefits or we ??, Speaker Changes: Representative ??, Speaker Changes: yes sir, Speaker Changes: we have a staff person that can answer that, Speaker Changes: yes, Speaker Changes: Cindy Ms ??,

Find balance, and we went back a little bit farther than you asked. In 1999, 2000 was $1.2 billion, but as you may recall in '02, '03, we had a recessionary period and the fund actually in '04, '05 was negative. Then we came out of the recession, we had a short period where we were able to build the fund up so that in '07, '08 the fund at that time had recovered, we had a $414 billion with a B dollar balance in the trust fund at the beginning of this great recession. [SPEAKER CHANGES] $4 million. [SPEAKER CHANGES] $4 million, I'm sorry I said, excuse me, sorry about that, I was getting real excited there. [SPEAKER CHANGES] I was too. [SPEAKER CHANGES] I knew that was going to follow with the bad news, which is the great recession hit extremely hard, we had a lot more people laid off, more people than we customarily have laid off. And the period, the duration has been a lot longer that people have been on unemployment during this period. So the short answer to your question was at the beginning of the great recession we had a little over $400 million dollars in the trust fund. [SPEAKER CHANGES] Just one more follow up. [SPEAKER CHANGES] Follow up question. [SPEAKER CHANGES] More a statement than a question. Ladies and gentleman I run a business with 77 employees. I went form 104 employees down to 34, so my company will be paying the highest rate at 6.84 or better, it will cost a ton of money, but what it will do more than anything else, it will cost someone their job because I'm going to have to lay somebody off to be able to pay my unemployment. So with the passage of this bill, and I will vote for it, with the passage of this bill and I understand the necessity for where we are, do not expect employment to tick up, because these are heavy taxes on employers. We didn't cause a recession. [SPEAKER CHANGES] No. [SPEAKER CHANGES] I didn't set the length of time. I didn't set the rates, I wasn't even here. [SPEAKER CHANGES] I know. [SPEAKER CHANGES] I didn't spend the money elsewhere. I didn't not do the rainy day fund but yet it's fallen on the employers back and I don't know what happened before we got here in 2010 and that's water over the dam but I certainly hope that this is the fix and that we will never ever find ourselves in a position where we've got to lay this on employers again because we're in a soft economy and so someone in my company will lose their job because I won't be able to pay them, one or two people, excuse me, may lose their job because I will not be able to pay them because of taxes because taxes do one thing, they change behavior and you have got to adjust your behavior to your bottom line. And so with this passage of this bill I want to state that I'll be soon running a not-for-profit business. Thank you. [SPEAKER CHANGES] Representative Howard. [SPEAKER CHANGES] I believe what you're saying and I respect what you're saying because I'm deeply troubled with the 31 re-freshmen members of the house that are coming in, this is their first vote on a really critical bill. However I will share something with you, a couple of weeks ago my economic developer in Davy county called me and asked me if I could come over and meet with a perspective person that is looking at North Carolina. And I will admit he had already looked at the roads and the schools and the things that they would. The first question Senator Tucker that he asked me was, Representative Howard if I come into North Carolina, if I bring my company to North Carolina, do I become an immediate debtor with your UI system? And the answer I had to give him was yes sir. That's another piece of the recruitment efforts that our economic developers, the department of commerce, that's a problem they're facing. There is no magic line in this bill , it's everybody working together. Businesses are paying more, cities and counties are now posting their dollars. A lot of things are happening to make this come together. Will it work? I certainly pray it will. [SPEAKER CHANGES] Thank you. I've got Senator McKissick.

Well thank you representative Howard for your presentation, a couple of questions. I was wondering to what extent there were alternatives evaluated that would impose lower tax on employers but also provide greater benefits than 350 maximum that is shown in the bill today for employees? Because there's a lot of room between the 535 weekly benefit and 350 and I can logically assume that there's someplace in between where the burden would not be quite as great on employees and likewise if we were to look at repaying this debt over a longer term the burden might not be as great on employers either. [SPEAKER CHANGES] Thank you senator, to answer the question, we did not set the repayment schedule at the federal level, that is mandated on us, we can't change that. Where the [??] tax rate is going to increase, congress will cut us no slack there, we have asked. One of the first things that we looked at was trying to bond this debt and extend it over a longer period of time as Senator Tucker just said. Our credit card is maxed out. We have no - we do not have the debt capacity to bond this. We looked at every option and again if you offer an amendment and that amendment should pass that we change it from $350 to $400 dollars that's just going to take that debt out longer. Everything that we change in the bill will take the debt out for a further period of time. We looked at everything that we thought we could possibly look at. [SPEAKER CHANGES] Okay, let me ask you this, and yeah, in terms of those individuals that have been adversely impacted do you - In know I asked this question earlier during a committee that was considering this bill previously, but do you have the numbers in terms of how many individuals that received benefits since the recession came along they would have received reduced benefits had this law been in affect at that time? And likewise how would it affect the number of claimants potentially if you had changed the period of time from 26 weeks down to either 20 or 12 and that kind of floating range? [SPEAKER CHANGES] Well I believe that up [??] John did that model because I got a copy of ti and I hope you got yours, the copy, to address this that - i wish that we had made these changes three years ago but we didn't. And so the only time frame we have in our face now is today, to start. It's painful. Is it going to be painful? Short term pain for the long term gain we hope. We have to fix it because as I stated we - the employers have paid $126 million and $189 million, they've already paid that in excessive taxes trying to repay the debt and we haven't made a dent in it so it tells you that there's something that is not working and we need to look outside of just forcing the employers to pay additional tax. [SPEAKER CHANGES] One quick follow up. I mean the data which I have seen suggested that there were about perhaps as many as 132,000 people that would have been in-adversely impacted, and these are people that would have been making between $30 and $50,000 dollars a year. I mean we're not talking about anything except hard working middle income people and perhaps as many as 400,000 would have been adversely impacted had we changed the period of calculations. Is that the same data you've seen or the numbers that have been shared with you? Because I think it's insightful. [SPEAKER CHANGES] I think it is and it looks the column that you really want to, you know, it's a lot of proposals and estimates and no, I agree, it's there, but I will tell you that there will be no change even after July the 1st in the amount of the benefits for folks making up to about $46,000 dollars. So...

They're benefits do not change so are we really can say that comes from this is some second on the four are because I believe the charred yes , I believe if it's something that can come from the john $41000 income they weekly benefits from the we could lead you will be capped at three CD Banks that were within 3/94 ms the login a difference 95 S and the weekly benefit the 737 brain 337 I said that (SPEAKER CHANGES) that this 1,000,000, down there a mammoth weekly benefit us to follow question that you get just a quick poll of the men and women from time to the recruiting that is the other question three relating to the band that are met and (SPEAKER CHANGES)we would call was to fund people to accept employment suitable employment if they were all three of 1520% more 120 visit more than the weekly benefit is to use of their four defeat in that $350 maximum weekly benefit you and you do in fact the age of 820% more timely yet if he lost a job paying 50,000 at least that lost a job at 50,000 atlas can't get three CD probably would be a ms better positioned to take that job , 22,000 from least tell me that have a job to get a job in our belief wrongful conduct a jumbo a death-seven summit this prestigious, coming as chairman of the members would also a yearlong wallet a good many normal home run with a cure for while some will pose from session at least two stories of us continue on display today that he set about that doesn't mean we have to use every moment in a crackdown in the good sources said Tillman five and $7.00 and five (SPEAKER CHANGES) you don't have to work queue nine and your committee said tucker you were here when we, should not only employers portion of the facts and remember we saw in this recession $400,000,000 was taken when going so flawed that it was going down in the recession hits and drop slightly above all that won the one we got six that came out that small business people dislike you call mail, and therefore they're only place in the Balkans are the people for mistaken about our goal is to focus all we all for the business community when we were years for this 78910 will we should go up on the senate action we should know you have marred, we will know what we tell them that's a lesson this will create a big are holding a bit too far down the road down the road again recession said longer we got a problem got to fix with that said, the motion for 5 to 4 take that motion they would collect money to see if there any additional comments and the senate would leave as chairman of which offered an image of bill and (SPEAKER CHANGES) Paul Wright times that the judge said in a screen pass allowed in the same one would be prepared to explain it and also how you'd like to balance the difference in dollars if that is what it is because all these pieces seem ?? to fit together if they has anybody, copy of this in this point might say women speak for the-art think you've got to work on this and (SPEAKER CHANGES) I follow show your work on this bill in the months to put into this month and appreciate you reflect the racial 1935 language and talk about the left wing of the surest be a short term bridge and that we've reached the obtained .............

Here in an emergency state dealing with this crisis we're making fundamental and permanent change to employment insurance that's going to harm North Carolina's unemployed people. This is not a short term bridge. This is not a short term solution. We're making fundamental changes under duress. There's a old saying, never let a serious crisis go to waste and this bill to me feels like that we're not letting this serious crisis go to waste in order to make fundamental changes. If you look the amendment I have purposed addresses section 12 on page 39 of the original bill, reinstates the language of our current unemployment insurance and mediocritive section here is section 12D on the second page or the back page of the amendment. The intent of the amendment here is to purpose we pay back the debt under the terms of the bill representative Howard and his junior team have drafted. Once we've paid back that debt we return to the unemployment insurance that we have today. So section 12D speaks to that this my amended section becomes effective January 1st of the year when the federal unemployment tax is no longer increased on businesses to repay the outstanding debt. [SPEAKER CHANGES] Representative Howard [SPEAKER CHANGES] Thank you Mr. Chairman. We had a similar amendment on the house floor last night and I quickly again pointed out to the member section 10 is the important part of this bill. That we need to give the bill the opportunity to run and have that committee in place. That's the committee that can recommend the changes to you and I senator, to change those benefits. It takes a vote of this body to do that. So members I would ask you to vote no on this amendment. [SPEAKER CHANGES] Senator Brown. [SPEAKER CHANGES] I agree, I think you've got provision in the bill to address it hopefully as this thing pays off and I think representative Howard has touched on the most important thing, your projections say that it should be paid off by the end of 15 or 16 but that's not a guarantee at this point. So until we know I think we've got a committee that will be working on this as we move forward. So I would ask them to vote against the amendment. [SPEAKER CHANGES] Mr. Chairman. Mr Chairman. [SPEAKER CHANGES] Senator Stein to speak to the amendment. [SPEAKER CHANGES] The impact on pseudo rates under this bill is negligible. [SPEAKER CHANGES] No sir, I'm sorry there [SPEAKER CHANGES] I said pseudo not feudo [SPEAKER CHANGES] I understand. [SPEAKER CHANGES] My understanding that for a quarter 25% of businesses they either have the same rate or a reduction in rate. Is that wrong? [SPEAKER CHANGES] Well there's also I believe it's a 138,000, I'm looking over at the staff from the division, I believe there's 138,000 people that are currently at the zero rate and they will immediately go to the new rate. These people had a zero rate for pseudo tax. So we're reaching out and bringing those people in. It's a whole different group of payers that's helping to resolve this. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Mr. Klegg might help you with that. Would you comment about that? [SPEAKER CHANGES] Yes. Good afternoon. I'm David Klegg, Assistant Secretary of Commerce for Employment Security since January the 4th. The number of taxpayers we have right now who have the zero rate is about 30,000. [SPEAKER CHANGES] And they will go up? [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] So there's a tax increase on every single person? [SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] Every group. Follow up. [SPEAKER CHANGES] Mr. Klegg my understanding is that the impact over the 3-4 year period addressing this debt out of the pseudo increases applying it to new businesses is about 20 million out of a $2.5 billion shortfall. Am I understanding it correct? [SPEAKER CHANGES] Representative Howard. [SPEAKER CHANGES] I think that if you look at the pseudo tax only in comparison with the amount

-- Speech to Text Benefit you might be right but I think that it is only fair u also include that to seven least a year that you are selling fruit that you get tax increase, from your account of the Federal tax plan, (SPEAKER CHANGES) the thing that I do not disagree with you at all when the senate acts as a substantial impact and design sense about 25% of the deficit and win again with page 310, 75 percent being achieved through the budget reductions the Point Serb element that this attack switches that contribution of businesses to deal with the shortfall expire when the debt is repaid estimate and represent words amendment simply says that in its 52 the expiration of the dead then this could tax on employers goes away and 2015 & 2016 and the benefits of its tracks two workers should awaken them again we evaluate where we are in the system one is temporary the other shoe to temper its excesses sunset and ice tongs for this, make its own affair procreative production Howard said that (SPEAKER CHANGES) the tax increase this new group of employers that are being brought also the employees remember that 0.06 is the bottom and that's the bottom eccentric actor said that in a lot more than nine and those tax increases do not expire . They stand on the distances Mr. chairman Businesses are, or NBC's until we make those changes that with ms constant are 7 to 20% surtax that has is the UK nine businesses Trader said NE turn this around the Ralphs said that MSI is nothing that if you can say with one automatically ends should schedule for lack of better word that the Federal government has imposed Albany’s if that's what automatically and when we resell the thank you, (SPEAKER CHANGES) any additional questions seven nested five FM just a restatement and IBM and call for the thing, then ended up on the phone at the Luxor get us take a bath unit of a case said about the future personnel minuscule gun law section 10 of this bill handle this going for anyone ever review systems of this investment really not needed from the gritty by a vote against trying to send a wooded , but cliche goes to work in section two and 8¢ and seven blocks comments by this as (SPEAKE CHANGES) I read this and we think about whether to 16 and 17 assists and brown dress where turnover of the reliance on the system being there been solid two yet another committee of the spotted owl of trust our committees with two are business people who are unemployed citizens trust that done that yet another legislative committee to study what this might be coming out of this recession has repaid by this troubled that you're looking for certainty , believe that by this amendment provides a sponsor for the fun walk and technical parts of that and I were to vote for the bill to provide that served the again we've taken from the oddball crisis they were taking advantage of when the lane that go to waste to make fundamental changes , which were doing network of bottom of the welded training (SPEAKER CHANGES) I wish we were designed idea that with three com will slip remain clear what the getaway them what sentence nothing to say urging support for that he said would I have a need for additional discussions of a motion from center bound too low to that of the get but the man but it's the difference crash and we're concerned site, the amendment, due out in a fight that would escutcheon will have more money than they are all in favor of several other genetically say eye on all opposed the same day the base at question additional questions I have a motion to families that this should the skinny 7-5 to be heard as homely slave and then I have a man with a face to face the company said the fear …

Wanted to go back to Senator... [SPEAKER CHANGES] Senator Nesbitt just one moment, is that amendment out in everyone's hands? [SPEAKER CHANGES] No. [SPEAKER CHANGES] Okay, would you distribute while Senator Nesbitt discusses? Senator Nesbitt. [SPEAKER CHANGES] Thank you sir. Just a little addition to the issue that Senator Tucker raised. For the members, if we don't know history we're doomed to repeat it and this one has a right interesting history. In fact, you heard Representative Howard say that this was enacted in 1935 I believe she said, it's part of the social security act. and this system has worked all that time until now. And it's designed senator Tucker so that when hard times hit we do have the ability not to raise taxes on business, that's the whole intent here and that's why you go in debt so that you don't have to put a burden on business. And I want to kind of say that because that's how the systems supposed to work and I'm scared to death five years from now or ten years from now we'll be in here saying, oh no, don't go in debt, we went in debt and like never got out. It is designed to do that. And what happened to us here is kind of a perfect storm in that we actually had a goal I believe of a billion and a half is what we thought we needed to have going into a recession. Staff can tell us what that was, that was back in the prior to this recession. The problem was we had such a short recovery between the last recession and this one we didn't get there, but we actually had the taxes in place and everything headed toward a billion and a half in a savings account ready for a recession and this one just, I think everybody in this room knows it hit quicker than any of us ever thought it would, it just caught us overnight. And it resulted in higher unemployment than you have in a normal recession, and it went on for five years. I firmly believe the federal government should have either adjusted the program to anticipate this in the future, or forgive some of what debt major states had to incur to get through it because it is their system, it's not our system. And none of that happened, and i hope that they will because the system is not designed to withstand four and five years of 9% unemployment, and if it happens again you're going to have a problem again. And I kind of wanted to get that out there because I don't think, yes we adjusted the rates for business up and down and in hindsight we had them too low or we could have gotten to a billion and a half quicker, but we thought we had more time to get there so we were trying to spread it out and do it right. But that's kind of the long term history of it and I have to come along and raise taxes on business in the middle of a recession is anathema [??] to this program, to me, to everybody in the room. We just don't want to have to do that. And we're at a point where somethings got to be done, representative Howard seems to get all the good jobs in the house. Every time I see her she's very pensive. But she's working at it hard and what I've got, Mr.Chairman if I could send forth an amendment. [SPEAKER CHANGES] Your amendment has been distributed. Please speak. [SPEAKER CHANGES] Thank you Mr. chairman. I wanted to send this forth and I'm not going to go into great detail on it but I want to get this idea out there to you. When you loo at this , this is a system that's like a wave and you have good times and bad times and good times and bad times. And we're in bad times right now. we still are at 9.4% I believe and up Representative Howard's way with freight liner doing what it's doing I understand they're going to lay off another 7 or 800 people, those people up there aren't going to be able to get a job. You're going to have 1000 people out there looking for manufacturing jobs that don't exist. You've already got some of them on long term unemployment, I believe they laid off 5 or 600 Representative Howard earlier. [SPEAKER CHANGES] They did. [SPEAKER CHANGES] That are probbaly drawing long term benefits. And we have pockets like this all over the state that are just difficult for people. The federal government recognized that and gave us 100% federal money for extended benefits for another year. And...

Realizing that the this is not a, B all in all the year from now for two years nine to process a bit now the problem that can I safely to back up and take another look at Middle East letting those people on long-term unemployment are saying those benefits of turn January the same those benefits that the 2525 I think that the number 80,000 people 25,000,000 thousand and that $25,000,000 a month is flowing into the communities that may be the worse they have a nice run ball networks or outright honor to be more people calling it will be the get the money, Liane your small business people be able to survive better than money in the economy than they would without an amendment was fairly complicated and the comics packet just leave your no need access to make up 78 Richie Gillick the basically that's what goes into says list of the effective date and the best I can tell all I want to explain that if all your calculation for perfect which they never are that they never are all this is a mastermind of valuable and they're getting how much the corner with a macro stop that would simply mean that we put a best bet all for six months later gets completed the process is completed six months later recalled leaving everything else in place and of that you're welcome the top staff about a few of the best in Tijuana Friday here and it would mean no additional tax at this time to 89 , it would not that he had missed this memo 1000 impact the benefit changes that are making it the sales move your second base so we don't lose at $25,000,000 a week from four this period of time and we help the local companies Alabama and that that you all take this feel like a form of money they are you telling me go to somebody else do it by the someone eight look at the culver, make this problem worse if if we don't do this to compress and businesses, businesses and the small towns where the many jobs ?? (SPEAKER CHANGES) are it's a mistake but it's hard to comment, (SPEAKER CHANGES) yes sir, they are an yes administer the command early and Federal government and linux FM balance why are just seven of nine able to retire the 920 from 16 F. Kennedy in the seventh and rest what this man would get you on your your TV seven in place just As a that 9 deadly for Joan Forbes lines come we had no a NFA cup at nine 90 and magic and am from in Washington from NYC and are talking too high a congressional delegation, best of our senators are two from from the years and FSI going to be extended can connect time frame that ms speculation in mind, five highways and out nine and three months then the second time in switch no more than 6/9 the Federal government , played out and many red Maximum five neither full year INI that was IE for ready to two energies lee 29 that we could not grant from …….

so, meaning that we're giving another full year's emergency benefits, taxing our businesses every year more and more and more but would not allow us to make any change that affected the benefits in our state plan. That's pretty much tying our hands to the back of the chair. So I would ask, if I'm in the position to ask, members of the committee, I hope you won't pass this. We tried, this same amendment was run on the House side and it's with good intent, I understand it, but I would ask you to defeat this amendment. [SPEAKER CHANGES] Thank you, Representative Howard. Senator Nesbitt, when this was all being looked at after the revenue laws it adds a 400 million dollar additional cost to the business community in paying that. And you might think six months was a different but it actually added a year of longer term, which my recollection is it would have increased the cost per employee up to about $146 because of the extension. So, yes sir. [SPEAKER CHANGES] Thank you, Mr. Chair, and I would point out to you what I said. All this is an estimate and Senator Howard, I mean Representative Howard, she called me a Representative a while ago so I thought I'd elevate her. [SPEAKER CHANGES] You were once. [SPEAKER CHANGES] She thought you had elevated. [SPEAKER CHANGES] And we, she said, "We'll pay it off in 15 or 16." We're having to estimate when all this is going to happen. If, in fact, it results in additional tax being payed in you could turn around at that time and reduce the SUTA to offset it. If it's paid in it's going in to the fund. So you could, there are a zillion ways that you could offset that somehow into the future if that occurred. [SPEAKER CHANGES] That 400 million dollars is FUTA. It's basically the FUTA tax that is creating the additional expense, just carrying that out another year. [SPEAKER CHANGES] At a higher level. [SPEAKER CHANGES] If I could ask a question. [SPEAKER CHANGES] Sir. [SPEAKER CHANGES] But doesn't that feed in to repay our debt and then come to us when our debt's paid off? [SPEAKER CHANGES] No, sir. When our debt is paid off it stops so it doesn't generate any additional FUTA doesn't. When the debt is paid it's, those rates come back to $42. [SPEAKER CHANGES] I understand. [SPEAKER CHANGES] Sir, follow-up question. [SPEAKER CHANGES] Well, I think we're saying the same thing. When the debt's paid off we are, that tax goes away. [SPEAKER CHANGES] The FUTA tax goes away, yes sir. [SPEAKER CHANGES] But what I'm saying is, yes, the FUTA tax goes away. So we're back to square at that point and I'm saying that other adjustments could be made. You've got this committee in place to look for the next three or four years. You could make a very minor adjustment here or there, perhaps to the SUTA tax, to offset for business if you wanted to but hopefully by this time we're going to be having good times and they'll be better able to afford it then than they will now. [SPEAKER CHANGES] Okay. [SPEAKER CHANGES] That's what I'm pitching, it's not complex. I'm just saying, this thing is a wave it's not flat line and we have a chance right now that we've got to either take or not take to pump 25 million dollars a week into these, mainly into these poorer counties with high unemployment rates that I think they desperately need. [SPEAKER CHANGES] You'll still have money, Senator Nesbitt, going out backdoor to continue paying these bills from the businesses who are trying to stay alive and trying to create job opportunities. Senator Hise. [SPEAKER CHANGES] First question, just as I'm looking at the amendment, as I see this amendment does away with any cap on the maximum benefits that currently exist and actually just sets that maximum cap at 2/3 the average weekly wage. [SPEAKER CHANGES] Mr. Chair. [SPEAKER CHANGES] One second, let's get this one. [SPEAKER CHANGES] I told you you wouldn't believe me so he needs to ask Cindy Everett. [SPEAKER CHANGES] Okay, Ms. Everett, do you have an answer to that? Ms. Everett? [SPEAKER CHANGES] Yes, sir. On lines 1-12, basically what you're doing is keeping the current law in place from July 1 of this year through the end of this calendar year.

That's the way the maximum benefit is currently derived is trough a formula. So the first few lines, even though it's underlined is basically just keeping the current law in place through the end of this calendar year, and then beginning on lines - line 18, we put into the bill effective January 1, 3014 the change that is proposed in this bill, which is the $350 dollar maximum benefit amount and the new calculation. [SPEAKER CHANGES] Senator Hise does that answer your question? [SPEAKER CHANGES] I'll let it go. [SPEAKER CHANGES] Okay, Senator Brown. [SPEAKER CHANGES] Thank you Mr. Chair. Senator Nesbitt I think the tough part of that is the food attacks in this scenario would go from a max of about, Representative Howard correct me if I'm wrong, but $105 dollars per employee per year, to about $140 dollars or so per employee per year. And because it extends it out that much longer. [SPEAKER CHANGES] But isn't it 21 a year? [SPEAKER CHANGES] Yes sir, it's.. [SPEAKER CHANGES] It's 21 a year. [SPEAKER CHANGES] More. [SPEAKER CHANGES] Yeah. [SPEAKER CHANGES] Representative... [SPEAKER CHANGES] My, my, sorry. It is, this is the way it's escalating right now. It is currently $42 dollars, that's what we'd like to have it back [??]. In 2011 we added 42 and then 21, so every year, and the chart, my chart only goes down as far as 189 and then you would put thee - so you're well over $200 dollars after, per employee per year, at 2019. So... [SPEAKER CHANGES] Representative Howard, I think Ms. Everett might help the answer to that question and that senator Brown alluded to. Ms. Everett. [SPEAKER CHANGES] Under the bill as is written right now it's estimated that the fund would be positive in 2015. That means in 2016 the fueda [SP] rate for employers would be $42 dollars per employee. Under the amendment there would not be a positive balance until sometime in the year 2016. That means that the fueda [sp] rate for 2016 would be $147 dollars. So the difference is it would be $147 under this amendment, $42 under your bill for a difference of $105 dollars per employee in that calendar year, 2016. [SPEAKER CHANGES] Mr. Chair. [SPEAKER CHANGES] Senator Brown, did that clarify that? [SPEAKER CHANGES] It does and just to follow up on that. [SPEAKER CHANGES] Follow up. [SPEAKER CHANGES] Senator Nesbitt I think you can see most of us were at $42 dollars, we're going to be at $105 dollars, this would put us at $147 dollars, an additional $105 with what we're already paying. And I'm like senator Tucker, I can't tell you, I'm to the point, I send in a check, seriously, I sent in a check a couple weeks ago for $6000 dollars additional on top of what I normally send in, and that's going to continue to get worse and worse for me, and I'm like senator Tucker, I'm going to start laying people off because you don't really have any option. You get to the point that you got to make it up somewhere. And it comes down to people when you're in business. And the sooner you can fix this the better off you are because it's not going to be any fun for anybody in business. I've got 120 people, I employ about 120 people, in Jackson another 125, in Spruce Pines I've got about closer to 150 employees, so you can just compute what that is going to cost me. And so there's going to be a lot of pain for me I can tell you if you're working through this thing and it's going to mean people. [SPEAKER CHANGES] Thank you senator Brown. Any additional questions on the amendment form Senator Nesbitt? Seeing none all in favor of senator Nesbitt's amendment please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed say nay. [SPEAKER CHANGES] Nay. [SPEAKER CHANGES] The nay's have it. Ladies and gentlemen any additional? There are no additional? We have a motion for a favorable report on house bill four, any additional debate? Seeing none, all in favor of favorable report, the motion favorable report for house bill four please say aye. [SPEAKER CHANGES] Aye. [SPEAKER CHANGES] All opposed nay. [SPEAKER CHANGES] Nay. [SPEAKER CHANGES] Aye's have it. That concludes this meeting. Thank you very much and thank you Representative Howard.