For jobless, N. Carolina the cruelest state

RALEIGH - An estimated 170,000 jobless workers in North Carolina will be thrown off the unemployment-benefit rolls in July thanks to legislation passed by state lawmakers this week that triggers a little-known provision of federal law.

North Carolina is joining the growing ranks of states that have decided that they can no longer shoulder the growing financial burden of the unemployed. But it stands alone in violating a law that disqualifies its jobless from collecting federally funded unemployment benefits that would allow the state's jobless to collect up to 47 weeks of additional aid.

The reason is the way North Carolina - which at 9.2 percent has the nation's fifth-highest jobless rate - went about slashing its benefits.

Not only did the state reduce the maximum number of weeks someone could collect state benefits from 26 to 20, but it also lowered the maximum weekly benefit from $535 to $350. On top of that, North Carolina is reworking how unemployment benefits are calculated, which advocates say will cut the average weekly benefit from about $296 to the low $200s.

"It is a self-inflicted wound," said George Wentworth, senior staff attorney of the National Employment Law Project.

States are forbidden from reducing benefit amounts if they want to remain eligible for extended federal aid. Congress put the so-called "non-reduction" rule in place in 2009 when it added $25 a week to jobless benefits as part of the stimulus bill. The idea was to ensure that the federal help flowed to the unemployed rather than to state coffers.

Since then, the measure has been renewed each time Congress has extended funding for federal unemployment aid.

Before the recession, virtually every state offered workers up to 26 weeks of jobless benefits. But that standard, which dates back to the 1950s, has been eroded by the extreme fiscal challenges facing states suffering through years of high unemployment.

During the economic slowdown, at least 35 states have exhausted their unemployment-insurance funds and have turned to the federal government for loans. With those loans now due, at least eight states have moved to trim benefits to control costs, although they have not run afoul of federal law.

Some reduced maximum benefits during brief lapses in the law while Congress fought to renew it. That allowed them to be grandfathered in.

Without reducing maximum weekly aid, other states simply scaled back the number of weeks the jobless could collect benefits. Those changes often led to a reduction in the amount of time workers could collect federal help, rather than a total elimination of federal help.

In Georgia, for example, lawmakers cut eight weeks of state benefits, which triggered an 11-week cut in the maximum length of federal benefits. In Michigan, legislators trimmed maximum state benefits from 26 to 20 weeks, causing an eight-week reduction in the maximum time that a jobless worker could collect benefits there.

North Carolina, which owes the federal government $2.5 billion, could have averted the federal reduction by simply delaying benefit changes until next Jan. 1, when the current extension of federal benefits is scheduled to expire.

But officials there - concerned about the mounting red ink in the state's jobless fund - decided to move more quickly, passing a law that would trim benefits in July. As a result, the state will forfeit as much as $780 million in federal funds, baffling both advocates for the unemployed and federal officials who say the cuts will harm the economy.