RALEIGH -- Gov. Beverly Perdue's administration announced Wednesday it was blocking some changes to unemployment benefit guidelines approved by the General Assembly this summer over Perdue's veto and the threat of higher taxes for North Carolina businesses.

Employment Security Commission chairwoman Lynn Holmes wrote legislative leaders about her decision - directed by Perdue - to suspend rules in a new state law that regulators said in June could put the state out of good standing with federal law. Incompliance could have required, among other things, employers to pay a federal unemployment insurance tax of 6 percent on a worker's first $7,000 of income, compared to 0.6 percent today, a commission spokesman said.

Republican leaders who voted in July to override Perdue's June 30 veto of the bill said Perdue, a Democrat, had exaggerated the threat of higher taxes and that Holmes already had authority to step in and suspend the contested rules to avoid the tax problems until they could be reworked next spring. The rules at issue were part of a 79-page bill that finalized moving the Employment Security Commission to the state Commerce Department starting Nov. 1.

Still, Perdue's office framed the decision as one preventing immediate higher costs for business that had been initiated by Republicans.

"The law that the General Assembly passed over my veto was going to cause taxes to skyrocket for North Carolina employers," Perdue said. "I refuse to sit by and allow an unnecessary tax increase on North Carolina businesses."

Holmes' letter angered a key Republican senator who accused Perdue and her administration of dragging their feet on a study the Legislature ordered in March but has never been completed about the $2.5 billion in debt the state owes the federal government for paying benefits during the economic downturn.

The Commerce Department was supposed to hire an outside consultant. A department spokesman last month attributed the delay in part to a lack of immediate funding for the study and merger issues with the commission, which manages the state's unemployment benefit programs.

Commerce Secretary Keith Crisco wrote Sen. Bob Rucho, R-Mecklenburg, last week proposing that three reports from investment firms he attached would suffice for the study. Rucho said the reports, which suggested repaying the money with private debt at a lower interest rate than what the federal government requires to save money, barely scratched the surface of what the study is supposed to entail.

Rucho said he still expects the study to be completed.

"The governor's been sitting on (the study) from the day that it's passed," Rucho said in an interview. "We gave the governor the authority and the governor sat back on her hands and did nothing."

Perdue spokesman Mark Johnson said the studies Crisco offered "didn't cost the state a dime."

"Why in the world would we want to spend tax dollars to do another one?" Johnson asked.

Holmes also wrote legislative leaders Wednesday that employers soon will have to begin paying a little extra on their federal unemployment insurance tax because lawmakers took "no substantive action" this year on how to pay down $2.5 billion in debt it owes the federal government for paying benefits. The extended debt will result in employers receiving effectively an additional 0.3 percentage point on their rates, she wrote. The new rate of 0.9 percent will occur automatically.

"The General Assembly has the primary authority to address how the state will repay the principal of that debt," Holmes wrote.

Rucho said it was the commission's fault for failing to alert legislators sooners about the extent of the debt and to offer their own solution.

He said Holmes wrote "a political letter that was really embarrassing" to the administration and that Holmes should be replaced as chairwoman for incompetence by herself and the agency. The commission took heat last year for errors that resulted in overpaying benefits to tens of thousands of displaced workers. Johnson said Rucho "has resorted to vicious personal attacks" on Holmes, who helped prevent unemployment taxes from increasing six fold.

The debt issue is touchy for both political parties because lawmakers and labor experts say any solution ultimately will require the state's businesses to pay even higher unemployment insurance taxes to pay off the debt over the next decade.

The suspension of the rules Wednesday stemmed from a June 23 letter from the U.S. Department of Labor to state officials. It raised concerns about provisions in the bill that would have given employers 30 days to protest claims made by former workers and language specifying what kind of misconduct would warrant a person from being disqualified for receiving benefits. Federal law limits circumstances for disqualification and state unemployment benefit officials must determine a denial of benefits on a case-by-case basis.

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