By James T. Hammond
Published May 27, 2011
South Carolina employers could see their huge Jan. 30 increases in unemployment taxes reduced by about 18% under legislation awaiting final approval in the waning days of this session of the General Assembly.
Sen. Hugh Leatherman, R-Florence and the chairman of the Senate Finance Committee, put $100 million in the Senate version of the state budget to reduce the huge tax increases on employers that went into effect this year.
That provision is now before the House for concurrence or non-concurrence. If the latter happens, the issue will be decided in a Senate-House conference committee.
But John DeWorken, a government affairs consultant for the staffing industry and some other major employers, said the $100 million would remain unspent, even if passed with the budget, if a companion piece of legislation is not approved.
House bill 3762 outlines how the $100 million would be spread out across a range of employers. The bill also makes changes in the unemployment benefit system in an effort to reduce the cost of the system.
The bill would enable the $100 million to be spent on across-the-board 18% cuts in the unemployment tax on employers.
The unemployment tax became a crisis issue as the recession caused employers to lay off huge numbers of workers between 2008 and 2011, causing the state’s underfunded unemployment compensation reserve fund to disappear and trigger $900 million in borrowing from the federal government to meet mandated benefits for people who lost their jobs through no fault of their own.
In order to repay the federal loans, the reorganized Department of Employment and Workforce set new unemployment tax rates that employers must pay. Typical annual rates of $300-$400 per employee skyrocketed to $900-$1,100 per employee. Employers with the highest percentage of layoffs were taxed at punitive rates under the new schedule. It was not uncommon to see increases ranging from double to eight times the previous premium payments.
The hardest hit sectors of the economy set to work to turn back the high rates. When the state Board of Economic Advisors raised its estimate of next year’s tax revenue about $200 million, the Senate earmarked half that amount for relief from the new, high unemployment tax rates.
The legislation needed to spend the $100 million on the tax rate reduction also includes:
Reduction of unemployment benefits to 20 weeks from 26 weeks.
Seasonal workers would not be eligible for unemployment benefits.
A provision in the House version said people who are laid off and receive severance pay would not become eligible for benefits until their severance expires, was stricken by the Senate version. The provision, if reinstated during a conference committee, would mean that if a person receives a two-month severance, for example, that person must wait two months to apply for benefits.
The Department of Employment and Workforce has also taken steps to stop the practice of granting unemployment benefits to people who are fired from their jobs for cause. DeWorken estimates that alone could save the system $30 million a year.
S.C. Chamber of Commerce President Otis Rawl said he believes the relief will pass, and that there is general support for the legislation in the House and the Senate.
The enabling legislation was approved by the Senate in a late night session that started Thursday and ended after midnight Friday.
DeWorken said the relief is needed because the draconian increases in unemployment taxes might actually cost more people their jobs.
“There are real jobs at stake; real people will lose their jobs or not return to work if we don’t get this done,” DeWorken said.