unemployment rates scenario 10

As you know, I’ve been chairing the sub committee with legislation to make changes to the Department of Employment of Workforce’s (DEW) handling of unemployment claims. Before the reform in 2010, hundreds of millions of dollars have been doled out to recipients that have quit or have been fired for cause. The previous Employment Security System (ESC) mismanaged this agency for years. They’re actions combined with the great recession combined with the Fed’s constant extensions have put SC in a $ 1 billion hole.

changes include:

-If a claimant applies for a job and fails the employer’s drug test, benefits are discontinued

-repairing the “anomaly” – Some SC employers had surplus payments, very few claims, yet found a huge increase in charges. This involved a small amount of employers and can be repaired easily. Click here to view more details on the anomaly

-rate adjustments

The 2010 legisaltion creates 20 rate classes. The 45,426 employers in class 1 pay $ 4.31 per employee per year and the 5,601 employers in class 20 are charged $1121 per employee per year. As you can assume, we’ve got a lot of happy employers and some unhappy employers, however, there is no industry average above class 11. Industries hit hardest are temporary staff firms and manufacturers.

In 2010, the new rate classes were based on several factors. Some employers had laid off many employees and many in SC laid off none. In the past, employers that never used the system were unfairly charged high rates, while employers with many layoffs were creating large deficits. Some employers are even accused of using the unemployment system as a business model. In other words, “gaming” the system at the expense of other employers in SC. Along with experience ratings, the rate classes take into consideration whether the employer had a surplus or deficit in their payments.

DEW’s lookback for these rates was only 7 years. The legislature wanted to go back 10, but did not have the necessary data. Some employers claim that they’ve been paying into the system for 20+ years yet after the recession in 2008, were unfairly put in high categories.

Other employers were placed in a low category. They claim they’ve been “subsiding” the system and finally deserve some relief.

These projected rates were made public in May of last year. The accusation that anyone was withholding information is entirely inaccurate. I understand employers’ dissatisfied with rates, but the process in 2010 was as transparent as possible in dozens of meetings open to the all employer associations, the press, citizens, and members of the general assembly.

The bill’s got to be paid. The committee has considered many options. Bonding the federal debt would violate the constitution. Extending the payment out doesn’t offer much relief. The only way to give substantial relief to employers is to revisit the rate classes. The committee has looked at several scenarios. There have been members considering scenario 10. If you click here, scroll down to scenario 10 to see the chart. Whether the committee agrees with any solution or not, we have been assigned the task of assisting members that want to offer an alternative. The math is very complicated and adjustments need to go through the process with DEW.

We’ve been asked to create an amendment based on scenario 10. Scenario 10 adds $200 to class 1 and proportionally increases rates to class 12. The relief is given proportionally to classes 13-20 with class 20 getting the most reduction. Class 1 would be charged $210.30 while class 20 is reduced to $ 744.33. This plan gives relief to a small amount of heavy users, yet increases rates to more than 1/2 of the employers in SC with little or no use.