State Chamber on Unemployment scenarios

Senate Continues Exploring UI Scenarios, House Begins Work
Senate Labor, Commerce and Industry (LCI) subcommittee meetings were held again this week as the Senate continued discussions on the new unemployment insurance (UI) tax rate structure. Senator Kevin Bryant (Anderson) chairs the LCI subcommittee.

Several new scenarios were examined this week, but a new “Scenario 15,” which was proposed by the South Carolina Association of Personnel and Staffing, received the most discussion and was ultimately adopted by the subcommittee. The South Carolina Chamber of Commerce met with the National Federation of Independent Business (NFIB), South Carolina Manufacturers Alliance (SCMA) and the South Carolina Farm Bureau to discuss possible support of the staffing industry’s “Scenario 15.”

“Scenario 15” extends repayment of the more than $900 million debt to the federal government to 2016, one year later than the plan the General Assembly passed last year. This extension would result in higher interest costs and leave the UI Trust Fund balance at zero in 2016 rather than with a $200 million surplus under the current rate structure. Therefore, the UI Trust Fund will essentially be in the same state the General Assembly found it in at the beginning of the last recession.

“Scenario 15” would provide savings of roughly $146 million immediately to Rate Classes 13-20, those who used the system the most, in the form of reduced rates for 2011 and 2012, nearly a 20 percent reduction. A surcharge would be placed on Classes 13-20 to cover the increased FUTA costs for all rate classes, including holding Rate Classes 1-12 harmless.

The South Carolina Department of Employment and Workforce (DEW) did express two main concerns to “Scenario 15.” The primary concern is that recessions typically occur every seven years on average. If “Scenario 15” is adopted, the UI Trust Fund would have no surplus heading into the next likely recession. The other concern expressed by the DEW is the difficulty of accurately counting employees in each rate class, making it tough to calculate the surcharges on Classes 13-20 in order to hold Classes 1-12 harmless.

The staffing industry is now pushing for “Scenario 12,” which would reduce their rates by as much as 40 percent, but force the state to borrow nearly $250 million more from the federal government. Rates would then spike for all rate classes in 2016, right around the time the next recession is anticipated.

The Senate LCI subcommittee continues to examine reforms that reduce benefit payouts, including a provision disqualifying anyone who fails a drug test or does not show up for a DEW coordinated interview matching his or her skill sets. The South Carolina Chamber supports both of these reform efforts.

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