COLUMBIA - South Carolina's unemployment agency announced Wednesday that it made a $60 million early payment toward its debt to the federal government, helping to reduce businesses' insurance taxes.
The payment earlier this week is more than six months ahead of schedule, saving $1.4 million in interest. It leaves a balance of $396 million on the state's original debt of nearly $1 billion, according to the Department of Employment and Workforce.
It marks the fourth year the state has made an early payment on the loan. The state is still on track to pay the debt off next year.
The debt accumulated between December 2008 and April 2011 as the agency borrowed money to send unemployment checks amid climbing jobless rates, which peaked at 11.9 percent in December 2009. The state made its first payment on the debt in August 2011.
"Making this $60 million early loan payment could not be possible without the work of the state's business community in improving South Carolina's economy faster than expected," said agency Director Cheryl Stanton.
Beyond reducing interest, paying early ensures that the state avoids higher federal unemployment tax rates. That allows for lower 2015 tax bills to businesses paying into the unemployment insurance trust fund, which had about $130 million in it Wednesday.
The U.S. Department of Labor recommends that the state have $780 million in reserves, which represents a year's worth of benefits paid, but the state must pay off its debt before it build its reserves.
Gov. Nikki Haley also attributed the early payment to a better economy, saying it's "exactly what is possible when a state sees the kind of economic growth and success that we have." The state's unemployment rate fell to 5.5 percent in March.
But policy and legislative changes are a large part of how the state's climbing out of debt.
Other than chronically high unemployment, management problems contributed to the depleted trust fund and the need to borrow. Legislators approved a repayment plan in 2010 that increased employers' rates as part of a law that overhauled the former Employment Security Commission and made it a Cabinet agency.
The rate increases caused a backlash from business owners hit with bills that soared by hundreds of dollars per worker. Both the agency and legislators have since clamped down on who can receive benefits, and for how long.
That includes a 2011 law cutting from 26 to 20 the maximum number of weeks the jobless can receive in state-governed benefits. In 2012, legislators required full, automatic denial of benefits for workers fired for misconduct, such as theft. And internal policy changes set a four-week maximum of state-governed benefits to people who are fired for offenses that don't meet the misconduct definition, such as tardiness and attendance issues.
The agency also has reduced overpayments, which include accidental and fraudulent payments, through a series of changes aimed at catching more errors and catching them faster. The overpayment rate spiked to nearly 18 percent of all benefits paid in 2010-11, or $69 million. It has since dropped to 6 percent.
The 2010 law created a 20-tiered rate system in which businesses are billed according to their layoff history. This year, employers with no claims pay about $11 per worker, while those with the worst unemployment records pay about $936 per worker yearly.