Businesses might face new fees

COLUMBIA -- South Carolina businesses may have to pay added fees of at least $21 each for the state's roughly 2 million workers after November -- fees that could accelerate yearly -- to repay federal loans for unemployment checks.

It's a process that could take years and hamstring the state's prosperity for a generation, warns South Carolina's chief economic adviser, John Rainey.

And that addresses just one part of the problem. In addition to paying back the $1.3 billion the state is projected to borrow by the end of the year for unemployment checks, South Carolina will owe an estimated $350 million in interest and must come up with an additional $1.4 billion to rebuild the bankrupt Unemployment Insurance Trust Fund.

Where the money will come from is up in the air. What is certain is that something has to be done, Rainey said.

"The incompetence of government and the indifference of the business community has placed an additional burden on the taxpayers of South Carolina at a time when they can least afford it," Rainey said.

Covering the politics of the Lowcountry, South Carolina and the nation.

Rainey said state leaders failed the public by allowing the fund that pays out unemployment benefits to lose as much as $155 million a year for nearly a decade until it eventually went broke in 2008.

Money in the trust fund comes from rates that businesses pay on every worker they employ. Companies pay between $87 and $427 per employee, depending on how often they lay off workers.

The fund is run by the troubled Employment Security Commission, which was found in a recent Legislative Audit Council review to have handed out millions of dollars in questionable benefits to workers fired from their jobs.

Otis Rawl, president of the S.C. Chamber of Commerce, said the state needs to take a comprehensive look at the problems with the unemployment trust fund to find a suitable solution. The business community would not accept a rate increase without an overhaul at the Employment Security Commission, he said.

"We realize we've got to do our part ... to look after our employers," Rawl said. "But before we do anything else, we just want to make sure the reforms are in place."

Measures aimed at reforming the agency are pending in the House and Senate.

Senate President Pro Tem Glenn McConnell, R-Charleston, said the impact on businesses won't fully be known until the Legislature completes its reform of the Employment Security Commission, which could come up for debate on the Senate floor as early as this week.

For starters, McConnell said the state needs to re-examine the standards for which it grants benefits and to stop people who get fired for cause from collecting checks. The state could also offset the problem by attracting more jobs, he said.

"The last thing that business can afford is to pay more in taxes," McConnell said. "I know we've got to face the music, but we need to know what we're dealing with."

The state is facing a deadline from the federal government to repay the money borrowed since 2008. The balance reached more than $765 million as of the beginning of February. If the unemployment rate averages 12 percent this year, the state will have to borrow $519 million more from the federal government by the end of the year. Unemployment in December reached 12.6 percent, the last month for which data is available.

The federal government has threatened to take away part of a tax credit businesses receive if the state does not start to pay back the loans by November. Losing part of that credit would cost businesses $21 per worker a year, growing under the current model by that amount annually -- to $42, then $63, etc. -- until the debt is paid off.

Rainey said for every dollar more businesses pay in taxes, they have one dollar less to hire workers. The end result is the state's slower recovery from the economic downturn, he said.

"These dollars won't be there," Rainey said.

Reach Yvonne Wenger at 803-926-7855 or ywenger@postandcourier.com.