COLUMBIA — South Carolina’s unemployment agency has paid off its nearly $1 billion debt to the federal government, five months ahead of schedule.
Gov. Nikki Haley announced that the Department of Employment and Workforce made a final payment Thursday of $120 million. Early payments over the past four years have collectively saved businesses nearly $13 million in interest, while also reducing their insurance taxes.
“We are now debt-free,” agency director Cheryl Stanton said.
Businesses’ unemployment insurance taxes can now go toward building up benefit reserves, to avoid needing to borrow if the economy nosedives again. Stanton expects the agency’s trust fund to have $200 million in it by December. It will take several more years to build reserves to where they should be, she said.
Lewis Gossett, president of the South Carolina Manufacturers Alliance, said paying off the debt equated to taking a billion dollars out of the state’s economy — a “painful” scenario.
“For our members, it’s not been fun, but we did it,” said Gossett, who pushed for years for reform at the agency formerly named the Employment Security Commission. Following many legislative and policy changes, he said, “We feel pretty good about going forward.”
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.
Among the 36 states that borrowed money to pay recession-era unemployment benefits, South Carolina was the only state to avoid penalties that increase federal unemployment tax rates and would have forced businesses to pay more, Haley said.
Other than chronically high unemployment, management problems also 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 agency and put it in the governor’s cabinet. The law created a 20-tiered rate system in which businesses are billed according to their layoff history.
Both the agency and legislators then 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 substantial changes “ensure the people who get benefits are the people who deserve benefits,” Stanton said.
The agency also worked to reduce overpayments, which spiked along with unemployment.
According to the agency, it paid $14.4 million in improper payments in 2014, while collecting back $22.5 million. That represents the first year the agency collected more in improper payments than it doled out, Stanton said.