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Trump plans to send federal unemployment aid to states. But it could cost SC millions.

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McMaster

Gov. Henry McMaster and Sen. Lindsey Graham field questions about President Donald Trump’s plan to have South Carolina’s state government cover an extra $100 in unemployment benefits to eligible applicants. Staff/Jamie Lovegrove

President Donald Trump announced a plan this weekend that would send additional aid to unemployed Americans throughout the country, but the proposal could end up costing South Carolina millions of dollars to participate. 

The plan, as explained by the White House, would provide an additional $400 a week in jobless benefits to people who were forced out of work amid the coronavirus pandemic.

That money would help to replace part of the extra $600 per week in federal unemployment assistance people were receiving until the end of July. 

The new proposal, however, requires states to pay 25 percent of the cost in order to cash in. In effect, the federal government would cover $300 and South Carolina would need to chip in the other $100. 

That would place a huge financial burden on the state, which is already dealing with declining tax revenues as a result of the pandemic and economic recession.  

South Carolina is still managing a historic surge in unemployment applicants. In the latest count, more than 188,000 idled workers continued to file an unemployment claim with the S.C. Department of Employment and Workforce, which is far higher than anything the state witnessed during the Great Recession. 

If those numbers don't decline, it would mean that South Carolina would need to contribute roughly $18.8 million per week to participate in Trump's new unemployment plan. 

On Monday, Gov. Henry McMaster suggested it was a cost he is willing to pay.

“We don’t want our people to be hurt by the virus,” McMaster said. 

It remains unclear where the money for the state's share would come from. Zach Pippin, a spokesman for McMaster, said the governor would be meeting with leaders of the S.C. House and Senate's budget writing committees this week to discuss the potential unemployment costs. 

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The additional money could be pulled from existing unemployment insurance trust fund. That fund is used to cover the state's normal unemployment benefits, which max out at $326 per week depending on an applicant's previous income. 

But relying on the trust fund could create some difficult decisions for lawmakers. The account is already being drained at a historic rate by the unexpected wave of jobless claims this year. 

The trust fund, which had accumulated more than $1 billion by the start of 2020, now has roughly $566 million remaining in it, according to DEW. 

McMaster and state lawmakers saw this problem coming earlier this year. That's why they set aside another $500 million, which was provided by Congress through the Coronavirus Aid, Relief and Economic Security Act, to help revitalize the fund as the recession set in. 

At the time, McMaster said he wanted to avoid a repeat of the Great Recession, when the state ran out of money for unemployment benefits and was required to borrow $1 billion from the federal government.  

He also wanted to make sure businesses in the state, which bankroll the unemployment trust fund, wouldn't see their taxes go up amid one of the nation's worst-ever economic downturns. 

"The reforms enacted by the General Assembly in the wake of the 2008 Great Recession should not be forgotten, including paying off the billion-dollar unemployment insurance trust fund deficit," McMaster said in a letter to state lawmakers. "Many businesses will not survive paying higher taxes to replenish the fund twice in one decade." 

DEW said it is still waiting on more guidance about how Trump's order would work in practice. Even so, sending an additional $100 per week to every eligible jobless applicant will only stress the state's unemployment fund even more than it already is. 

Congressional Democrats have put forward a different plan that would completely fund an extra $600 in federal assistance until the end of the year. But that plan has been stalled as part of the negotiations over a new round of federal financial aid. 

Many Republicans in Congress continue to argue that an extra $600 per week in unemployment benefits encourages some low-wage workers to remain out of a job. They would rather tie the additional unemployment aid to people's lost wages, a proposal that could take state's months to implement. 

Meanwhile, the U.S. Department of Labor announced this week that there were three unemployed workers for every job available in the United States

Reach Andrew Brown at 843-708-1830 or follow him on Twitter @andy_ed_brown.

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