COLUMBIA -- Senators have been given a plan that, in five years, would pay back the projected $2 billion the state owes the federal government for unemployment benefit loans.
The plan also would set up a new tax structure designed to reward employers that rarely lay off workers.
The plan is the latest piece in a package of legislative fixes intended to straighten out problems at the agency formerly known as the Employment Security Commission. The agency has been renamed the Department of Employment and Workforce. This week, Gov. Mark Sanford appointed retired Air Force Brig. Gen. John Finan as interim director.
The Senate Labor, Commerce and Industry Committee on Thursday agreed to send the bill to the full Senate, which should take it up in early May after budget discussions are finished at the end of next week.
Sen. Greg Ryberg, an Aiken Republican who has been leading efforts to fix problems at the agency, said lawmakers must pass legislation this year to put the fund that pays out unemployment benefits on sound financial footing.
"This issue is really complex," he said. "It involves people's money and wallets."
As it is now, taxes employers pay a year for each worker on payroll generates roughly $250 million. But with an unemployment rate at 12.2 percent, the fund is paying out much more than it is collecting. The state is borrowing approximately $12.5 million a week from the federal government, as it has since late 2008 when the fund went broke.
The debt is projected to reach $2 billion before the state can pay it back. Businesses will be charged an additional $21 per worker next year until the debt is repaid. The loan would be repaid in late 2014 or early 2015, under the plan.
The state got into the fix for several reasons. A recent report by the Legislative Audit Council found the agency did not do enough to warn legislators that the fund was rapidly going broke. However, warnings were made to many legislators and they failed to act. Some in the business community also knew for years, all the while, companies enjoyed low worker taxes.
The bill before the Senate shifts employers into 20 different categories based on the frequency that they lay off workers. Eventually, the employers with the best records will not pay any taxes on their workers. Companies with the worst will pay more than they do now.
All the changes would go into effect in January, if the bill becomes law.
Under the current system, employers pay between $87 and $427 a year on each worker. The proposal would eventually charge between zero and about $900 for each employee. Over time, 95 percent of all businesses will pay less in taxes than they do now.
Additionally, wages, now taxed on the first $7,000, would be taxed on the first $14,000. The average taxation in the United States is on the first $15,400 of earnings.
The amount of money individuals would need to earn to collect benefits would also increase. As it is now, workers must earn $900 in about a year to collect unemployment benefits when they get laid off. The bill would increase the minimum earning to $4,450, which matches the practice in North Carolina. The maximum weekly benefits payout of $326 would be frozen at the same rate moving forward.
The new system would adjust the taxes due depending on the unemployment rate so the account always remains solvent, according to analysts. Of the 11 states that use the proposed taxation system, 10 have been remained solvent during the economic downturn.
More than 30 states have borrowed federal cash to pay unemployment benefits since the recession began.