COLUMBIA — South Carolina’s unemployment agency is making a $144 million early payment toward its debt to the federal government, helping to reduce businesses’ insurance taxes, agency officials told The Associated Press on Wednesday.
The payment Friday will be four months ahead of schedule, saving $1.7 million – $14,000 a day – in interest costs. It will leave a balance of $540 million on the state’s original debt of nearly $1 billion, said unemployment insurance Director Erica Von Nessen.
The Department of Employment and Workforce plans to make an additional payment of $50 million in September, provided there are no spikes in laid-off workers seeking benefits. The debt accrued between December 2008 and spring 2011 as the agency borrowed to keep sending checks amid climbing jobless rates.
The state is still on track to pay the debt off in 2015.
Business leaders praised the early payments and the internal and legislative changes that helped make them possible.
“The quicker this state can get out from under it, the better it’s going to be for the business community, manufacturing especially, because we shouldered a good deal of the increase,” said Lewis Gossett, the president of the South Carolina Manufacturers Alliance
THE PAYMENTS ALLOW FOR lower 2014 tax bills to businesses paying into the unemployment insurance trust fund, which had $370 million in it Wednesday. That’s still about $330 million less than the U.S. Department of Labor recommends as a reserve.
Beyond reducing interest, paying early ensures the state avoids higher federal unemployment tax rates, Von Nessen said.
It’s the third consecutive year the state has made an early payment on the loan. Of the many states that borrowed from the federal government amid the downturn, South Carolina was the only one last year to avoid the federal penalty, said John Finan, the state agency’s interim director.
A spokesman for the U.S. Department of Labor did not return a message Wednesday.
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 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 been clamping 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. Last year, legislators required full, automatic denial of benefits for workers fired for misconduct, such as theft.
Also, 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 department’s being more vigilant about who should receive benefits and who shouldn’t,” Gossett said.
The president of the South Carolina Chamber of Commerce, Otis Rawl, added, “The bad thing is, if we’d done these things earlier, we wouldn’t be in the shape were in, but it’s good we’re reconciling those problems now.”
The 2010 law created a 20-tiered rate system in which businesses are billed according to their layoff history. For the last two years, legislators have designated money in the state budget toward providing businesses some relief from impending increases called for by the repayment plan. The average credit for 2013 was 12 percent.
This year, employers with no claims pay as little as $11 per worker, while those with the worst unemployment records pay up to $940 per worker. Next year’s range is expected to be between $11 and $850, Von Nessen said.
An advocate for the poor said lawmakers are focusing too much on helping businesses, rather than the reason the agency exists.
“Some of the changes we’ve seen are giving us a lot of concern and appear to be deliberate in making sure it’s difficult for people who are eligible to get benefits,” said Sue Berkowitz of Appleseed Legal Justice Center. “While it’s good to see us pay our debts off sooner than later, it’s not good doing it on the backs of the unemployed.”