The state's unemployment trust fund has been nearly broke for months and since December has borrowed $300 million to cover checks as the jobless rate has persistently been among the nation's highest. March's 11.4 percent rate was the country's third highest.
Mr. Sanford said the debt could hit $1 billion. That money will have to be repaid beginning in 2011 as he leaves office after his second and final term. But he notes businesses may face higher taxes beginning in October 2010 to make the system solvent again.
"Regrettably, failure to make reform to the system in a timely manner will inevitably lead to tax increases on employers across the state," Mr. Sanford said in the May 6 letter.
Mr. Sanford said he pushed an overhaul of the unemployment system that would have moved the functions of the current, standalone Employment Security Commission into his Cabinet as a new Workforce Department. A version of that bill waits on the Senate calendar; the House version has been scuttled after twice being sent back to committee.
"Is it your position that we continue to borrow funds to pay benefits until the General Assembly can address this issue next year?" Mr. Sanford asked.
Senate President Pro Tem Glenn McConnell, R-Charleston, responded Thursday by saying the solution is tied mostly to creating jobs through Mr. Sanford's Commerce Department, not giving Mr. Sanford control of the Employment Security Commission.
"What your letter fails to point out is that making the ESC a Cabinet agency, as you have proposed, would not reduce debt or save a single dollar in unemployment benefits" that are paid because people earned them by working.
The proposal to create the Workforce Department "would not create a single job or reduce the heavy cost of unemployment benefits to the businesses and taxpayers of Carolina," Mr. McConnell wrote.
Sanford spokesman Joel Sawyer said Mr. McConnell's "over the top" response failed to answer the question of whether the state should continue borrowing money.
Mr. McConnell said Wednesday that he would like to see the results of a Legislative Audit Council report before making substantial changes at the commission.