The General Assembly returns Tuesday to address an oversight by the state's Employment Security Commission, another example in a long list of missteps by the agency. Now at a crisis stage, the business community urges legislators to make reforming this agency a top priority when they return in January.
As far back as 2005, the S.C. Chamber of Commerce warned the agency about the insolvency of the unemployment trust fund. State law requires the ESC commissioners to present recommendations to the General Assembly and the governor if the fund is heading toward insolvency. With no recommendations made by the commissioners or the agency, the fund became insolvent in December. By the end of this year, South Carolina will have borrowed close to $1 billion to pay unemployment benefits. Though it will ultimately fall to businesses to repay the federal government, the commission waited until April to issue its very first recommendations. Just this fall, it proposed more than doubling taxes on already-struggling businesses in the state.
With our current 11.6 unemployment rate, it's hard to remember that record lows in unemployment occurred between 2004 and 2007. During that time, the commission paid out considerably more in benefits than what it collected, taking no ownership to remain financially stable. In 2001, the unemployment trust fund had more than $800 million in surplus, but by the end of 2009, it will be more than $1 billion in the hole. If this is not a crisis of accountability, I don't know what is.
Then there's the subject of who is receiving unemployment compensation. By the commission's own estimates, since 2006 it has paid out nearly half a billion dollars to workers fired for misconduct or those who voluntarily quit their jobs. That's nearly a quarter of the total dollars paid out during that period.
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A number of reforms must be achieved before tax increases are ever discussed. Restrictions must be placed on workers who are dismissed for misconduct, voluntarily quit their jobs, have jobs with a known end date, receive severance packages, receive unemployment benefits while on strike and participate in the state TERI program. Claimants who are offered jobs but choose not to accept them also should be penalized. In addition, the General Assembly should consider raising the salary thresholds for eligibility and allowing businesses to prepay unemployment taxes. Allowing businesses to prepay during good times helps prevent tax increases during tough times.
Some industries have been attacked recently for filing unemployment claims for their displaced workers. Employer-filed claims are a convenience for workers temporarily displaced and prevent hundreds of South Carolinians from having to file their own claims, standing in long lines and burdening the Employment Security Commission field offices. If these claims are removed, it won't save the system a dime. According to the U.S. Department of Labor, these workers would still be entitled to benefits. It's simply a matter of who files the claim - the worker or the employer.
Legislation to restructure the commission was introduced during the most recent legislative session, but it failed after political pressures won out. The General Assembly must commit to reforming the agency in January and restoring the solvency of the unemployment trust fund over time without simply raising taxes on businesses, the creators of jobs.