Most SC businesses will avoid unemployment tax increase next year, says Gov. McMaster
Gov. Henry McMaster and the state’s workforce director said Thursday that most South Carolina businesses will not see their unemployment insurance tax rates go up or change next year as the state’s economy continues to still grapple with the COVID-19 economic impact.
“Even though we have gone through a terrific pandemic, we will not be raising taxes on businesses with unemployment insurance,” the governor, standing next to GOP lawmakers and leaders in the state’s business community, said, despite an exception that about 13% will see their rates go up because of classification changes that were not COVID-19 related. “That is a major accomplishment.”
South Carolina’s jobs chief Dan Ellzey had warned this spring the state’s fund that pays out unemployment benefits could go broke, possibly requiring government help as businesses — which pay into the fund — started to close under the weight of the virus.
Before the pandemic, the unemployment trust fund had reached about $1.1 billion, its highest level since the 2008-’09 recession.
But the virus and subsequent layoffs and furloughs wreaked havoc on the system. And at one point there was only about $200 million in the fund, said Ellzey, whose agency has now paid out more than 700,000 unemployment claims since about mid-March.
“In 2008 and 2009 when that crisis hit, we had to ... borrow money and we just finished paying it off,” McMaster said, referring to the state’s more than $977 million loan from the federal government to help cover the unemployment trust fund that was paid off in 2015.
“Well, we’re not going to have to do that this time because we did things the right way,” McMaster said.
Today, the trust fund is back up to about $886 million, thanks in large part to funding provided to the state through the federal CARES Act that S.C. lawmakers dipped into, sending more than $900 million of the state’s $1.9 billion share to shore up the unemployment trust fund. Because of that infusion of cash, senators were confident in September that the insurance tax rates would stay the same for businesses.
Only about 13% of South Carolina businesses will see their rates go up because of a classification change. But none of those charges are based on COVID-19-related layoffs, but rather pre-COVID layoffs or layoffs that occurred during the pandemic but were not related to COVID-19, Ellzey said.
Ellzey said the state is in good shape to keep taxes where they are when asked whether they could go back up in the future.
Where “the economy is going right now, I see no increase in taxes,” Ellzey said. “Something bad happens, it’ll be a whole new ball game this time next year.”
South Carolina’s economy has stayed relatively stable despite another recent spike in positive virus cases.
Ellzey said the state went from a February unemployment rate low of 2.5% but when the virus shut the economy down it shot up to 12.8%. The state’s hospitality sector suffered the worst, losing “half of their jobs,” Ellzey said.
“Somebody asked me one time in an interview, did the governor reopen the economy at the right time?” Ellzey said, adding that he replied, “Well, don’t ask my opinion, just look at the numbers.”
For example, Ellzey said, the state’s unemployment rate as of September is down to 5.1% and more than 2.2 million are employed in the state, as opposed to just a little more than 2 million at the height of the COVID-19 outbreak. In April, there were more than 303,000 people unemployed. The latest figures in September are at about 121,000.
Still, however, Ellzey said the state has roughly 120,000 unemployed South Carolinians who need to get back to work.
Ellzey said the state’s Department of Employment and Workforce soon plans to launch a communications effort at getting those unemployed back to work, called Project Job One.
“Keep looking, there are jobs out there,” was Ellzey’s message to unemployed South Carolinians.
“There are not necessarily jobs in your area where you need it,” Ellzey continued, which is why DEW, he said, is heavily targeting training. “Unemployment money is good, but (a) better job is better. Get out and get it while it lasts or you’re going to wind up taking whats left.”
This story was originally published November 12, 2020 at 12:13 PM.
