In 2020, South Carolina businesses will pay about 34% less on average in unemployment insurance tax rates than in 2019.
S.C. Gov. Henry McMaster announced the tax cuts Thursday at the Statehouse, joined by Dan Ellzey, executive director of S.C. Department of Employment and Workforce, and the leaders of several state business associations.
McMaster and Ellzey also announced that for the first time since 2003, the state’s Unemployment Insurance Trust Fund is solvent and no longer paying solvency surcharges. At its current level, Ellzey said the fund is able to withstand a recession. He said DEW also has a more effective process for monitoring the fund.
“When the trust fund went under with the (2008) recession, we did not, at that point, have in place the triggers to really determine that problems were coming,” he said. “But we have resolved that. We do have triggers in place now. We watch it every month. We look at what the trust fund balance is.”
The state has been able to repay a federal loan issued from 2008-2011 and rebuild the trust fund depleted during the Great Recession. South Carolina had to borrow nearly $1 billion from the federal government in order to pay unemployment insurance benefits to state residents during the recession, which began in December 2007 and stretched for 18 months.
When the loan was paid off in 2015, South Carolina businesses were saved $12 million, officials said. The Legislature also approved a regulation requiring DEW to rebuild the trust fund within five years to a level that would cover potential payments without having borrow from the federal government.
McMaster said the effort to address the trust fund balance and the subsequent federal loan is one of several reforms the Legislature has been attempting to address in recent sessions.
“It’s taken a lot of work to get here over a lot of years,” said McMaster. “A lot of people have done a lot of thinking. Businesses are growing. This is a signal of what’s yet to come.”
S.C. Senator Thomas Alexander (R-Walhalla), chair of the Senate Labor Commerce and Industry committee, said the state has a funded, economically sound unemployment system, which he attributes to S.C. businesses whose contributions helped pull the state out of its deficit.
“It is the money coming out their pockets that have paid the debts,” he said.
All liable S.C. businesses receive a tax rate based on how they use the system. On Nov. 8, businesses will be mailed their tax rate notices under the adjusted 2020 Unemployment Insurance Tax Rate Table.