South Carolina officials have argued for months about how to repay almost $1 billion in federal loans that bailed out the state’s unemployment system for a year. A new payment tier system began in February, which required higher unemployment insurance taxes from companies that laid off the most employees, while lowering the taxes of businesses that kept their workforces largely intact.
However, for some companies, that means costs of more than $1,000 per employee each year. The SC Manufacturers Alliance says some could end up paying $500,000 this year.
Rep. Dan Cooper (R-Anderson) says the legislature wants to find a different solution.
You compound the problem because (these companies) wind up having to go out of business. And we certainly don’t want that. We’re going to take a serious look at it. We’ve got to come to some kind of consensus…to resolve it. I hope we can do that soon.
Governor Nikki Haley is working with legislators to find a way to pay off the loans over a longer period of time. Right now, South Carolina has to repay the money over five years. A bill passed by the House Wednesday would expand that to eight years.
The current working plan calls for the state to help pay back the money through a total of $180 million in bonds. The bonds would be financed through UI tax money collected from those companies in the top tier. That’s drawing criticism from the state treasurer, Curtis Loftis, who compared it to paying off one credit card’s debt with a second card.
Every bond issued needs a certain stream of income. The bondholders want to make sure they’re going to be paid. This is the first time we’ve ever done a bond like this. The income is volatile, and we’re not sure that we can sell it in the market.
Loftis said financing the bonds through an unstable revenue stream like jobless insurance risks the state’s AAA credit rating. He says the plan also assumes the unemployment rate drops over the next eight years, which means another economic setback could make the financial situation even worse.
We’ve been struggling with the unemployment problem in this state for 12 years. And now we’re going to stretch it out for another eight years. We could be in another recession in three, four, or five years. So, we’ve got to be careful.
Lawmakers wanted to pass out the legislation before this week’s procedural deadline. That way any subsequent changes would only require only a simple majority, rather than a two-thirds vote.
South Carolina has to pay the federal government back $972 million it borrowed after the state’s Employment Security Commission trust fund went bankrupt in 2008.