South Carolina employers are about to see fiscal prudence and fairness return to the state's unemployment insurance program.
Companies that put the most strain on the system will pay the most per worker, but all companies will help pay down the debt owed the federal government.
The cost per worker ranges from about $10 for companies with the best records for maintaining a stable work force to $1,128 for companies with the worst records. Companies will be notified of their individual costs early next year.
Under the old system, companies paid between $87 and $427 a year per employee.
The new rates are part of a major overhaul of the now defunct state Employment Security Commission, an abysmal example of mismanagement.
This spring, lawmakers created the Department of Employment and Workforce, a new cabinet agency reporting to the governor.
A damning audit of the old agency found that its officials knew as early as 2001 that fund reserves were not adequate to meet the demand for unemployment benefits, but they didn't pursue changes to benefits or the tax structure to prevent insolvency. It also found that the agency didn't give the General Assembly adequate information about the declining trust fund balance, nor did it suggest ways to prevent the decline.
South Carolina had a more than $800 million surplus in its unemployment benefits trust fund in 2000. When the recession began in 2008, that number had dropped to $229 million.
We now have borrowed $887 million from the federal government to meet our unemployment benefit obligations. And we have to pay back that money with interest, hence the surcharge to employers.
State officials expect to pay it back by 2015, including a $150 million payment in 2011.
South Carolina's unemployment rate was 11 percent in September, the sixth highest in the country.
In addition to creating the new cabinet agency, lawmakers also reworked the unemployment insurance rates and tightened eligibility requirements.
Workers who leave their jobs voluntarily or are fired for illegal drug use now are ineligible for benefits. They also can be denied benefits for gross misconduct, which includes reckless damage to employer property, employee theft, and criminal assault or battery against a fellow employee.
Unlike most states, South Carolina had allowed employees fired for misconduct to collect unemployment benefits. That cost the state $171 million (10 percent of total benefits) between July 1, 2006, and June 30, 2009, according to the agency audit.
As part of the update of its unemployment insurance laws, the state also has broadened who qualifies for benefits by allowing people who seek part-time work to get unemployment checks. People also will be eligible if they have to quit jobs for compelling reasons, including for their or an immediate family member's illnesses or disability or a spouse taking work in another state.
With the continuing demand on our unemployment system, it's more critical than ever that this state agency is properly funded and operating at peak efficiency.