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Two conditions should precede loan request
posted December 24, 2008
Op-Ed by Gov. Mark Sanford
You may have read recently about the dust-up over state unemployment
benefits, and I thought it was worth taking a minute to let you know
why we’re making noise about this issue, and why it’s important you do
In simplest form, our state is running out of money to pay unemployment
benefits, and our office has been drawn into the debate because it’s up
to us to request a band-aid loan of sorts so that these checks can
continue being issued.
Right now, there’s a lot of finger-pointing going on about who is
ultimately responsible for the situation we find ourselves in.
According to the Employment Security Commission (ESC) – the agency that
administers unemployment benefits – this is a problem many years in the
making that they have briefed legislative leaders about without action.
Regardless of what the legislative branch did or didn’t do, it would be
a mistake to not ask questions about this federal loan – though the
easiest thing to do would be to keep my head down and simply ask for
the loan instead.
Here are my reservations:
A loan without reforming our unemployment benefits system will mean one
thing down the road – a tax increase on businesses. What’s already
being contemplated will mean roughly doubling the tax employers pay for
unemployment insurance. Doubling this tax from the current $300 million
will mean a less competitive business climate – and by
extension higher unemployment and less economic opportunity. According
to the non-partisan Tax Foundation, our state is roughly in the middle
of the pack on our business tax climate, except when it comes to
unemployment taxes – where we rank ninth-highest in the country, our
least business friendly tax ranking. Given the economic times we find
ourselves in, we don’t think it makes sense to pass this cost on to
businesses and those they employ.
That’s why we’re making somewhat of a fuss with the ESC before applying
for a loan. This is ultimately about protecting taxpayers - and the
unemployed -- by making sure people who are entitled to these benefits
are receiving them, and that those who aren’t are not.
So we have simply asked for two things before we sign off on the loan.
One, we’re calling for an independent audit of the ESC.
Independent is key here, because an audit from the state Budget and
Control Board is the ultimate in representing a fox guarding the hen
house. This is the same group that gave a 20 year no bid contract for
the state’s insurance work to a former legislator and his family.
Accountability has never been the strong suit of the Budget and Control
Board. Since beginning to highlight this issue, we’ve had a number of
former ESC employees raise issues to us about the operations of the
agency. For example, in order to be eligible for benefits, a person
needs to be “actively seeking employment.” We’ve been told that some
interpret that to mean making just one phone call in a week to qualify
as “seeking employment.” In a 40-hour work week, it doesn’t seem like
one five-minute phone call should qualify you as looking for work.
We’ve also been told that some companies are essentially taking
advantage of the system, and use the unemployment benefits as a sort of
taxpayer funded furlough. These are the kinds of things an audit could
uncover, and in the process help avert a tax increase.
Two, we’re asking for better information sharing from the ESC.
The ESC has refused repeated requests from our Department of Commerce
and the business community to provide area-specific data about the
unemployed in this state. They can tell us how many people are
unemployed, but they can’t tell us where they are and why. Other states
like Virginia have this data in an easily accessible format so that
their economic development efforts can be better targeted. If we want
to maximize the number of people employed in South Carolina, we need
the same tools at our disposal as other states.
We’ve heard that one of the reasons data can’t be shared effectively is
because the agency is operating on a cumbersome, inefficient, and
decades-old mainframe computer system. Yet rather than use recent
funding increases to upgrade that system to better-serve the people of
this state, the money was instead spent on new construction of
facilities. I’m a firm believer in fixing what you have before
you take on new commitments, but unfortunately too many in government
don’t seem to feel that way.
If you think these things need to change, I’d ask you to make your
voice heard. Otherwise, the solution I fear will come from Columbia is
no reform and a tax increase - which I think represents the worst thing
that we could do in these times.
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