$36.1 Million needed

PIERRE — South Dakota businesses will be required to pay an estimated $36.1 million in surcharges in 2010 to shore up the state unemployment insurance system, according to the latest analysis released Thursday by the state Labor Department.

The extra payments would be levied on all employers on a per-worker basis, regardless of the type of business or its unemployment history. The surcharges would be in addition to the $26.5 million of normal payments and interest that the UI system is expected to receive in 2010.

The analysis was presented to the state Unemployment Insurance Advisory Council. One of its members, Carol Hinderaker of Watertown, said the numbers in the report indicate that surcharges might kick in again in first quarter 2011.

Other council members and state Labor Secretary Pam Roberts agreed with Hinderaker’s observation. Roberts cautioned that Labor’s projections are based on conditions as of June 22.

What Labor’s forecast shows is the UI system will go broke this winter and need at least $6.6 million to get through December. Then it will fall $9 million deeper into the hole during the first quarter of 2010, as the surcharge revenue begins to flow in.

South Dakota can borrow from the federal unemployment trust fund on a zero-interest basis through 2010. The anticipated $15.6 million of loans would need to be repaid by the end of 2010 in order to avoid paying interest.

The council members formally voted Thursday to re-consider their earlier position. They will now take a new look at whether to pursue an additional $11.7 million available in one-time federal supplements.

South Dakota would need to expand some of its unemployment benefits, based on choices from a federal menu, in order to qualify.

More information and projections will be presented at the council’s next meeting Aug. 20. The changes would need legislative action and likely will spark a debate about whether it’s better to accept the $11.7 million and face paying more in benefits for an indefinite period of years.

Roberts said Gov. Mike Rounds wants to hear from the council about how to proceed. “It’s very important we come to some conclusions with recommendations,” she said.

Labor’s current forecast for the remainder of 2009 shows the UI system receiving $25.3 million from normal payments and interest this calendar year, plus a one-time federal supplement of $5.9 million.

Meanwhile benefits paid out in 2009 are predicted to reach $62.7 million, according to the same analysis.

For the third week of June, there were 5,839 unemployment claimants. They received $1,579,793 in benefits.

In comparison, there were 1,452 claimants for the similar week in 2008. They received $329,120 in benefits.

Labor’s 2010 analysis indicates the state UI system would finish with a balance of $16.1 million on Dec. 31, 2010, assuming surcharges of $36.1 million, normal payments and interest of $26.5 million, the $15.6 million federal loan repayment and $39.9 million in benefits paid.