2 conditions should precede loan request

To the Contrary

December 27, 2008 

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 the same.

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 -- 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 nonpartisan 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 such as 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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Mark Sanford is serving his second term as governor of South Carolina.

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