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Unemployment Insurance Rate Reductions Pass House

HB 1097 - Revise certain unemployment insurance contribution rates, to provide for an unemployment insurance administrative fee, and to provide for the distribution of the fee.

This bill makes three changes in the Unemployment Insurance (UI) system; two of which will result in lower rates and one that will increase costs slightly.

Trust Fund Balance Linked to Rates.  In general, businesses with employees pay into a UI system that holds those funds and are to be paid out to people who have lost jobs through “no fault of their own”.  Each business has an account within the UI Trust Fund and the amount of UI premiums are determined by the balance of their account and their history of claims.  Businesses that have never had an employee file a claim for UI can actually earn a rate of “zero” and will not make any additional payments.

Businesses that are new or have not earned a zero rate pay a “premium” based on their claim experience or longevity as a part of the system. Rates start at 0.1% of employees’ wages for the first $15,000 per employee.  The rates continue to increase as claims grow.  The maximum rate that a business will pay to UI is 9.5% on a wage base of $15,000, or $1,425/employee. 

All business premium payments are kept in the UI Trust fund which currently has a balance of approximately $100 million dollars.  Key question – how much is enough?  Tough question, but one that is easier than the age old query about the number of angles on the head of pins.

Back to HB 1097.  The bill creates a measurement ratio using the balance of the fund, the total amount of wages covered by the UI system and the average claims payouts during the three largest recessions.  The largest payout ever was during the 2008-2010 recession when $68 million was paid out in 2009.  In a normal year, with a healthy economy, the UI fund pays out about $23 - $27 million.  This all leads to a ratio of 1.6 (it’s the same math that makes a $20 oil change cost $53).  Should this ratio exceed 1.6, the UI rates will be reduced.  If the ratio falls below 1.6, rates will be increased.  With $100 million in the bank right now, the ratio is exactly 1.6 percent. 

Rates Reduced.  Given the healthy Trust Fund balance, this bill also reduces rates by five hundredths of a percent (or 0.0005 x $15,000 = $7.50/employee).  This reduction is a permanent adjustment in the rates . . . at least until the next one.

New Fee.  As if too much good news might cause an outbreak of hives, the bill creates a new administrative fee that businesses will pay.  The fee is two hundredths of a percent (0.0002 x $15,000 = $3/Employee).  For those keeping score at home, the bill results in a decrease of $4.50/employee ($7.5 reduction and $3 increase) plus there will be a rate reduction triggered next year by the Trust Fund balance. 

Why a Fee?  The UI system’s employees have always been paid for by the Federal government using the Federal UI tax paid by all employers.  These funds have been reduced by US Department of Labor over the past several years.  The reduction in these funds has forced the State Department of Labor to reduce the UI staff from 90+ employees to about 65 employees.  These UI staff people have never been part of the State budget and their wages have never been paid by South Dakota taxpayers.  This fee raises some $700,000+ to avoid further reductions in staff.

Chamber Supports the Bill, Fee Included. The UI system is financially healthy, the decreased rates are a welcome move and the fee is a necessary part of keeping the system running well.  Department of Labor Secretary Hultman has done an excellent job dealing with the reduced funds from Washington and has cut the operation to the bone.  The Department needs the funds from the fee so that the UI division can function. The Chamber Board doesn’t love the fee, but accepts the necessity of it.  It’s like being at a family reunion and understanding everyone has to spend a little time with great Aunt Fanny – painful as it may be.   

Here is the vote on the floor of the House of Representatives that passed HB 1097. 
(Note – because this bill contains an ongoing appropriation, it needed a 2/3rds vote, which is 47 votes to pass.  It passed with 49 voting yes; 19 voting no; and 2 excused).

HB 1097, House, Do Pass

Two Employment Regulations Defeated
Required paid sick leave and accommodations for pregnancy/breastfeeding.

Two bills that were aimed at creating more regulations regarding sick leave and accommodations for employees who are pregnant or breastfeeding met with resistance in committees over the past several days.  The bills were:

SB 96 - Require a minimum amount of paid sick leave for employees. 

Required employers to offer one hour of paid sick leave for every thirty hours work.  The sick leave was allowed to be used for: Illness, injury, or health condition; medical diagnosis, care, or treatment for a mental or physical illness, injury, or health condition; or preventive medical care.  The employee may use the paid sick leave when the employee is a victim of domestic abuse or sexual violence for obtaining medical or psychological care, obtaining services from a victim services organization, relocation, or for participation in any civil or criminal legal proceeding.

Members of the Senate State Affairs Committee voted 6 to 2 to defer SB 96 to the 41^st legislative day, which effectively kills the bill.  Here is the vote:

SB 96, Senate State Affairs, Deferred to the 41st legislative day

HB 1120 - Create protections and accommodations for pregnant and breastfeeding mothers in their places of employment.

This bill was aimed at larger employers, ones with 50 or more employees, and was seeking to require reasonable accommodations for pregnant and breastfeeding employees.  Reasonable accommodations were in part defined as: more frequent or longer breaks, time off to recover from childbirth, adjustment of seating, temporary transfer to a less strenuous or hazardous position, job restructuring, private non-bathroom space for breastfeeding, assistance with manual labor, modified work schedules, or any other reasonable request directly related to pregnancy, childbirth, or a related condition. The employer shall engage in a timely and good faith process with the employee to determine effective accommodations. There were provisions that protected employers from facing accommodations that were too expensive or burdensome in the workplace.

Opponents, including the South Dakota Chamber of Commerce and Industry pointed out that employers with more than 50 employees face federal regulations that are similar and some of the terms were ambiguous.

The House Commerce and Energy Committee voted to defer HB 1120 to the 41^st legislative day, effectively killing it on a vote of 8 to 2 with several members excused.  Here is the vote on HB 1120:

HB 1120, House Commerce and Energy, Deferred to the 41st legislative day

Replacing IM 22
HB 1073 - Regulating Gifts from Lobbyists to Public Officials

One of the most discussed provisions of IM 22 was a limit on gifts for public officials.  The limit was $100 but the definition of “gift” included things that made the law unworkable, such as listing compensation from working for the state or other public entity.  This was an overreach that would have purged every retired public employee and anyone married or otherwise related to a public employee.

The other disabling provision of the initiative was including the expenses of gatherings such as social events during the session or even meetings with legislators during breaks if they included food.

HB 1120 keeps the $100 limit but makes it workable and enforceable.  It excludes food “for immediate consumption” (that costs less than $75) from the definition of a gift.  This allows citizen groups that travel all the way to Pierre, a trip equally inconvenient to most South Dakotans, the ability to share cocktail weenies and carrot sticks with their elected officials without fear of committing a misdemeanor.

Here is the language listing the items that are not included in the definition of a gift:

    For purposes of this Act, the term, gift, means anything of value, including any object, money, property, or service, that is given without compensation or remuneration. The term does not include:

            (1)    Anything of value for which the recipient paid an equal or greater value;

        (2)    Any contribution to a political committee that is regulated by the Federal Elections Commission or under chapter 12-27;

            (3)    Any service to assist a public official in the performance of official duties, including any cost to educate or inform the public official on matters of public policy; any advice, information, consultation, or communication regarding actual or proposed legislation; any service to constituents or to promote the economic development of the state;

            (4)    Any food or beverage provided for immediate consumption under seventy-five dollars per meal;

            (5)    Anything of value exchanged between immediate family members;

           (6)    The cost of admission to any state-owned facility or state-sponsored industry or event, if provided by the sponsoring state agency, political subdivision, or publicly funded institution;

        (7)    Anything of value received due to membership in a group, the majority of whose membership is not comprised of public officials, if the object or other thing of value is also given to other members of that group or to other members who also serve as officers or directors of that group; or

         (8)    Any scholarship, prize, or financial support awarded or supported by a principal for a program related to education, and widely available and generally awarded to qualifying members of the public, the majority of whom are not comprised of public officials or the immediate family of public officials

HB 1073 was approved by the House State Affairs Committee on a unanimous vote of 13-to-0.