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Senate approves revenue-neutral shift to fund unemployment program operations
Summary
The South Dakota Senate passed Senate Bill 26, which reduces employer contribution rates to the Unemployment Insurance Trust Fund while increasing the program's administrative fee by an equal amount to cover operations; sponsors said the change preserves federal tax credits and avoids staff cuts.
Senators passed Senate Bill 26 on a two-thirds vote after sponsor remarks that the measure is revenue neutral and intended to sustain the state reemployment assistance program's operations.
The bill lowers employer taxes that fund benefit claims by $3 million and raises an administrative fee charged to employers by $3 million to cover program operations. Senator Vilhauer, speaking as sponsor, said funds deposited to the Unemployment Insurance Trust Fund may only be used to pay benefit claims under federal law, and therefore cannot be used to pay the division's operating costs. She warned that without the administrative fee, the department would need to cut staff from 76 to 51, risking loss of federal compliance that currently yields employers a reduced federal unemployment tax liability.
The nut of the bill, sponsors said, is to preserve South Dakota's compliance-based federal tax credit. Vilhauer explained that the federal credit reduces employers' federal unemployment tax liability from 6% to 0.6% on the taxable wage base (currently producing about $42 per employee under South Dakota practice); losing compliance could raise that to $420 per employee and increase businesses' annual liability by an estimated $183 million statewide.
Supporters noted committee backing from the Senate Commerce and Appropriations Committees. There were no recorded opposing floor remarks during final consideration.
The Senate adopted final passage by roll call, and the president declared the bill passed after a tally reported 34 yeas and 1 excused. The bill's title was deemed correct on voice vote.
The bill does not change the legally restricted purpose of the Unemployment Insurance Trust Fund (benefit payments only), nor does it appropriate trust-fund dollars for administration; it instead creates an ongoing administrative-fee revenue source.
