PIERRE -- The panel that keeps an eye on the financial health of South Dakota's unemployment insurance system decided Monday that the recently troubled program should be allowed to continue accumulating money from business owners, until its balance of available funds reaches a target of $76 million.
The goal is to build a reserve that would be approximately 50 percent larger than at any point in the past decade, so that the cash on hand would be sufficient to weather a future recession as severe as the one experienced in South Dakota since 2009.
The reserves peaked at $51 million-plus heading into 2001 and again in 2003, but eventually all of that money was spent to pay unemployed benefits that were costing twice as much as the revenue coming in from employers.
The program eventually fell $7.7 million into debt by the end of 2009, causing the state Department of Labor to take a federal loan to get through.
An emergency surcharge and unemployment tax increases, both of which businesses paid, eventually brought the system back into financial balance.
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The system finished 2010 with an available balance of $26.1 million and that grew to $36.5 million through the end of 2011. Current projections indicate the balance should reach $52 million by the end of this year and climb to $71.9 million by the close of 2013.
State Labor Secretary Pam Roberts said those numbers are based on current conditions and are only estimates.
"We have no idea what will happen tomorrow," Roberts told members of the state unemployment insurance advisory council at their meeting Monday.
The panel voted to accept her department's recommendation that a $76 million target be set for the program's balance. No one suggested going higher.
"I'm comfortable with the course we're on," said Shawn Lyons, executive director for the South Dakota Retailers Association.
The council also reviewed the state laws regarding when the emergency surcharge is triggered.
That occurs when the trust fund's balance drops to $11 million or less at the end of any calendar quarter, and the surcharge stops after four consecutive calendar quarters and the trust fund balance is $16.5 million or higher.
The surcharge that was imposed starting in October 2009 was the first time a surcharge had become necessary in the history of South Dakota, according to Pauline Heier, director for the unemployment insurance program.
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It generated $27.7 million, she said.
She noted that the $11 million trigger amount was set in 1961 and hasn't been updated.
Council member David Owen, president for the South Dakota Chamber of Commerce and Industry, performed a quick calculation that found the trigger now would be a balance of $83.7 million if adjusted with inflation.
"I vote no," Owen said, pre-empting the question of whether the trigger should be raised to something higher than $11 million.
