Bill adjusting unemployment assistance taxes unanimously passes committee

Legislation proposing a higher tax on employers to cover administrative expenses of the state’s unemployment assistance program passed a legislative committee with a unanimous vote Tuesday at the Capitol in Pierre.

The bill would also lower a tax used to fund the program’s payouts to the unemployed.

South Dakota’s Reemployment Assistance program acts as a safety net for laid-off workers. Payroll taxes from employers help support the trust fund to cover unemployment claims. Payroll taxes also go toward the administration of the program and toward the Future Fund, which is used by the governor for economic development grants.

The increase in the administrative portion of the taxes is needed, according to state Department of Labor and Regulation Secretary Marcia Hultman. The administration fund is projected to fall into the red in coming years due to state employee salary increases passed by the Legislature, inflation and other expenses. That would jeopardize the program, she said.

The “modest increase,” Hultman said, triples the portion of taxes known as the “administrative fee” to raise a collective $3 million, while simultaneously reducing taxes paid to the unemployment trust fund by $3 million to be “revenue neutral.”

No opponents spoke against the bill during its appearance in the Senate Commerce and Energy Committee on Tuesday. Representatives of business organizations testified in support, though some previously expressed concern that it could disproportionately affect small retailers based on the tax rate change.

“This bill is irksome, irritating, annoying and objectionable, and we support it,” said South Dakota Chamber of Commerce and Industry President David Owen, praising Hultman for her work as secretary. “This is a program that stands on its own, and we support her, we support her staff and we support this bill.”

Owen is also a member of the state Reemployment Assistance Advisory Council.

The bill now heads to the Senate floor.