1 South Dakota Retailers Association

2 South Dakota’s Job Loss December 2007: National recession hits U.S. U.S. Unemployment Rate: 4.9% S.D. Unemployment Rate: 2.7% Workforce 2025 Focus – finding workers October 2008: National recession impacts S.D. U.S. Unemployment Rate: 6.6% S.D. Unemployment Rate: 3.2% Hiring stops; layoffs begin October 2009: Impact continues in S.D. U.S. Unemployment Rate: 9.8% (September 2009) S.D. Unemployment Rate: 4.8% (September 2009) Layoffs continue; hiring minimal

3 South Dakota Workers Affected 2nd Week October nd Week October 2009 UI Claimants 1,3764,755 Amount of Benefits Paid $319,762$1,296,543 Job Openings 14,0006,800 Job Seekers 14,10021,400

4 Weekly Unemployment Benefit Trends

5 SD Workforce Changes South Dakota Nonfarm Wage and Salaried Workers (seasonally adjusted) Nonfarm Wage and Salaried WorkersSeptember 2008September 2009 Change Percent Change Total Nonfarm412,200404,300-7, % Mining, Logging & Construction23,30021,900-1, % Manufacturing42,90037,300-5, % Wholesale Trade18,80018, % Retail Trade50,50049,400-1, % Transportation and Utilities13,10012, % Information6,9006, % Financial Activities31,00030, % Professional & Business Services28,20026,800-1, % Educational & Health Services62,20063,5001,3002.1% Leisure & Hospitality43, % Other Services15, % Government76,20077,9001,7002.2%

6 UI Trust Fund YearTotal IncomeBenefitsTrust Fund Unemployment Insurance Totals (in millions) 2009* *Projected

7 ARRA Stimulus Provisions Provides funds to State Trust Funds to pay more workers Option 1: Alternative Base Period ($5.9 million) Must implement Option 1 to be eligible for Option 2 Option 2: Expand Eligibility ($11.7 million)

8 Alternative Base Period Base Period: First 4 of last 5 completed quarters Base Period If claim is filed in: Alternative Base Period Base period changes every quarter Eligibility requires earnings in 2 base period quarters Alternative Base Period: Last 4 completed quarters OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP JAN FEB MAR

9 Alternative Base Period Implemented July 2009 Estimated 730 workers would become monetarily eligible (equivalent of 61 per month) Actual alternative base period claims: July 2009 = 52 August 2009 = 37 September 2009 = 52

10 UI Trust Fund Projection * ** * Surcharge will trigger 9/30/09 for 4 th Quarter employer payments due 1/31/10. (1.5% on first $9,500 wage base = $142.50) ** Trust Fund balance goes negative; federal loans available at 0% interest thru Surcharge will again trigger 12/31/09 for 1 st Quarter employer payments due 4/30/10. (1.5% on $10,000 wage base = $150) 1st Qtr2nd Qtr3rd Qtr4th QtrTotal 2009 Contributions/Interest In$2.9$13.0$6.2$3.7$25.8 Stimulus Revenue In$5.9 Benefits Out$20.3$17.8$12.5$14.3$64.9 Trust Fund$8.9$8.8$2.8*-$7.8**-$7.8 UI Financial Projections - Quarterly Summary (in Millions)

Surcharge Example $9,500 Wage Base Employee A: Full Time/$40,000 annual salary Wages Paid per Quarter: Surcharge Effective 4 th Quarter Base Wage of $0 x 1.5% = $0 Surcharge 1 st 2 nd 3 rd 4 th Base Wage $9, Excess Wage $500$10,000

Surcharge Example $9,500 Wage Base Employee B: Part Time/$10,000 annual salary Wages Paid per Quarter: Surcharge Effective 4 th Quarter Base Wage of $2,000 x 1.5% = $30 Surcharge 1 st 2 nd 3 rd 4 th Base Wage $2,500 $2,000 Excess Wage 000$500

13 UI Trust Fund Projection * 4 th Quarter 2009 Employer Payments ** Trust Fund deficit covered by federal borrowing as needed. Surcharge will trigger again 3/31/10 for 2 nd Quarter employer payments due 7/31/10. (1.5% on $10,000 wage base = $150) *** Surcharge will not trigger for 3rd Quarter employer payments; balance will be over $16.5 million. 1st Qtr2nd Qtr3rd Qtr4th QtrTotal 2010 Contributions/Interest In$2.7$13.0$6.2$4.1$26.0 Surcharge In $3.5*$23.3$9.3$36.1 Benefits Out$15.3$10.4$6.3$8.0$40.0 Federal Repayment Out$16.9 Trust Fund-$9.0**$26.0***$18.3$14.4 UI Financial Projections - Quarterly Summary (in Millions)

Surcharge Example $10,000 Wage Base Employee A: Full Time/$40,000 annual salary Wages Paid per Quarter: Surcharge Effective 1 st Quarter Base Wages of $10,000 x 1.5% = $150 2 nd Quarter Base Wages of $0 x 1.5% = $0 1 st 2 nd 3 rd 4 th Base Wage $10, Excess Wage 0$10,000

Surcharge Example $10,000 Wage Base Employee B: Part Time/$10,000 annual salary Wages Paid per Quarter: Surcharge Effective 1 st 2 nd 3 rd 4 th Base Wage $2,500 Excess Wage 0000 Surcharge Due: 1 st Quarter – $2,500 x 1.5% = $ nd Quarter – $2,500 x 1.5% = $ rd Quarter – Surcharge Removed TOTAL PAID = $75

16 Consequences 1.Surcharge will trigger 9/30/09. 4 th Quarter employer payments due 1/31/10 (1.5% on first $9,500 wage base = $142.50) Revenue raised: $3,531,000 2.Trust Fund balance goes negative. Federal loans available at 0% interest thru Surcharge will again trigger 12/31/09 and 3/31/10 All employer payments due 4/30/10 and 7/31/10 (1.5% on $10,000 wage base = $150) Revenue raised: $32,606,000 4.Additional $11.7 million in stimulus funds available if benefits are expanded by 2010 Legislature.

17 UI Trust Fund Projection * Surcharge will trigger 3/31/11 for 2 nd Quarter payments due 7/31/11 (1.5% on $10,000 = $150). ** Surcharge will trigger again on 3/31/11for 3 rd Quarter payments due 10/31/11 (.1% on $10,000 wage base = $10) because the balance has not reached $16.5 million. * 1st Qtr2nd Qtr3rd Qtr4th QtrTotal 2011 Contributions/Interest In$3.1$14.2$6.8$4.5$28.6 Surcharge In $9.7$0.4$10.1 Benefits Out$12.3$8.1$5.1$7.0$32.5 Trust Fund$5.2*$11.3**$22.7$20.6 UI Financial Projections - Quarterly Summary (in Millions)

18 UI Recovery Act Provisions Option 2: Expand Eligibility ($11.7 million) Part-time Workers Dependents Allowance Quit for Compelling Family Reasons Benefits for Training

19 Benefits for Training UI exhaustees participating in state- approved or WIA-funded training programs receive additional payment of 26 weeks. Projected Annual Cost: $800,000

20 UI Trust Fund Projection – If Legislature Passes Modernization Option 2 1st Qtr2nd Qtr3rd Qtr4th QtrTotal 2010 Contributions/Interest In$2.7$13.0$6.2$4.3$26.2 Stimulus Revenue In $11.7 Surcharge In $3.5$23.3$9.3$36.1 Benefits Out$15.3$10.4$6.6$8.3$40.6 Federal Repayment Out $16.9 Trust Fund *-$9.0$26.0$29.8$25.7 1st Qtr2nd Qtr3rd Qtr4th QtrTotal 2011 Contributions/Interest In$3.2$14.4$6.9$4.5$29.0 Benefits Out$12.6$8.4$5.4$7.3$33.7 Trust Fund$16.3$22.2$23.7$20.9 * Trust Fund Difference Covered by Federal Borrowing as Needed UI Financial Projections - Quarterly Summary (in Millions)

21 UI Advisory Council Recommendations 1. Pass UI modernization legislation in Study the entire UI tax system for 2011 Legislature

22 South Dakota Retailers Association Discussion