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South Dakota Retailers

Association

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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

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South Dakota Workers Affected

2nd Week October 2008

2nd Week October 2009

UI Claimants 1,376 4,755

Amount of Benefits Paid

$319,762 $1,296,543

Job Openings 14,000 6,800

Job Seekers 14,100 21,400

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Weekly Unemployment Benefit Trends

Weekly UI Trust Fund Payments (October- October)

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

Mil

lio

ns

2008-2009 2007-2008

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SD Workforce Changes

South Dakota Nonfarm Wage and Salaried Workers (seasonally adjusted)

Nonfarm Wage and Salaried Workers September 2008 September 2009Change 2008-09

Percent Change 2008-09

Total Nonfarm 412,200 404,300 -7,900 -1.9%

Mining, Logging & Construction 23,300 21,900 -1,400 -6.0%

Manufacturing 42,900 37,300 -5,600 -13.1%

Wholesale Trade 18,800 18,500 -300 -1.6%

Retail Trade 50,500 49,400 -1,100 -2.2%

Transportation and Utilities 13,100 12,900 -200 -1.5%

Information 6,900 6,700 -200 -2.9%

Financial Activities 31,000 30,300 -700 -2.3%

Professional & Business Services 28,200 26,800 -1,400 -5.0%

Educational & Health Services 62,200 63,500 1,300 2.1%

Leisure & Hospitality 43,200 43,200 0 0.0%

Other Services 15,900 15,900 0 0.0%

Government 76,200 77,900 1,700 2.2%

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UI Trust Fund

Year Total Income Benefits Trust Fund

1999 15.8 15.1 48.72000 17.5 15.2 51.12001 16.9 22.8 45.12002 17.0 29.8 51.22003 17.5 31.0 37.42004 18.0 28.1 27.32005 18.9 25.8 20.42006 19.5 20.8 19.32007 26.3 20.8 24.12008 26.5 25.1 25.5

Unemployment Insurance Totals(in millions)

2009* 25.8 64.9 -7.8

*Projected

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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)

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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 quarterEligibility 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

JAN FEB MAR

APR MAY JUN

JUL AUG SEP

OCT NOV DEC

JAN FEB MAR

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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

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UI Trust Fund Projection - 2009

* **

* Surcharge will trigger 9/30/09 for 4th 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 2010. Surcharge will again trigger 12/31/09 for 1st Quarter employer payments due 4/30/10. (1.5% on $10,000 wage base = $150)

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total

2009

Contributions/Interest In $2.9 $13.0 $6.2 $3.7 $25.8

Stimulus Revenue In $5.9 $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)

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2009 Surcharge Example$9,500 Wage Base

Employee A: Full Time/$40,000 annual salaryWages Paid per Quarter:

Surcharge Effective

4th Quarter Base Wage of $0 x 1.5% = $0 Surcharge

1st 2nd 3rd 4th

Base Wage

$9,500 0 0 0

Excess Wage

$500 $10,000

$10,000

$10,000

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2009 Surcharge Example$9,500 Wage Base

Employee B: Part Time/$10,000 annual salaryWages Paid per Quarter:

Surcharge Effective

4th Quarter Base Wage of $2,000 x 1.5% = $30 Surcharge

1st 2nd 3rd 4th

Base Wage

$2,500 $2,500 $2,500 $2,000

Excess Wage

0 0 0 $500

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UI Trust Fund Projection - 2010

* 4th Quarter 2009 Employer Payments

** Trust Fund deficit covered by federal borrowing as needed. Surcharge will trigger again 3/31/10 for 2nd 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 Qtr 2nd Qtr 3rd Qtr 4th Qtr Total

2010Contributions/Interest In $2.7 $13.0 $6.2 $4.1 $26.0Surcharge In $3.5* $23.3 $9.3 $36.1Benefits Out $15.3 $10.4 $6.3 $8.0 $40.0Federal Repayment Out $16.9 $16.9

Trust Fund -$9.0** $26.0*** $18.3 $14.4 $14.4

UI Financial Projections - Quarterly Summary(in Millions)

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2010 Surcharge Example$10,000 Wage Base

Employee A: Full Time/$40,000 annual salaryWages Paid per Quarter:

Surcharge Effective

1st Quarter Base Wages of $10,000 x 1.5% = $1502nd Quarter Base Wages of $0 x 1.5% = $0

1st 2nd 3rd 4th

Base Wage

$10,000

0 0 0

Excess Wage

0 $10,000

$10,000

$10,000

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2010 Surcharge Example$10,000 Wage Base

Employee B: Part Time/$10,000 annual salaryWages Paid per Quarter:Surcharge Effective

1st 2nd 3rd 4th

Base Wage

$2,500 $2,500 $2,500 $2,500

Excess Wage

0 0 0 0

Surcharge Due:1st Quarter – $2,500 x 1.5% = $37.502nd Quarter – $2,500 x 1.5% = $37.503rd Quarter – Surcharge Removed TOTAL PAID = $75

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Consequences

1. Surcharge will trigger 9/30/09.4th 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 2010

3. Surcharge will again trigger 12/31/09 and 3/31/10All 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.

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UI Trust Fund Projection - 2011

* Surcharge will trigger 3/31/11 for 2nd Quarter payments due 7/31/11 (1.5% on $10,000 = $150).

** Surcharge will trigger again on 3/31/11for 3rd Quarter payments due 10/31/11 (.1% on $10,000 wage base = $10) because the balance has not reached $16.5 million.

*

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total

2011Contributions/Interest In $3.1 $14.2 $6.8 $4.5 $28.6

Surcharge In $9.7 $0.4 $10.1Benefits Out $12.3 $8.1 $5.1 $7.0 $32.5

Trust Fund $5.2* $11.3** $22.7 $20.6 $20.6

UI Financial Projections - Quarterly Summary(in Millions)

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UI Recovery Act ProvisionsOption 2: Expand Eligibility ($11.7 million)

• Part-time Workers• Dependents Allowance• Quit for Compelling Family Reasons• Benefits for Training

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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

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UI Trust Fund Projection – If Legislature Passes Modernization Option 2

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total

2010Contributions/Interest In $2.7 $13.0 $6.2 $4.3 $26.2

Stimulus Revenue In $11.7 $11.7Surcharge 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 $16.9

Trust Fund * -$9.0 $26.0 $29.8 $25.7 $25.7

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total

2011Contributions/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 $20.9

* Trust Fund Difference Covered by Federal Borrowing as Needed

UI Financial Projections - Quarterly Summary(in Millions)

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UI Advisory Council Recommendations

1. Pass UI modernization legislation in 20102. Study the entire UI tax system for 2011 Legislature

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South Dakota Retailers Association

• Discussion