Gov. Kristi Noem signed the first bill of the legislative session Wednesday that will cut unemployment insurance employer contributions by 0.5%.
Noem said the bill, HB 1011, will deliver an $18 million tax cut for South Dakota businesses.
“South Dakota’s economy is booming, our unemployment rate is the lowest in our history, and our people are choosing to work,” Noem said. “So many new businesses are choosing to call our state home, and our existing businesses are thriving, so our unemployment reserves are stronger than ever. It’s time to put money back in the pockets of hardworking South Dakota business owners.”
To assess the solvency of the Unemployment Trust Fund, the state uses an average high-cost multiplier (AHCM). An AHCM of 1.0 means enough funds exist to cover a full year of benefits during a recession.
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Since 2016, employer tax rates have been based on the AHCM of the fund at the end of each fiscal year.
The bill Noem signed Wednesday reduces employer contribution rates by 0.5% when the balance in the Trust Fund at the end of the fiscal year is at or above an AHCM of 1.5.
The bill adjusts the trigger point for a surcharge, or additional tax, that employers must pay when the fund drops below $11 million. Previously, the trigger was tied tied to a dollar amount. Now the trigger is based on the AHCM ratio.
HB 1011 unanimously passed in the House of Representatives, but was opposed by three Democrats in the Senate. Sens. Liz Larson, Reynold Nesiba and Shawn Bordeaux voted against the measure.