1. 1 South Dakota Retailers Association

2. 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. 3 South Dakota Workers Affected 2nd Week October 2008 2nd 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. 4 Weekly Unemployment Benefit Trends

5. 5 SD Workforce Changes South Dakota Nonfarm Wage and Salaried Workers (seasonally adjusted) Nonfarm Wage and Salaried WorkersSeptember 2008September 2009 Change 2008-09 Percent Change 2008-09 Total Nonfarm412,200404,300-7,900-1.9% Mining, Logging & Construction23,30021,900-1,400-6.0% Manufacturing42,90037,300-5,600-13.1% Wholesale Trade18,80018,500-300-1.6% Retail Trade50,50049,400-1,100-2.2% Transportation and Utilities13,10012,900-200-1.5% Information6,9006,700-200-2.9% Financial Activities31,00030,300-700-2.3% Professional & Business Services28,20026,800-1,400-5.0% Educational & Health Services62,20063,5001,3002.1% Leisure & Hospitality43,200 00.0% Other Services15,900 00.0% Government76,20077,9001,7002.2%

6. 6 UI Trust Fund YearTotal IncomeBenefitsTrust Fund 1999 15.815.148.7 2000 17.515.251.1 200116.922.845.1 2002 17.029.851.2 2003 17.531.037.4 2004 18.028.127.3 2005 18.925.820.4 2006 19.520.819.3 2007 26.320.824.1 2008 26.525.125.5 Unemployment Insurance Totals (in millions) 2009*25.864.9 -7.8 *Projected

7. 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. 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. 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. 10 UI Trust Fund Projection - 2009 * ** * 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 2010. 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)

11. 11 2009 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 $9,500000 Excess Wage $500$10,000

12. 12 2009 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. 13 UI Trust Fund Projection - 2010 * 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)

14. 14 2010 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 $10,000000 Excess Wage 0$10,000

15. 15 2010 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% = $37.50 2 nd Quarter – $2,500 x 1.5% = $37.50 3 rd Quarter – Surcharge Removed TOTAL PAID = $75

16. 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 2010 3.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. 17 UI Trust Fund Projection - 2011 * 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. 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. 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. 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. 21 UI Advisory Council Recommendations 1. Pass UI modernization legislation in 2010 2. Study the entire UI tax system for 2011 Legislature

22. 22 South Dakota Retailers Association Discussion