PIERRE, S.D. (KELO) — Thousands of South Dakota businesses could see their state re-employment taxes reduced by an estimated $18 million next year.

The state Reemployment Assistance Advisory Council recommended the package of tax cuts and related changes Monday.

The South Dakota Legislature will consider the proposal in the 2023 session that opens January 10.

The package results from a projected record balance of $195.8 million in the state re-employment trust fund that the South Dakota Department of Labor and Regulation administers. The fund would have an estimated balance of about $209 million at the end of 2023 without the new tax schedule.

“For once I’m excited to go to the Capitol with R-A legislation,” state Labor Secretary Marcia Hultman told council members and representatives from South Dakota’s business community taking part on the conference call. “I don’t know if that’s always been the case.”

The fund has brought in amounts ranging from $31.9 million to $45.9 million in normal years during the past decade. The $18 million of savings would last for some time, according to Hultman.

“I don’t want to jinx it, but I think this puts us in a really good place for years to come,” Hultman said. “It won’t be just a one-year savings for employers, but ongoing savings.” 

Pauline Heier oversees the re-employment trust fund. She said benefits paid out will probably total $22.2 million for calendar year 2022. That would be the smallest amount since at least 2013.

“Our claim volume has been significantly lower than it has been in a few years,” Heier said.

The large balance is partially a result of that — and South Dakota’s unemployment rate of 2.4% for November, compared to 3.7% nationwide.

Another reason was $88.6 million of federal CARES Act funding that South Dakota received for its trust fund, in response to the COVID-19 pandemic that began in 2020. The CARES funding bumped the ending balance up from $117.7 million at the end of 2020 to a record $170.8 million at the close of 2021.

Council members voted 7-0 to include the package as part of their annual report to the governor and the Legislature. Among those voting for it was former Labor Secretary Pam Roberts of Pierre.

Another former Labor secretary, Julie Johnson of Mina, is a long-time lobbyist whose clients include the South Dakota Society for Human Resource Management. Johnson said it will be a “communications challenge” to share the recommendation with the small-business community.

“Anything you can do to help us with that would be great,” Johnson said. 

Hultman said they will work together “so there is limited confusion.”

One of the council’s members, lawyer Rob Anderson of Pierre, took the historical perspective of South Dakota’s last significant recession that led to changes at that time. He said the situation in 2008-2009 would have been “much more manageable” had the proposal been in place. 

Several other council members praised the proposal. South Dakota Chamber of Commerce and Industry president David Owen called it “a significant improvement.” Nathan Sanderson, executive director for the South Dakota Retailers Association, described it as “awesome.”

For more on who’s affected and who’s not, check out South Dakota’s Reemployment Assistance Employers Handbook. And there’s more here on South Dakota’s reemployment laws and rules