Richard Eckstrom (l) and Bobby Harrell (r) The City of Columbia with its mismanagement and abject absence of generally accepted accounting principles is not alone. The State of South Carolina and its Employment Security Commission is guilty of the same. But while Columbia City Hall continues to wonder what went wrong, the State House is cleaning house, at least as far as the ESC is concerned.

One of 27 states

South Carolina is not alone. Another 26 cashstrapped states joined South Carolina and borrowed $31 billion from the federal government over the past two years to cover their unemployed workers’ benefit checks. South Carolina needs to repay its debt, but some states, according to

Charleston’s Post and Courier,

are holding out hope the federal government might forgive the loans. South Carolina is yet to put together a plan to pay back the federal government while it continues to borrow.

For all of 2010, assuming the current 12.6 percent unemployment stays roughly where it is for the year, the state’s debt to the federal government is expected to grow from $800 million to $1.28 billion by Dec. 31.

Across the country, 130 million workers meet the eligibility requirements should they get laid off.

U.S. House Majority Whip Jim Clyburn, D–S.C., says he and other Congressmen are looking at the issue from different study angles, trying to come up with a plan that might include federal forgiveness of some or all of the debt.

Meanwhile, the state’s Employment Security Commission, which oversees the Unemployment Insurance Trust Fund, is under attack for mismanagement, making an unplanned mess out of an already uncertain situation. The state fund had about $835 million in 2000, but the fund was broke at the end of 2008. As early as 2004, state lawmakers were warned the trust fund was losing $155 million a year.

Samuel Foster is the interim executive director of the Employment Security Employment Commission. The state’s Legislative Audit Council says it found gross mismanagement by Foster’s commission. The council released its thorough review on the commission last month.

Foster responded to the release of the review by suggesting most of the problem could be attributed to the recession.

Besides the repayment, there’s something approaching $350 million in interest the state needs to pay, and the unemployment fund must be replenished. To reconsider the replenishment, the rate companies pay into it per employee is likely to increase. For now, companies pay into the fund between $87 and $427 a year per employee, based on a formula of several complicated variables. Replenishment needs to leave the trust fund with maybe $1.4 billion as a safe total in case of future failings in the economy or natural disasters that put thousands out of work.

Combining the federal debt, the fund’s replenishment, and the projected interest, South Carolina is handling a funding problem approaching $3 billion.

Speaker Harrell

On Wednesday, February 17, the South Carolina House of Representatives passed a major Employment Security Commission reform bill – H. 3442 – by a vote of 108–1. The House voted to create a new Department of Workforce, combining ESC duties with the Workforce Investment Act and connecting with the Commerce Department. House Speaker Bobby Harrell said about the passage of the bill:

“The gross mismanagement, total lack of oversight and complete failures in accountability at the ESC will come to an end under the reform laws that the House overwhelmingly passed today. It is our goal to change the ESC from a check writing agency to the job placement agency our state needs. For far too long, job placement has taken a back seat to simply throwing more money at our employment problems — today that changes.

“The problems at the ESC were severe and well documented. The recent LAC audit of this broken government agency revealed a recurring pattern of huge failures over the past decade.

“For a government to knowingly fail on this grand of a scale is completely unacceptable. Since 2000, the ESC has lost taxpayer money at a rate of $600,000 per day, but failed to alert anyone to this problem. Ignoring multiple state laws requiring notification, the ESC just watched as its Unemployment Trust Fund plummeted from an $835 million surplus to a near $800 million deficit.

“By reforming and restructuring the ESC into a Department of Workforce, our state’s employment agency will now work jointly with our job creation agencies putting our citizens back to work. Today, we made the necessary changes that will bring much needed oversight and accountability to this broken agency. Our state’s unemployed will now have a more responsive and more effective job placement agency working for them.”

S.C. Chamber of Commerce

The S.C. Chamber of Commerce did not agree with Samuel Foster, the ESC’s executive director, so the state chamber failed to find any excuses in the recession. The chamber lay the blame directly on Foster and his three appointed commissioners, all who should step down, as chamber CEO Otis Rawl put it.

The three appointed board members are McKinley Washington Jr. of Ravenel, J. William McLeod of Columbia, chairman, and Becky Richardson of Columbia.

Comptroller General Eckstrom

On Tuesday, February 9, South Carolina Comptroller General Richard Eckstrom called on the U. S. Inspector General’s office and the Federal Bureau of Investigation to look into the irregularities in the ESC’s accounting for stimulus funds used to pay federal extended benefits. A year before, Eckstrom had warned the ESC to properly encode the stimulus money, avoiding waste and abuse.

When Eckstrom inquired at the ESC about federal stimulus money, which was after he had contacted the U.S. Inspector General’s office and the FBI, the agency then disclosed it had received $688 million, previously not properly recorded.

In a release to the press on Friday, February 12, Eckstrom said:

“Most disappointing, I learned that this agency, which annually handles billions of dollars of public money, hasn’t had a certified public accountant in its accounting department for more than 20 years... The list of shortcomings that recently have been uncovered — like failing for months to send the IRS millions in taxes it had withheld from benefit checks — are far too numerous to list here, but the most troubling failure to me was its mishandling of stimulus funds. The agency improperly recorded federal stimulus funds it received from Washington, making it impossible for the State to track that money and disclose how it was being spent... Fortunately, the Employment Security Commission’s blunders offer the strongest case yet for putting that agency under the control of the governor...”

The City of Columbia has no comptroller general. It has, though, an unfilled position of chief financial officer. Bill Ellis, certified public accountant and the city’s deputy CFO, is pulling the city out of its accounting shortcomings. To close out the 2009 budget year and complete the audit, Columbia City Council last week voted unanimously to take an almost $700,000 loss on a city experiment in strip center development in Eau Claire.