State Government and Taxes and Unemployment Taxes and Government & Economic Development and Government

House panel OKs delay in unemployment tax hike

February 17, 2010

An Indiana House committee endorsed legislation Wednesday that would delay for one year increases in taxes that employers pay into the state's bankrupt unemployment insurance fund.

But the Democrat-controlled House's Labor and Employment Committee made changes to the bill that was previously passed by the Republican-controlled Senate. They would expand the number of people eligible for benefits and allow the state to collect nearly $148 million in federal stimulus dollars for the insurance fund.

The changes also could raise the maximum weekly benefit that the jobless can receive. State law now caps the maximum at $390 per week, but under the amended bill, benefits would be tied to a formula based on the average weekly wage in Indiana for the previous year. If it goes up as projected, the maximum on benefits would go up.

Democrats said the bill would help employers and the jobless, but Republicans said the extended benefits would put more financial pressure on the bankrupt unemployment fund. The changes were approved on a 7-4 party line vote, and then the overall bill passed 7-2 and was sent to the full House.

Republicans have sought the one-year delay in the tax increase, saying it could cost employers up to $360 million this year and cause layoffs in a still struggling economy.

Democrats have said the tax increase was meant to start shoring up the unemployment insurance fund, which already has borrowed $1.6 billion from the federal government to remain solvent. In order to go along with a delay in the tax increase, House Democrats insisted on the additional benefits for the jobless.

"It is prudent to try to help businesses the best we can, but we needed to try to do something for the workers also," said Democratic Rep. David Niezgodski of South Bend, chairman of the House Labor Committee.

"These dollars that you put into the unemployed's pockets, not one dime of it is going into the bank," he said. "They're going to be going for groceries, medicine, clothes."

The state has to choose among certain options for getting the $148 million in stimulus money. Two of them that House Democrats chose would allow people who need to take care of a relative's illness or disability to get benefits, as well as those who are unemployed but making progress in state-approved job training programs.

Republican Gov. Mitch Daniels' administration opposes taking the federal stimulus dollars for unemployment insurance, because once they run out, the extra eligibility standards would remain and have to be paid by the state fund.

Officials with the Department of Workforce Development said the stimulus dollars would run out in two to four years. After that, the extended eligibility standards would cost the fund $80 million annually. The department said the higher maximum benefits could cost up to $43 million a year.

"This (amended) bill puts more burden on an insolvent fund," said Rep. Matt Bell, R-Avilla.

Two Republicans stormed out of the committee before a vote on the overall bill was taken.

Eighteen states have not enacted changes to qualify for unemployment insurance stimulus money, according to the employment advocacy group National Employment Law Project.

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