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

Talks resume at Statehouse after brief impasse

March 9, 2010

Negotiations on some major issues resumed in the Indiana General Assembly on Monday after a meltdown occurred last week between Democrats who control the House and Republicans who rule the Senate.

Senate Republicans offered a compromise Monday on legislation to delay increases in taxes businesses pay into the state's unemployment insurance fund. The proposed compromise includes some job-creation provisions sought by House Democrats; however, the Republicans rejected harsher penalties that Democrats wanted for businesses who classify workers as independent contractors to avoid paying unemployment taxes.

The Republicans' proposal would require the Labor Department to develop new guidelines for classifying workers for tax purposes. But Rep. David Niezgodski, D-South Bend, said that wasn't enough. He said a true crackdown on companies that cheat is needed.

He and other House Democrats also said the proposal fell short on job-creation efforts through tax breaks and other incentives.

"We believe we need more strength," Niezgodski said.

Talks on those issues—as well as funding flexibility for schools to help offset $300 million in budget cuts—broke off last Thursday, when lawmakers had hoped to finish business and adjourn days before a March 14 deadline set by law for ending the session.

But House Speaker Patrick Bauer, D-South Bend, surprisingly put the House in recess until Wednesday, saying Senate Republicans weren't negotiating in good faith. The move outraged Republicans, especially Senate President Pro Tem David Long of Fort Wayne, and the full Senate met Friday and Monday.

Some House Democrats met in House-Senate conference committees Monday, but the full chamber remained in recess.

Long said Monday that he had talked to Bauer and they had agreed to keep communicating.

"It's water under the bridge," Long said. "Our goal is to get our business completed as soon as possible and move on."

Possibly the biggest sticking point is unemployment insurance.

House Democrats and Senate Republicans approved legislation last year that would raise unemployment insurance taxes on employers beginning next month. The increase was intended to start shoring up an unemployment insurance fund that has borrowed $1.6 billion from the federal government to remain solvent.

But Republicans now want to delay it for one or two years, saying the increase would force employers to lay off workers in a still-struggling economy.

House Democrats want several things in return, including the harsher penalties on companies that cheat the system. They also want to expand eligibility for jobless benefits in order to draw $148 million in federal stimulus dollars for the unemployment fund.

But Republicans say the federal money would only last about two years, but the expanded eligibility would remain and cost the unemployment fund tens of millions of dollars annually.

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