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House passes measure fixing unemployment fund

January 31, 2011

The Indiana House approved a bill Monday to help fix the state's bankrupt unemployment insurance fund by reducing jobless benefits for some people and softening tax increases on businesses.

After impassioned debate over the plan, the Republican-led House voted 61-38 mostly along party lines for the plan, which now goes to the Republican-led Senate for consideration. Supporters said the bill was a fair way to fix Indiana's unemployment fund, which currently pays out millions of dollars more in jobless benefits than it takes in through employer taxes.

Bill sponsor Rep. Dan Leonard, R-Huntington, said the bill will repair the fund without putting companies out of business or drastically cutting unemployment checks for most out-of-work Hoosiers. He said businesses make up about two-thirds of the solution with the remaining third on workers.

"It is a balanced approach," he said.

Opponents and labor unions say the benefit reductions would unfairly hurt workers and push the unemployed further into poverty by reducing benefits for seasonal workers and others who they said needed the help from unemployment checks.

Maximum jobless benefits would remain at $390 a week under the bill, but the method of calculating payments would change. Currently, benefits are based on a worker's highest-paid quarter of a 12-month period. The new bill bases benefits on a worker's total wages over a year — a change that would hurt some employees like construction workers who earn more money during summer months than in winter.

Anyone making about $43,000 a year would get the maximum $390 a week under the plan. But Democrats who opposed the bill said the changes would leave plenty of out-of-work residents with smaller checks than they would get under the current system.

"It's not just about formulas," said Rep. Scott Pelath, D-Michigan City. "It's about people who are getting the short end of the stick from this economic system that we have right now."

Union members wearing red shirts watched the debate from the House balcony and applauded and cheered when Democrats complained that the bill would hurt workers. Republicans argued that if businesses took all the responsibility for balancing the state's unemployment fund, it would put companies out of business and leave more workers without jobs.

Republican Rebecca Kubacki, R-Syracuse, addressed the union members, telling them lawmakers aren't asking them to take a huge cut.

"What we're trying to do is solve a problem we have created ourselves," she said. "We all have to pitch in. We all have to make that sacrifice."

In addition to changing benefit calculations to an annual basis, the bill would change some eligibility rules. Workers in plants that have planned shutdowns for retooling would no longer be able to draw unemployment during the shutdowns. Workers who take lump-sum severance pay packages would not be immediately able to file for unemployment, and those who take voluntary buyout packages to leave their jobs would no longer be allowed to collect benefits.

Republicans said that businesses would also share the pain as the state works to turn around its unemployment fund, which has borrowed about $2 billion from the federal government to continue paying jobless benefits.

The legislation reduces business tax increases approved in 2009 that were slated to take effect this year after being delayed by legislators last year. Lawmakers are trying to pass the bill soon so that revised first-quarter tax bills can be sent to businesses. Revised bills based on the current proposal would be lower than the bills already sent out.

The bill also charges businesses a 13-percent surcharge on their unemployment taxes to help pay the interest on the state's loan from the federal government. The state expects to owe about $80 million in interest this year.

The fund wasn't always in trouble. In 2000, the state's unemployment fund had a surplus of $1.6 billion. But lawmakers raised benefit payments for the unemployed and lowered employer premiums, draining the account, and the recession compounded the problem.

Democratic Rep. Steve Stemler of Jeffersonville joined all 60 Republicans in voting for the bill, with the rest of the Democrats opposing the legislation. The bill is expected to get a warm reception in the Republican-controlled Senate, where Senate President Pro Tem David Long, R-Fort Wayne, has said senators will start working on the plan quickly.

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