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Indiana moving ahead with plan to fix jobless fund

February 10, 2011

Legislators aren't holding up a plan to fix Indiana's debt-ridden unemployment insurance fund as they wait to see whether the federal government will put off charging the states interest on what they owe.

The state Senate's tax committee voted 8-4 Thursday along party lines to advance a Republican proposal that would reduce jobless benefits for many recipients and soften tax increases on businesses in order to start paying off the $2 billion that Indiana has borrowed from the federal government.

The Obama administration this week proposed that Congress grant a two-year delay in charging states interest on unemployment fund debts with a plan under which employers could face higher taxes in 2014.

Indiana expects to owe about $80 million in interest this year, but Republican Gov. Mitch Daniels didn't seem interested in the interest delay.

"Not on the terms I've seen so far," Daniels told reporters Thursday. "It is another one of these short-term goodies, long-term cost things like they've proposed before. I don't think it's very attractive."

The plan backed by Daniels reduces business tax increases approved in 2009 that are taking effect this year. It also would revise how jobless benefits are calculated starting in July 2012 — a change estimated to mean a 25-percent reduction in the state's unemployment payments.

Mark Everson, commissioner of the Department of Workforce Development, told the committee that holding off on approving the changes would mean businesses paying millions more in extra taxes due this spring.

"It is irresponsible to take decisions or act based on what has already met with some skepticism," he said of the Obama proposal. "We haven't even seen the details.

Under the bill already approved by the House, the top payment to unemployed workers would stay at $390 a week. However, the method of calculating payments would now be based on total annual earnings rather than earnings during the highest-paid three months in the previous year.

That would, for instance, reduce payments to those in seasonal jobs, such as construction workers. Labor leaders estimate the average weekly payment would drop by about $70, to $212.

Everson said a delay in enacting the changes could upset a compromise that has employers shouldering about two-thirds of the burden of paying off the fund's debt.

State AFL-CIO President Nancy Guyott told the committee that the revised formula would leave Indiana with one of the worst unemployment benefits in the country and leave many struggling families unable to pay their bills and buy necessities.

"I ask you to be mindful of the real pain this bill could cause," she said.

Sen. Karen Tallian, D-Portage, said the bill's provisions were based on an unnecessary goal set by Republicans of paying off the debt by 2020.

The Legislature's session isn't yet at its halfway point, but the bill's Senate sponsor Phil Boots, R-Crawfordsville, said lawmakers needed to get the changes approved quickly so that businesses can know how much they'll owe on tax bills due in April.

"As soon as we can get them out, it will mitigate their concerns somewhat," Boots said.

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