Gov. Mitch Daniels signed into law Thursday a plan aimed at fixing Indiana's debt-ridden unemployment fund that labor unions had opposed because it will reduce jobless benefits for some people while softening business tax increases.

Daniels signed the bill before reporters in his Statehouse office, calling it a balanced approach toward bringing the unemployment fund into balance and repaying $2 billion that's been borrowed from the federal government to pay benefits.

"Indiana had an upside-down system when we were at full employment," Daniels said. "It was going to have to be fixed sometime and that all was made dramatically worse by the recession."

The Republican-led House approved the bill Jan. 31, but House Democrats included it on their list of objectionable legislation that they said caused them to leave for Illinois on Tuesday, shutting down legislative action since then. The GOP-ruled state Senate approved it Tuesday night.

Maximum jobless benefits would remain at $390 a week under the bill, but the method of calculating payments would change starting in July 2012.

Currently, benefits are based on a worker's highest-paid quarter of a 12-month period. The new law will base 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.

The nonpartisan Legislative Services Agency estimates the change would mean a 25-percent reduction in the state's unemployment payments, which were $1.4 billion in the 2010 budget year.

Those changes are among the grievances of union members who have crowded the Statehouse by the thousands during four days of protests this week.

"That bill takes from this economy's victims and at the same time gives corporations a humongous tax break," state AFL-CIO President Nancy Guyott said. "We just think that is tone deaf in an economy where working people are hurting."

The new law reduces business tax increases approved in 2009 that were to take effect this year. Tax revenue under the previous plan would have increased an estimated 55 percent, while the new law will see revenue go up about 30 percent.

The Daniels administration has estimated that employers will shoulder about two-thirds of the burden of paying off the unemployment fund's debt.

Daniels said he had no concerns about the business tax increases hurting the state's economy.

"These changes will not move our ranking even one place as a low-tax, low-cost business state," he said. "It was necessary to have a system in which premiums and benefits were in some balance. I think it was appropriate that we worked on it from both ends."