An Indiana House committee split along party lines Tuesday to approve a bill that would cut jobless benefits for some people starting next year as the state tries to fill the $2 billion hole in its unemployment insurance system.
The Republican-led House Labor, Employment and Pensions Committee voted 8-5 to advance a bill that Democrats argued unfairly penalizes laid-off workers. The bill also reduces business tax increases approved in 2009 that are taking effect this year after being delayed by legislators last year.
Republican Gov. Mitch Daniels' administration doesn't think the tax increases can again be delayed if the state is going to meet its goal of repaying the federal government by 2020 the $2 billion that it borrowed for the unemployment fund, said Mark Everson, commissioner of the Department of Workforce Development. However, the administration supports scaling back the increase.
"We can't kick this can down the road forever," Everson told the committee. "We think we need to get on with it now."
Under the bill, the benefit cuts would start in July 2012. The top payment to unemployed workers would stay at $390 a week, but the method of calculating payments would change from how much a person earned during their highest-paid three months in the previous year to their total annual earnings.
That would, for instance, reduce payments to those in seasonal jobs, such as construction workers.
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.
Bill sponsor Rep. Dan Leonard, R-Huntington, said the changes would bring Indiana's unemployment taxes and benefits closer to the national averages. He said the legislation balanced the needs of businesses and unemployed workers.
"All I'm trying to do is to be fair," Leonard said. "We can't have the lowest premiums in the country and the highest benefits in the country."
Businesses paid $557 million into the unemployment fund last year, with the new tax rates estimated to bring in $868 million during 2011, according to the Department of Workforce Development. The revised rates in the bill would reduce this year's state taxes to $723 million, but much of that reduction would be eaten up by federal taxes to pay interest and principal on the fund's debt.
Labor leaders objected to the package of changes, arguing that they hurt jobless workers with the estimated average weekly payment dropping by about $70 to $212.
Pete Rimsans, executive director of the Indiana State Building & Construction Trades Council, traced the problem back to 2001, when Democratic and Republican legislators were "giddy" over a $1.6 billion surplus in the unemployment fund and approved benefit increases and business tax cuts.
Democrats on the committee said the benefit cuts would hit those least able to afford them.
"The greatest pain is solely on the backs of the unemployed," said Rep. David Niezgodski, D-South Bend. "It bothers me intensely that now, at this late date, they have to try to put the largest hit on the unemployed, to say 'Well, you know we all have to pitch in and you're going to have to take your share."
Everson, the workforce development commissioner, acknowledged that the fund's surplus was dropping even before unemployment surged in 2008. But he said the changes were expected to mean $2 more in business taxes compared to last year for each $1 in benefit cuts.
"The trust fund was headed into the ditch before we had the precipitous collapse of the economy," Everson said. "So while we got into this situation because we were more generous in benefits … what's happening here is that employers will be shouldering over two-thirds of the burden."