FEIGENBAUM: Unemployment insurance bill's path surprisingly smooth

February 5, 2011

Once in a legislative blue moon, a bill will zip through the labyrinthine process with alacrity.

That speed is typically because lawmakers made a mistake and need to correct it, or a new problem has emerged that must be immediately addressed, and bipartisan consensus moves it quickly.

One piece of legislation riding the proverbial rails to the desk of Gov. Daniels doesn’t comport to the traditional fast-track rubric.

House Bill 1450, legislation sponsored by Rep. Dan Leonard, R-Huntington, would return the Unemployment Insurance Trust Fund to solvency by 2013 and pay back the federal government by 2020 for the $2 billion in loans the state has accepted to pay benefits over the past two years.

There is a push among the Republican House and Senate majorities to send a final version by month’s end. Just as remarkably, the version exiting the House may be amended in only minor aspects, if at all, in the Senate.

By now, you are familiar with the changes a decade back that trimmed premiums paid by employers and offered more generous benefits, a bipartisan reform package born of strong economic conditions and a trust fund almost embarrassingly overfunded.

As economic conditions changed before the 2007 recession, concerns arose over continued viability of the fund. But the lines trending in different directions weren’t expected to become problematic for many years.

Then the recession struck. The fund quickly ran south of depletion, and even current premiums proved burdensome on employers.

In 2009, Daniels, Senate Republicans and House Democrats agreed on a landmark package to substantially raise employer premiums, crack down on certain practices by employers and employees, and eventually ease the fund back into solvency.

But before the package took effect, the economy weakened further and an election loomed. Virtual unanimous agreement between the House and Senate, legislators and the governor, and Democrats and Republicans postponed implementation of “the largest tax increase in state history” for another year.

Before the 2009 legislation was to take effect this year, the new Republican majority drafted a blueprint for the future.

Under the measure that passed the House at the end of January, business will cover about two-thirds of the expensive climb from the red, while employees would see benefits cut to cover the remainder.

Employer premiums would be slapped with a 13-percent surcharge to cover the federal fund loan and the $80 million interest payment on it coming due in September. The updated rate results in employer-paid premiums doubling in many cases. Despite some cost savings over the unconsummated 2009 law, business interests are not happy, but there isn’t any painless solution.

A new proposed formula would offer unemployment benefits equal to 47 percent of an employee’s average weekly wages (capped at $390)—the national average for unemployment benefits, and a change disfavored by organized labor. Currently, benefits are apportioned based on an employee’s highest wage quarter. The quarterly approach favors construction workers, for example, who may earn the majority of their annual income during a three-month period. Those workers and others whose industries are more seasonal would see benefits reduced under the new calculation.

The bill also places new restrictions on who may collect benefits. Workers who receive severance pay, take voluntary buyouts or are employed on an on-call basis would no longer qualify for weekly checks. The package of changes would result in a 20-percent reduction in benefits, which Democrats find unacceptable both on a human level and because they find it a drag on the economy: It will keep money from recirculating in a community hit hard by unemployment.

Democrats prefer no benefit cuts and seek a 20-year bond for repaying the loan and replenishing the fund.

Outnumbered Democrats appear to offer only token resistance, and may prefer to use this as their 2012 campaign rallying point—perhaps even finding sympathy from business, which also takes a huge cash hit.

You may also be seeing a division of labor (so to speak) along the lines of two years ago, where some unions offer weak resistance to the trust fund steamroller, and look instead to play more serious defense on other fights—such as project labor agreements and a right-to-work bill.

The bill appears headed to the governor on rockets, in time to implement the new structure for first-quarter premium bills—and avoid having it victimized by potential Democratic shenanigans over other issues.•


Feigenbaum publishes Indiana Legislative Insight. His column appears weekly while the Indiana General Assembly is in session. He can be reached at edf@ingrouponline.


Recent Articles by Ed Feigenbaum

Comments powered by Disqus