Jobless-fund plan a good solution

March 30, 2009
Indiana lawmakers are stuck between the proverbial rock and a hard place when it comes to fixing the state's bankrupt unemployment insurance fund. Should they stick it to businesses to raise enough money to erase the half-billion-dollar deficit or should they slice benefits for the jobless during the worst recession in a generation?

The sensible choice can be found in a plan approved March 24 by the Senate. It's a compromise that puts a bigger but manageable burden on most businesses while also requiring some unemployed Hoosiers to share in the solution. It also makes businesses that frequently lay off employees pay more and lets jobless workers avoid a big hit if they pursue job training.

Legislators have no choice but to address the problem. The fund has been heading deeper into the red since 2001, when lawmakers boosted benefits during the economic slowdown after 9/11. They did so, however, without increasing contributions to the fund.

As a result, Indiana has borrowed more than $560 million from the federal government in order to keep paying unemployment benefits. That amount, escalated by the recession, could grow to $1.2 billion by the end of the year.

If it becomes law, House Bill 1379 could make the fund solvent by 2011. The plan calls for all businesses to see a one-year, 10-percent increase in their contributions. Then, it would permanently increase business taxes $328 million annually starting in 2010.

Right now, Indiana businesses pay a minimum unemployment premium of $77 for each employee and maximum of $392. Under the bill, the minimum dips to $75 per employee and the maximum rises to $820. Businesses with workers who regularly tap the unemployment system would pay higher amounts.

The plan lowers the maximum unemployment benefit from 54 percent of the salary a worker received at his or her prior job to 50 percent, but it boosts the top weekly payment allowed from $390 to $424. And, if the laid-off worker enrolls in a state training program, payments remain constant. If the worker doesn't, benefits are lowered on a sliding scale over 26 weeks.

Bill opponents say it's unfair to cut benefits in tough times. Reducing payouts to somebody struggling to find work would be unfortunate, but putting the entire burden on businesses could have even worse consequences. If employers are hit too hard by premium increases, they are likely to lay off even more workers.

Indiana's unemployment benefits are already generous compared with other states'. Based on average income, the state ranked third in the nation in 2008 for replacing lost wages with unemployment benefits, according to the U.S. Department of Commerce.

Some say Indiana should accept $148 million in federal stimulus money to ease the deficit, but those funds come with strings that would expand unemployment eligibility, costing the state even more money in the future. Lawmakers would be wise to avoid the quick and easy cash. After all, not looking ahead is what created this mess in the first place.

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