Efforts to fix Indiana’s bankrupt unemployment insurance system are shaping up as a slugfest in the General Assembly, one likely to last to the end of the session in late April – if not beyond.
“This is the one issue that can slip us into a special session, and we had the opportunity to start talking about this in a bipartisan way and a bicameral way, and those discussions are simply not taking place,” said Senate Minority Leader Vi Simpson (D-Bloomington).
Partisan tensions intensified last week when Republicans who control the Senate proposed a plan designed to fix the system by increasing taxes on employers overall, reducing benefits to most jobless claimants and tightening eligibility requirements.
Senate Republican leaders said the plan, which could pass the Senate this week, was a balanced approach because both employers and the jobless would feel the effects.
“Everybody has to participate in a solution and I don’t think it’s correct if one group has to pay and another group doesn’t,” said Sen. Dennis Kruse (R-Auburn), one of the chief architects of the plan.
But Democrats in the Senate and House, as well as labor groups, are crying foul over the proposed benefit reductions and tighter eligibility standards at a time when Indiana’s unemployment, at last count in January, was 9.2 percent. That’s the highest it has been in 25 years.
During four hours of testimony on the bill in committee last week, business owners and groups said they generally supported the proposal. But some opposed higher employer taxes, while others said employees should pay into the system.
Everyone agrees that the problem is huge. The system has been paying out hundreds of millions of dollars more in benefits than it has been collecting in employer taxes. It has borrowed $535 million from the federal government, a figure projected to reach $1.2 billion by year’s end.
The problem is getting worse as more people lose their jobs. About 320,000 Indiana residents were looking for work in January, nearly twice as many as a year before. And the state reported the biggest increase in new claims for the week ending March 7, with a jump of more than 5,500.
Senate Republicans say their plan would make the system solvent by the end of 2011. Then the state would have to repay the federal loans, which Kruse said could end up being as much as $2 billion. The plan after that is to build up a surplus so the problem doesn’t happen again.
Republican Gov. Mitch Daniels said it was an excellent plan, and the only one proposed so far that would fix the problem. He commended everyone who was involved in putting it together.
But Simpson said it was strictly a Senate Republican plan, with Democrats having no input. No plan can pass without bipartisan support, since Democrats control the House.
There’s no question each side wants to put its own spin on the debate.
Daniels has said Indiana on average replaces 54.6 percent of a person’s lost wages, making its jobless benefits third highest in the nation.
“The answer cannot solely be to ramp up taxes to meet Rolls-Royce benefits,” Daniels said recently.
That characterization has irked Democrats, who point to other statistics.
The state’s maximum weekly benefit of $390 ranks 24th in the nation, according to the Department of Workforce Development. And it is lower than all surrounding states’ except Michigan. The average weekly benefit of $298 ranks 18th.
And under the Senate Republican plan, benefits for most people would be reduced.
Simpson said Daniels’ reference to Rolls-Royce benefits “was pouring gasoline on the fire, which is becoming more and more partisan as we move forward.”
Kruse noted that the House failed to pass a bill addressing the problem, so it was up to Senate Republicans to draft a plan.
He said it was now the Democrats’ job “to pick it apart and complain and yell and holler,” but the Senate has to pass a plan so all four caucuses have a bill to work on in conference committee negotiations. Nobody in the end would be happy, he said, but all sides will have to share the pain.
House Minority Leader Brian Bosma (R-Indianapolis) echoed that.
“I think that with the problem that we have with a billion-dollar essentially unfunded liability, no one will like this solution, but it’s clear that a solution has to happen,” he said.
It’s also clear that getting to that solution is one of the toughest tasks lawmakers have faced in years, and with the economy in the tank, it could not have come at a worse time.