Indiana lawmakers will be scrambling to meet tonight’s midnight deadline for adjourning the legislative session, but differences remained yesterday over a new state budget and fixing Indiana’s bankrupt unemployment insurance fund.
Negotiators for House Democrats and Senate Republicans said yesterday that they had reached a tentative compromise on a plan designed to start fixing the unemployment fund. But Senate President Pro Tem David Long (R-Fort Wayne) said later in the day that there was still work to do on that issue.
“We’re close to an agreement, but we don’t have an agreement,” Long said.
Although negotiations continued on several bills, Republican Gov. Mitch Daniels and House Speaker Patrick Bauer (D-South Bend) had said that passing a new budget and addressing the unemployment problem were really the only musts.
Failure to pass a budget on time would force a special session, and not resolving the unemployment issue has the potential of doing the same.
Budget negotiators for the Republican-ruled Senate and Democratic-led House were at odds over the amount of money that should be spent on spending increases for schools, and how large the surplus should be at the end of the next two-year budget cycle in June 2011.
Both sides had their own proposals, and both would provide spending increases for schools. House Ways and Means Chairman William Crawford (D-Indianapolis) said he thought he had reached a budget agreement “in principle” with Senate Republicans on Monday night that would leave the state with a $1.3 billion surplus at the end of the biennium.
But Senate Appropriations Chairman Luke Kenley (R-Noblesville) said he wanted to take $100 million from proposed increases for schools so the state would have a $1.4 billion surplus after two years.
Kenley said more recent bad news on the economy, especially in the automobile sector, required a larger surplus – especially to protect education funding if needed in two years. He also said that without a $1.4 billion surplus, Daniels would probably veto a budget bill.
“I have some pretty strong assurances from him that if we cut that other $100 million out of the [school] funding formula and give him a $1.4 billion balance that he will sign the bill,” Kenley said.
Bauer said later that House Democrats had agreed on a surplus that topped $1.3 billion, but did not say by how much.
“Basically we think we can leave enough reserve to make everyone happy,” he said. “I think we have that number.”
He said the $1.4 billion figure for a surplus had been “plopped in” on Monday.
“If tomorrow it’s another higher number, then obviously there is someone who wants a special session really bad,” Bauer said.
Kenley said early last night that House Democrats were hopeful that they had found money to provide a $1.35 billion surplus, but he said he thought that was too optimistic.
“Until that is resolved, we’re probably not going to have a budget bill that could be voted on tomorrow,” he said.
The top two negotiators on the unemployment fund said earlier yesterday that they had tentative agreement on a plan to start fixing a system that has been paying out hundreds of millions of dollars more than it has been collecting in employer taxes.
Senate Republicans had passed a plan that would increase employer taxes, cut benefits for many jobless claimants and tighten eligibility.
Democrats had proposed plans to increase employer taxes, but were adamant about not cutting benefits – and it appeared they might get their way.
Sen. Dennis Kruse (R-Auburn) had said the new, tentative compromise needed to be reviewed by the party caucuses and might need some fine tuning, but it looked promising for Democrats that the plan would not cut benefits.
“It will be a meaningful effort toward a solution, but it’s not going to be a 100-percent solution,” Kruse said. “We’ll have to continue working on this in the next couple of years I think.”
But Long said later that it was by no means a final agreement, and any plan needed some support from all four caucuses. Rep. Dan Leonard of Huntington, the lead negotiator on the issue for House Republicans, said he had problems with the proposed new plan, in large part because it relied so heavily on increasing taxes on businesses.
Indiana employers currently pay annual state unemployment taxes of 1.1 percent to 5.6 percent on the first $7,000 of an employee’s income. Employers with a history of layoffs pay more.
Under what was earlier called a tentative compromise by Kruse and Rep. David Niezgodski (D-South Bend) tax rates would range from 0.75 percent to 10.2 percent, and the wage base would be $10,000.
Kruse and Rep. David Niezgodski (D-South Bend) said the employer taxes would raise about $400 million more a year, and changes made in the system would save about $300 million.
Niezgodski said although some employers would face higher taxes, they would still allow Indiana companies to remain competitive.
“We cannot take and allow businesses to be pushed over the edge,” he said.