Negotiators for House Democrats and Senate Republicans have reached a tentative compromise on a plan designed to start fixing Indiana’s bankrupt unemployment insurance fund, but remained at an impasse today on a new state budget.
Lawmakers were scrambling to finish business before tomorrow’s midnight deadline for adjourning the regular session. 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.
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.
The two sides had separate versions of budget 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 last night that would leave the state with an estimated $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 auto 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.
The top two negotiators on the unemployment fund said today 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. The fund has borrowed more than $770 million from the federal government to remain solvent.
Senate Republicans had passed a plan that would have increased employer taxes, trimmed benefits for many jobless claimants and tightened eligibility. Democrats had proposed plans to increase employer taxes, but were adamant about not cutting benefits – and it appeared they would get their way.
Sen. Dennis Kruse (R-Auburn) 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.”
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 the tentative compromise, 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. They said some of the changes are designed to make sure that people who should not be eligible for benefits don’t get them.
Niezgodski said although some employers would face higher taxes, they would still allow Indiana companies to remain competitive with those in other states.
“We cannot take and allow businesses to be pushed over the edge,” he said.