The state’s long trek back from a bankrupt unemployment trust fund is now fully over.
On Thursday, the fund—which is used to pay benefits to unemployed Hoosiers—reimbursed the state some $250 million it had owed it since last fall.
That’s when Gov. Mike Pence took cash from the budget surplus to pay off the last of roughly $2 billion in federal loans the state’s unemployment system accepted during the Great Recession, money needed for benefits when the taxes paid into the fund by businesses were woefully short.
That moved saved Indiana companies about $327 million this year.
“This early payoff, strongly supported by the Indiana Chamber, was a common sense step taken by lawmakers and Gov. Pence to help employers and their employees," said the chamber's president, Kevin Brinegar, in a written statement. "It has had among the greatest impacts of any public policy over the last year on the business community.”
The General Assembly in 2011 overhauled the unemployment fund, requiring businesses to pay about 80 percent more into the system and trimming benefits to out-of-work Hoosiers by about 20 percent. That put the system on the road to climbing out of debt.
But because the state still owed the federal government money, the U.S. Department of Labor had been charging companies additional penalties, money that was used to start repaying the loans.
Those penalties are calculated in November of each year. So by paying off the balance of the federal loans using surplus money in November 2015, the Pence administration was able to end the extra payments for businesses early, which would have cost $126 per employee—or $327 million in total—in 2016.
Now, enough money has built up in the unemployment trust fund to pay back the state.
“Now that a tax on hiring has been eliminated, Hoosier businesses across the state can use the $126 per employee for critical initiatives, such as hiring new employees, growing existing companies, raising wages, buying new equipment, and more,” Pence said in a statement. “As we look ahead, Hoosiers can rest assured that we will continue to maintain our state’s finances with the fiscal responsibility and prudent financial planning that makes these opportunities possible.”