RE-TOOLING UNEMPLOYMENT FUND ON TO-DO LIST THIS SESSION
Despite Indiana’s ability to attract and create new jobs, layoffs and shutdowns have many fellow Hoosiers hurting. Legislators this session will need to add to our to-do list some focus on re-tooling our state’s unemployment insurance fund designed to help those standing in the unemployment line. The global economic slowdown is affecting Hoosiers, and as a result, Indiana’s unemployment trust fund balance has eroded to the point that it’s currently sustained in-part by a line of credit from the U.S. Department of Labor.
As state lawmakers seek to pass yet another balanced two-year budget in this session of the Indiana General Assembly, we need to also restore order to this fund so Hoosiers hit by economic hard times will have somewhere to turn. In this column, I want to briefly explain why our unemployment trust fund needs help and what action may be necessary to ensure it continues to be ready when fellow-Hoosiers need it.
Our $1.6 billon balance in 2000 declined quickly and sharply to just $302 million by 2007. Rising unemployment and the state’s low “taxable wage base” contributed to the problem. You see, employers nationwide do not contribute to their state’s unemployment trust funds based on 100 percent of each employee’s pay. Instead, federal law stipulates employers contribute based on what is known as a taxable wage base. Indiana’s employers contribute to the fund based on the first $7,000 of employees’ pay — the lowest base allowed by federal law and the same level as 25 years ago despite growth in personal incomes. Meanwhile, weekly unemployment benefits have increased in nine of the last 12 years.
Unchanged receipts? Increased expenditures? Clearly, even if our unemployment rate had remained low, the fund was destined for trouble. Hoosiers might say it was a “train wreck” in the making. Yet, if we act now, it is one that can still be averted for the most part.
Aside from considering an increase in the taxable wage base, other issues with the unemployment insurance fund must also be addressed. Particularly troubling is how Indiana treats its “bad actors” – those employers who fail to file quarterly reports or make payments of taxes, interest or other charges to the Indiana Department of Workforce Development. Currently, Indiana’s “bad actors” are treated much less severely than in many of our neighboring states. The average penalty tax of those states is 8.26 percent. In Indiana, bad actors pay only 5.6 percent. They significantly increase the cost of our fund doing business, but are merely slapped on the wrist for doing so.
At the same time, Indiana is certainly not alone in our unemployment fund problem. According to the National Association of State Workforce Agencies, Indiana is one of 30 states at risk of having unemployment trust funds become insolvent. Michigan, New York, Ohio and South Carolina have joined Indiana in borrowing from or establishing a line of credit to help sustain their unemployment trust funds in lieu of cutting benefits at a time when unemployed citizenry may need a temporary helping hand.
So don’t be surprised if Indiana’s unemployment insurance fund begins hitting the headlines as the legislative session continues. Rest assured there are many lawmakers on both sides of the political aisle who are working together to find affordable solutions to these and other problems plaguing our state. Take heart in knowing that perhaps it won’t be needed as often in the future due to our state’s ability to maintain and grow jobs.
Indiana is better positioned than most to weather the waves of this national economic storm because of its positive climate for attracting business and investment. Last year, 158 companies chose Indiana over another state or country to make their next job-creating investments. In fact, Indiana was first among the 50 states in terms of international investment and ranked fourth for lowest business costs in the nation.
We have a double dose of opportunity here. As we repair and update our unemployment insurance fund for the first time in years and we continue to develop a climate that will bring more businesses to Indiana, ultimately our unemployment insurance fund will grow stronger and stronger. Fixing the fund now will save us money and hardship later, as loans to bolster its balance will not be needed.
When this session is history, I hope we’ll not only have an improved unemployment insurance fund, but also continued promise of an economic climate where fewer and fewer Hoosiers will need to use it.
Please contact me with your thoughts on this or other concerns: State Sen. David Long, Indiana Senate, 200 W. Washington Street, Indianapolis, IN 46204; toll-free at 1-800-382-9467; or Senator.Long@in.gov.
Sen. David Long (R-Fort Wayne) is President Pro Tem of the Indiana Senate. He serves District 16, which includes portions of Fort Wayne.
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