Here’s 15 facts critics didn’t want you to know about new law repairing our unemployment insurance fund
STATEHOUSE – Indiana legislators entered this session facing a crisis in our state’s unemployment insurance fund. For many years, premiums paid by businesses have failed to keep pace with benefits paid to jobless Hoosiers, even when unemployment rates were at historic lows. On top of this structural imbalance, experts estimated hundreds of millions of dollars annually in waste, fraud and abuse of the system only exacerbated the problem.
Indiana’s bankrupt fund is now borrowing more than $7 million every day from the federal government. While the $800 million loan balance from the federal government is temporarily interest-free, it is estimated Indiana’s unemployment insurance borrowing may top $1 billion by year’s end – almost as much as the state has in emergency reserve funds. Indiana lawmakers had to take decisive action to reform the system and restore its fiscal integrity.
In response, the General Assembly approved – and now Gov. Mitch Daniels has signed – a bipartisan plan which puts the fund on a path to solvency, preserves worker benefits, addresses unfair premiums paid by tens of thousands of employers, gives employers new protections and appeal rights, and reforms the system to reduce waste, fraud and abuse.
Our Indiana compromise struck between the more liberal-leaning, pro-labor House of Representatives and our more conservative, pro-business Indiana Senate balances almost dollar-for-dollar the needs of workers and concerns of businesses. This reform-minded compromise has earned the support of a variety of employers, labor and pro-business advocacy groups. The National Federation of Independent Businesses, which represents the vast majority of small businesses in Indiana, has strongly endorsed many of the provisions of the new UI bill for their balance and fairness to the small-business owners across the state. Similarly, the Indiana Restaurant Association noted that “Legislators listened to small business.”
Yet critics remain. And not surprisingly, many of the negative comments are being leveled by the same interest groups who years ago helped to carefully craft the system that is now bankrupt. Missing from their one-sided onslaught are these 15 facts critics apparently didn’t want you to know about our efforts to make unemployment insurance work for all Hoosiers – small-business owners, industry leaders and their employees:
1. Indiana Faced a Federal Government Takeover: If state lawmakers did not act quickly and thoughtfully this session, Indiana faced a forced-fix by the Obama Administration. A Washington takeover would have resulted in premium increases of up to 800 percent on all Indiana businesses – even those who never tap the fund.
2. Small Businesses Were Unfairly Forced to Subsidize Big Businesses: Some businesses even factored in UI benefits in collective bargaining agreements, knowing that their planned annual furloughs would allow employees to draw more out of the UI fund in just one week than the company paid in premiums the entire year. These furloughs often lasted for several weeks, each and every year.
3. Some Big Businesses Wanted “The Little Guy” to Bail Them Out: Some groups actually lobbied legislators during the worst national economic calamity since the Great Depression for a new tax on workers to help make up the fund’s shortfall. Lawmakers on both sides of the aisle considered a worker tax unpalatable and pointed out that only one other state – Alaska – requires regular employee contributions to their unemployment insurance funds.
4. $1.2 Billion House Price Tag Was Reduced 75 Percent by Senate: An alternative plan proposed by the Democrat-controlled House would have doubled premiums on tens of thousands of Hoosier employers, even though evidence showed these employers never used the fund. It would have resulted in a more than $1.2 billion annual tax increase on Indiana’s business community and contained far fewer reforms to the system than the just-passed plan that big users of the fund are now disparaging.
5. Reforms Save Employers Dollar-For-Dollar: Indiana’s solution, HEA 1379, does not put the responsibility of replenishing the fund solely on the shoulders of businesses, but balances it nearly dollar-for-dollar with $302 million in cost-saving reforms to the system and with about $315 million in new premiums for 2010.
6. Real Job Searches Will Be Required For The First Time: Common-sense, cost-saving reforms to the system in the new plan include requiring Hoosiers out of work to actually “apply” for jobs, not just “look” for jobs as current law provides – a change that will save an estimated $12 million annually. Further, workers will be penalized if they refuse to accept suitable work. To help out-of-work Hoosiers retool their skill sets, HEA 1379 also creates the Hoosier Workers Training Program.
I’ll share the rest of this list with you in my next column.
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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