SENATE GOP: DELAYING NEW UNEMPLOYMENT INSURANCE PREMIUMS WOULD CONTINUE STATE’S JOB GROWTH, HELP STRUGGLING BUSINESSES
STATEHOUSE – Senate Republicans have proposed delaying the state’s new unemployment insurance premiums to continue Indiana job growth and help struggling Hoosier businesses through the national recession.
Senate Republicans will introduce legislation in the upcoming session to push back by one year the start date for new rates paid by employers.
Legislators and Gov. Mitch Daniels are keeping a close watch on the fragile state and national economies. We are very sensitive to the current economic situation faced by Hoosier employers and workers. Last session, we recognized the need to slowly implement any premium increases on Indiana’s employers. We consequently avoided any increase in 2009 and spread those increases over a three-year period thereafter. Now, given the depth and duration of the recession, we are proposing to delay those increases for one additional year.
Tax and Fiscal Policy Committee Chair Brandt Hershman (R-Wheatfield) and former Pensions and Labor Chair Dennis Kruse (R-Auburn) co-authored last year’s sweeping reforms of the state’s jobless fund. Hershman and Kruse joined Senate Appropriations Chair Luke Kenley (R-Noblesville) and the new Senate Pensions and Labor Chair Phil Boots (R-Crawfordsville) recently in voicing support for the proposed delay of the UI premium schedule.
About The 2009 UI Legislation…
Indiana legislators entered last session facing a crisis in the state’s unemployment insurance fund. For many years, premiums paid by businesses had 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 in annual waste, fraud and abuse of the system only exacerbated the problem.
At the time, Indiana’s fund was partially sustained by a $790 million interest-free loan from the federal government. In response, the General Assembly approved – and Gov. Mitch Daniels signed into law – a bipartisan plan to put the UI fund on the path to solvency, preserve worker benefits, improve employer appeal rights regarding claims, and to reduce waste, fraud and abuse.
Today, Indiana is among 24 states borrowing interest-free federal loans to balance UI insurance programs. By the end of the recession, that number is expected to grow to 40 states borrowing an estimated $90 billion. At year’s end, our state’s interest-free federal loan is expected to carry a balance of about $1.7 billion.
Indiana and other states are presently not required to make payments on these loans, and there is increasing talk of a federal loan forgiveness program as more and more states are forced to borrow due to the national recession.
If Indiana’s new premium schedule were to go into effect in January 2010, an estimated 41,590 Indiana employers would face increases, because of high claims and delinquency penalties. With some employers just barely surviving the national recession, the revenue generated by the new rates might be negated by increased temporary layoffs and permanent job losses. Our thinking is this money would be better invested at this time in safeguarding current jobs, calling back furloughed workers and creating new opportunities for unemployed Hoosiers.
About The Fragile Economy…
Last week, Indiana’s Department of Workforce Development (DWD) reported Indiana’s unemployment rate dropped 1.1 percent over the previous three months and is now lower than the national unemployment rate for the first time since October 2008.
In September, Indiana’s manufacturing sector added 3,000 positions. Professional and business service sectors added 2,900 jobs. At the same time, DWD recorded a decline of 3,300 construction jobs, which officials said might signal a premature end to seasonal work. So, while we are encouraged by increases in manufacturing, professional and service jobs, clearly it is too early to say if we have turned the corner.
In Washington, D.C., talk has turned from “a jobless national recovery to a so-called recovery with actual job losses.
Since the current recession began, 8 million jobs have been lost nationwide. Workers have faced the worst job market since the Depression. Layoffs have averaged 6.5 months – a post-World War II record. The last thing Indiana lawmakers want to do is to suck the lifeblood from an already anemic economy.
Republican senators believe delaying the new premium schedule for one additional year is fiscally sound and economically prudent in that it provides more breathing room for Indiana’s economy to recover while also giving the state time to see what the federal government intends to do to assist states like Indiana that are struggling with an overwhelmed unemployment system.
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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