Jobless benefits fix costing businesses more

Indiana businesses have paid about 44 percent more in employer taxes this year under a legislative effort to fix the state's bankrupt unemployment insurance fund.

The Journal Gazette reported that so far this year businesses have paid $741.6 million to the state's unemployment trust fund. That's up about 44 percent from last year, when the total collected from Indiana companies was $514 million.

Those businesses also face the added burden of federal penalties because Indiana still owes the federal government about $1.8 billion it borrowed to continue making payments to the unemployed.

Businesses pay taxes into an unemployment insurance trust fund that pays jobless benefits to Indiana residents who lose their jobs. However, Indiana has been paying out more in benefits than it received from taxes since 2000. That eroded the trust fund surplus well before the recession hit.

Mark Everson, commissioner of the Indiana Department of Workforce Development, said "everyone saw this coming" and understands the need for the Legislature to take action and keep the fund solvent.

"There has been no uproar," said Everson, whose agency oversees state unemployment. "The fact that we dealt with this issue is a plus. Stability is an important thing."

Indiana began borrowing money from the federal government in late 2008 to pay claims. In 2009, legislators passed a big tax increase for businesses to start paying in 2010, but they delayed the increase out of fear that the economy was still too fragile.

This year, lawmakers reduced the state premium increases, but added a surcharge to pay interest on the loan from the federal government.

During the legislative session that ended in April, lawmakers estimated that sum would total $813 million for businesses in 2011.

Indiana's unemployment premiums still remain below the national average even with the increase, said Jerry Conover, director at the Indiana Business Research Center at Indiana University.

State officials estimate that about half of employers saw premiums decrease by an average of 46 percent per employee. The other half saw premiums rise by an average of 49 percent per employee.

The state's loan balance has dropped from more than $2 billion to about $1.8 billion. And the Department of Workforce Development is set to make a $60 million interest payment in September.

Projections show the federal loan should be repaid with interest by 2018.

In addition to the state increases, businesses are getting penalized on their federal unemployment tax because the state owes money. That flat fee of $21 per employee is expected to cost businesses an additional $58 million in payments this year.

Rep. Dan Leonard, R-Huntington, the architect of this year's repair bill, said times are tough for business regardless of the unemployment changes. But he believes the long-term benefits of a stable system outweigh initial discomfort.

"Everything seems to be going as projected," Leonard said.

The initial success might lead to another battle next year because a key part of the package — reductions in unemployment benefits — won't begin until 2012.

"The cuts are ill-advised," said Nancy Guyott, president of the Indiana AFL-CIO. "They hurt the economy overall by taking money out of circulation and in the long run don't help the trust fund."