Employers face steep hike in jobless-fund plan-WEB ONLY

A new proposal would help fix Indiana’s depleted unemployment insurance fund by raising taxes on employers.

The Indiana House labor committee voted 9-3 yesterday to raise more money from businesses by increasing both the taxable wage base and tax rates.

The plan wouldn’t raise enough money to immediately fix the fund, which is currently paying out millions of dollars more than it collects while relying on federal loans to issue checks.

But both Republicans and Democrats – along with labor and business lobbyists – said the bill was a good starting point.

The plan would increase taxes on businesses, but wouldn’t lower payments to unemployed workers or tighten eligibility rules.

Labor committee Chairman David Niezgodski, D-South Bend, said the plan could get the insolvent fund back on track over several years.

“There is no way we could solve this within a year,” Niezgodski said. “It would devastate businesses in this state.”

Companies now have to pay up to 5.6 percent on the first $7,000 of each employee’s salary each year – or up to $392 a year per worker. Indiana’s taxable wage base of $7,000 is at the federal minimum.

The proposed legislation would raise the maximum tax rate to 8.2 percent and increase the taxable wage base to $9,000. Instead of a maximum of $392 a year per worker, companies would pay up to $738 a year per worker.

If Indiana raised its maximum tax per employee to $738, it would still be less than any of the surrounding states, according to the Department of Workforce Development.

The agency said preliminary estimates showed the changes would raise an additional $260 million a year for the fund. That’s not enough to make the fund balanced. Last year, it took in $579 million but paid out $986 million in benefits.

“The bill is well short of what we need to raise,” said Rep. Dan Leonard, R-Huntington.

The fund balance also depends on how many people are employed: if more people lose their jobs, more is paid in benefits. If more people become employed, businesses contribute more in taxes since there are more workers.

“If the economy begins to act a little bit better, it’ll come very close to doing what’s necessary,” Niezgodski said of the proposal.

The legislation also includes a one-year surcharge on employers that would help pay back federal loans. That charge of 0.3 percent of taxable wages would raise about $57 million, officials said.

The state could be $1 billion in debt to the federal government by the end of the year, so that $57 million wouldn’t go far. Niezgodski said lawmakers are trying to fix the fund on their own, but that potential federal stimulus money would be a “gift” if lawmakers could use it to repay the debt.

The bill now moves to the full Democratic-controlled House for consideration.

The state’s unemployment insurance fund wasn’t always in trouble. In 2000, the fund had a surplus of $1.6 billion. But lawmakers raised benefit payments for the unemployed and lowered employer premiums, draining the account.