Political fight snares bill to repair jobless fund-WEB ONLY

Political fighting in the Indiana House has delayed at least temporarily a vote on a bill to help fix the state’s depleted unemployment insurance fund.

The bill would raise taxes on employers to help balance the fund, which currently pays out millions of dollars more than it collects while relying on federal loans to issue unemployment checks. The plan wouldn’t tamper with other ways to balance the fund, such as lowering payments to unemployed workers or tightening eligibility rules.

The Democrat-controlled House was set to vote on the bill last night, but Republicans said it wouldn’t fix the problem. The tax increase on businesses would raise about $260 million a year for the account – not enough to balance the fund. Last year, the fund took in $579 million but paid out $986 million in benefits.

“This is like trying to bail out a sinking ship with a teacup,” said Rep. Dan Leonard (R-Huntington).

Bill sponsor Rep. David Niezgodski (D-South Bend) said the bill was just a starting point, and noted that it could be changed in the GOP-controlled Senate. He then pulled his request for a vote, saying House Republicans needed to join Democrats in voting for the bill to increase taxes.

Niezgodski said he would request another vote on the legislation later. But he said Republicans need to know that an alternative to passing the bill was to do nothing, which he said was unacceptable since unemployed workers depend on the fund.

“I think it was a very drastic call for reality,” Niezgodski said. “This is something that’s not going away.”

In the closely divided House, it’s common for the political parties to avoid going out on a limb when it comes to unpleasant options – like tax increases on businesses or reducing benefits for out-of-work residents – for fear of their votes will be used against them in future elections.

Republicans said a real solution would include more than just tax increases. But GOP members didn’t suggest amendments to lower unemployment payments or tighten eligibility. House Minority Leader Brian Bosma (R-Indianapolis) said that was because Democrats could use political votes on those proposals as election fodder for 2010.

Bosma said Democrats, who control the House 52-48, should pass the bill on their own if they truly think it’s a good start.
“They’re in the majority – they’re elected to lead,” Bosma said. “When we were in the majority, we didn’t run around and say, ‘Oh, if you don’t support our bills we’re going to pull them.’ We did what we thought was right.”

The bill could come up for another vote as early as today. The legislation would raise more money from businesses by increasing both the taxable wage base and tax rates.

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.

The legislation also includes a one-year surcharge on employers that would help pay back federal loans. The state could be $1 billion in debt to the federal government by the end of the year. Lawmakers are also waiting to see whether federal stimulus money could help repay the debt because the surcharge wouldn’t cover the debt.

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