Senator developing plan to fix jobless fund-WEB ONLY

A top state senator is developing a proposal for fixing Indiana’s bankrupt unemployment insurance fund that he said yesterday is likely to include higher taxes on employers and cutting benefits paid out to the jobless.

Republican Sen. Dennis Kruse of Auburn, chairman of the Senate Pensions and Labor Committee, is taking the lead on the issue in the GOP-controlled Senate. The Democrat-led House failed to pass a bill to fix an unemployment system that has been paying out millions of dollars more in benefits than it has been collecting from employer taxes.

The state has borrowed about $470 million from the federal government to keep the fund solvent, and that amount is projected to be $1.2 billion by the end of the year if lawmakers do not fix the system.

Kruse said that next to enacting a new state budget, fixing the system was the biggest issue facing lawmakers this session, and he hoped to have a plan finalized by early next week.

“It’s one of those issues that it’s fair to make a declaration that nobody will be happy with the language of this bill,” Kruse said during a committee hearing on the issue yesterday. “This problem is growing by the day and our deficit is growing by tens of millions by the week. We need to have a solution by the end of April.”

Kruse said any solution likely will be a combination of raising taxes on employers, tightening eligibility and decreasing benefits.

Employers currently pay into the fund between 1.1 percent and 5.6 percent on the first $7,000 of each employee’s annual salary, with the higher percentage charged on companies with a history of layoffs. The maximum benefit paid to out-of-work residents is $390 per week.

A bill that failed to pass the House would have raised the maximum employer tax rate to 8.2 percent and increased the taxable wage base to $9,000. The Department of Workforce Development estimates those changes would raise an additional $260 million for the unemployment fund.

That’s not enough to balance the account, which last year took in $579 million but paid out $986 million. The House Democrat bill would not have reduced benefits or changed eligibility.

Kruse said his proposal likely would start with a maximum employer tax rate of at least 8.2 percent, and maybe even higher. He said it would begin with a taxable wage base of $8,000, but that too could be higher.

But he also said he was interested in reducing the minimum tax rate on businesses that rarely lay off workers to 1 percent or slightly less. And he said he envisioned a system in which weekly benefits would be lowered the longer a person was drawing claims. He said that would give people more incentive to seek work.

He also said the system should not pay benefits to seasonal workers who regularly but temporarily get laid off.

“I think that has become what I consider to be an abuse of the system,” Kruse said. “A planned layoff is not a separation of your job. You’re just not going to work for two weeks, but you keep your health benefits, you keep your pension benefits, you just walk out and come back in two weeks.”

Several small business owners testified yesterday that they were willing to pay some taxes into the system, but they shouldn’t bear a high burden of fixing it because they rarely lay off workers. They suggested that benefits be lowered and eligibility be tightened.

“Take a look at the benefits,” said Joseph Sergio, whose disaster restoration company – Sergio Corp. of South Bend – employs 42. “It looks like what happens is we are paying out benefits well above our capacity.”

Gail Piltz, owner of The Accounting Services Group in Indianapolis, said lawmakers should thoroughly study the problem and not come up “with some knee-jerk reaction.” If they needed a quick fix, he said, they should look to cut benefits.

A second committee hearing to take testimony on the general issue is set for today.