Senate Republicans have plan to fix jobless system-WEB ONLY

Indiana Senate Republicans have proposed a plan designed to fix the state’s bankrupt unemployment insurance fund by increasing employer taxes overall, reducing benefits for some jobless people and tightening eligibility requirements.

“Our effort is to make changes in the system that are gradual but does put us on a definite path to solvency in our unemployment insurance trust fund,” Senate Tax Chairman Brandt Hershman (R-Monticello) said yesterday.

Hershman’s committee plans to take up the new bill today and then send it to the full Senate for consideration. Republicans control the chamber 33-17, and are taking the lead on the issue now since the Democrat-led House failed to pass a bill on it.

The system has been paying out millions of dollars more in benefits than it has been taking in through employer taxes. The fund has borrowed about $535 million from the federal government to remain solvent, a figure that could climb as high as $1.2 billion by the end of the year unless lawmakers fix the system.

Senate Minority Leader Vi Simpson (D-Bloomington) called the plan a starting point for discussions but said it had some serious flaws. She said one of them was reducing benefits for lower-paid workers who have lost their jobs.

Under the current system, employers pay between 1.1 percent to 5.6 percent annually on the first $7,000 of an employee’s income. Those with a history of laying off workers pay higher rates.

The plan would reduce the minimum tax rate slightly, but raise the maximum rate to 8.2 percent. The taxable wage base would be increased from $7,000 to $10,000. The minimum employer contribution per employee would drop from $77 to $75, while the maximum contribution would go from $392 to $820.

Those changes would be implemented in 2010 and increase employer contributions by an estimated $328 million annually. This year, employers would pay a one-time 10-percent increase in premiums to help balance the fund.

Under the current system, the more somebody makes the more they get in weekly benefits. The maximum weekly benefit is $390. The average is about $290.

Under the Senate Republican plan, benefits would be paid on a sliding scale that would decline the longer a jobless person is in the system. The maximum benefit of $390 would be increased to $424 for the first four weeks, drop to $382 in weeks five and six, $344 in weeks seven and eight, and $310 in weeks eight through 26.

Hershman said sliding the benefits downward would give the jobless more incentive to find work. Overall, benefits would be reduced by about $125 million annually.

Senate Republicans said hundreds of millions of dollars could be saved by reducing fraud and waste in the system.

One example of abuse identified in the plan is that workers often collect benefits at the same time they are getting severance pay from a layoff.

And the plan could make it harder for some companies that regularly lay off workers for a period of weeks each year from taking part in the system, which means their workers would not get benefits.

Senate Republicans said their plan should balance the fund by 2011, but the state would still have to pay back the federal loans in 2012 and begin building an adequate surplus. Sen. Dennis Kruse (R-Auburn) said that could take several years.

Teresa Voors, commissioner of the Department of Workforce Development, said the plan was thorough.