updated: 3/25/2009 6:47:24 AM

Senate Passes Unemployment Fund Plan

Inside INdiana Business.com Report

The Indiana Senate has approved a Republican plan to fix the state's bankrupt unemployment insurance trust fund. The package increases benefits for jobless Hoosiers in the short term, then gradually reduces monthly payments. The bill now heads to a conference committee where a final package is expected to be negotiated.

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Source: Inside INdiana Business

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Press Release

INDIANAPOLIS (March 24, 2009) – Indiana Senators today voted 30 to 19 to move a plan to fix the state’s bankrupt jobless fund. The Senate passed bill says “no” to massive expansions required for using $148 million in federal stimulus monies, but “yes” to maintaining state-funded benefits for unemployed Hoosiers seeking re-training.

Tax and Fiscal Policy Chair Brandt Hershman (R-Wheatfield), Senate Appropriations Chair Luke Kenley (R-Noblesville), Pensions and Labor Chair Dennis Kruse (R-Auburn) and President Pro Tem David Long (R-Fort Wayne) worked together to write and pass the historic unemployment reform bill.

Indiana’s unemployment insurance trust, funded by employer-paid premiums, is currently insolvent. In 2008, it paid out $1 billion in benefits while taking in $579 million in revenues. Projections for 2009 show benefits will top $1.3 billion, with revenues of about $550 million.

Thirty states have UI funds already insolvent or at the risk of insolvency, according to the National Association of State Workforce Agencies. At least 14 states, including Indiana, have this year used federal loans totaling $5 billion in order to continue providing unemployment benefits.

“No” To Federal Stimulus Liberalization

State senators agreed with Hershman and rejected long-term obligations and financial burdens left after federal stimulus monies would be exhausted. Hershman warned federal funds often come with strings attached, and in this case, would permanently liberalize what are already seen as generous UI benefits when compared to other states. Based on average income, Indiana ranked third in 2008 for replacing lost wages with state unemployment benefits.

Hershman cautioned against the use of temporary stimulus money, because after two years, the state would again face premium hikes or benefit cuts. Federal guidelines for receiving the money would swell the number of those eligible for government benefits by 40 percent. Seven states have already rejected the stimulus monies for their unemployment funds. Indiana is on a growing list of states leaning against accepting the funds for this purpose.

Hershman noted that state leaders nationwide are opposed to expanding benefits to teen-agers who leave after-school jobs, parents whose children may contract Chicken Pox or another common illness, and those displaced when a spouse applies for and accepts a more lucrative job elsewhere.

“Yes” To Retraining, Real Job Searches

Kenley said the plan would maintain state funded jobless benefits for 26 weeks, if unemployed Hoosiers participate in state-approved job training and re-training. Otherwise benefits would be reduced over time.

Unemployment benefit recipients would also be required to actually “apply” for jobs each week under Hershman’s proposed bill, not to simply “look” for employment as state law now stipulates, Kenley said.

“Indiana workers who are laid off through no fault of their own deserve to be assured that they will have access to a UI system that works.” Kruse said. “To regain solvency, Indiana’s UI Trust Fund must support only those Hoosiers experiencing legitimate separations from work. Indiana’s IU fund cannot afford to subsidize those who use loopholes, fraudulently file claims or otherwise abuse the system.”

Closing loopholes and eliminating of fraud, waste and abuse would save an estimated $544 million annually and pay for nearly two thirds of the bill’s $872 million price tag. Tiered benefits—which serve as incentives for real job searches and re-training—and increased premiums of employers would help structurally balance the state fund by 2011, Kruse said.

Following today’s Senate passage, Long personally hand-delivered the legislation to the Indiana House of Representatives.

Long said the bill is expected to go to conference committee where differences between House and Senate concepts will be re-negotiated.

“We went into this session in need of an unemployment reform bill that would work for all Hoosiers – our employed and unemployed, our small businesses and large industries,” Long said. “We have authored and passed a Senate plan that replenishes the unemployment trust fund; reforms the system to close loopholes; reduces fraud, waste and abuse; and retrains displaced Indiana workers. However, our work on the jobless fund will not be complete until both chambers and the governor reach final agreement. Hoosiers should know their senators are prepared to stay as long as it takes and to work as hard as possible to find a permanent, bipartisan solution.”

Source: Indiana Senate Majority Caucus

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