Bankrupt Unemployment Fund Fix Balances Needs of Workers, Concerns of Businesses
Indiana’s General Assembly last week approved a plan to replenish the state’s bankrupt jobless fund. The bill, which passed the Senate 46-3, is a bipartisan compromise that preserves worker benefits, restores the fiscal integrity of the system, and prevents premium increases for employers who do not lay off workers – generally speaking, Indiana’s vital family-owned small businesses.
For industries with layoff histories, typically big business, any premium increases would be phased in over two years to help ease the impact during these troubled economic times. Regardless of size, if a business never lays off workers, a decrease in premiums should result.
To further empower business and restore the integrity of the system, House Enrolled Act 1379, which we co-authored and advocated, launches a series of sweeping reforms to eliminate waste, fraud and abuse and creates new on-going oversight to prevent future problems with Indiana’s unemployment insurance fund.
For some time, premiums paid by businesses – which fund unemployment benefits for laid-off Hoosiers – have failed to keep pace with benefits paid-out to workers. As a result, Indiana’s fund is now partially sustained by a more than $800 million interest-free loan from the federal government, an amount estimated to top $1 billion by year’s end.
If lawmakers failed to find a fix in the near-term, we risked facing a federal government takeover of the fund – a move that could have resulted in a massive, permanent expansion of Indiana’s unemployment insurance system and additional premium increases on top of those required to balance the fund.
Thirty states have jobless funds which are already insolvent or at risk of insolvency, according to the National Association of State Workforce Agencies. But many of these states are placing the burden to replenish their funds solely on the shoulders of businesses without looking to find efficiencies in their systems. No general tax revenues are used to fund the UI system. All proceeds are paid in via insurance premiums paid by employers, and all of the premiums in the UI fund are used only to pay unemployed worker benefits.
Common Sense, Cost-Saving Reforms
Indiana’s solution, HEA 1379, balances nearly dollar-for-dollar up to $302 million in cost-savings and reforms to the system with approximately $315 million in premium increases for 2010.
Reforms to the system include the creation of a compliance center tasked with monitoring the fund to prevent improper and overpayments to unemployment insurance claimants and an oversight committee charged with making future recommendations for reforms to the system.
Common-sense, cost-saving reforms will require jobless Hoosiers receiving benefits to actually apply for one job per week, not just look for one as current law provides. Workers fired for poor attendance, working under the influence of alcohol or stealing from their employers will no longer be able to claim benefits.
Fairer, Yet Competitive Premiums
Just as high-risk drivers pay higher premiums for their auto insurance than motorists who rarely have accidents, businesses more likely to lay off workers should pay higher premiums than those that never lay off workers. Consequently, nearly 40,000 Hoosier employers who have never tapped the fund will actually receive a slight decrease in premiums, while those who use the fund more frequently will see increases – but only to levels that maintain Indiana’s economic competitiveness with other states.
Even businesses experiencing the largest increase in their annual, per employee contributions – those who draw down the fund’s balance the most by laying off the most workers – will still pay lower premiums than the Midwest average of $1,042. New premiums will also be phased in over the next two years, giving businesses still recovering from the recession relief from approximately $100 million in 2010 premiums.
A Forward-Thinking, Innovative Solution
Lawmakers 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. Senate Republicans worked in a bipartisan fashion to author and pass a comprehensive bill that closes loopholes, protects many small businesses from premium increases and positions Indiana as a forward-thinking, innovative leader in tackling this nationwide problem.
Ron Alting Brandt Hershman Dennis Kruse
State Senator State Senator State Senator
Lafayette–District 22 Wheatfield–District 7 Auburn–District 14