[r54] Filling the Hole in the Unemployment Insurance Trust Fund (4/3/2009)

Friday, April 3, 2009

Start Date: 4/3/2009 All Day
End Date: 4/3/2009
This long session of the Indiana General Assembly is riddled with tough issues.  Some of those issues, such as local government reform and permanent property tax caps, are issues I don't think we should rush through.  For these two issues in particular, I think restraint is the best way to go. 

Hastily passing legislation such as the Kernan-Shepard recommendations or Senate Joint Resolution 1 could have sweeping negative effects for Hoosier families.

There's one issue, however, that calls for swift and decisive action this session:  Indiana's unemployment insurance trust fund is flat broke, and the system that supports it is broken.

This is a problem we've been avoiding for years. The weekly maximum benefit for qualifying unemployed Hoosiers increased every year between 1997 ($236) and 2005 ($390), but the premiums for employers didn't keep pace. Our maximum weekly benefit pay out of $390 is among the highest in the nation.

Another factor contributing to our broken trust fund is fraud and abuse. 

Under current law, the only way people could lose their benefits is to be convicted of a felony or Class A misdemeanor in connection with work.  This means that a person could steal from his employer, get fired because of the theft and still receive benefits until he is actually convicted of his crimes. 

There are other types of abuse, as well.  Most have to do with loopholes or poor definitions in existing law.  For example, there have been problems with the definition of "seasonal worker" and some claim unemployment insurance benefits for jobs that are known to only be active a few months a year. 

And with the highest unemployment rates we've seen in decades, something must be done to solve this problem before session concludes on April 29. 

While the House moved nothing forward to tackle the problem, the Senate passed a bill (SB 1379) that attempts to solve the problem by adjusting weekly benefits and premiums on businesses and addressing the problems of fraud and abuse.

Now: Companies pay a rate ranging from 1.1 percent to 5.6 percent on the first $7,000 of an employee's wages.

Under 1379: The rate would range from 0.75 percent to 8.2 percent on the first $10,000 in wages.

Now:  Benefits are capped at 54.6 percent of pay, with a maximum benefit of $390 per week for up to 26 weeks.

Under 1379: Benefits would be capped at 50 percent of pay and would decrease after four weeks and then again after eight weeks.  However, those in job training programs would have their benefits frozen.

The bill also attempts to reduce abuse by expanding certain definitions, closing loopholes and not allowing employees to draw unemployment while awaiting a conviction for crimes that got them fired.  This move alone could save the trust fund about $20 million per year. 

On March 26, the House voted to approve a dissent on HB 1379 when it returned for final approval. This means that the proposals will be addressed in conference committee, where legislators representing each caucus will meet to work out the bill's final version.

This conference committee met for the first time on April 2 to lay out the issue and discuss all the options. 

With three weeks remaining, the group will have to work fast to create a bill that best fixes the problem.

In my view, the best bill will most likely be one that nobody is completely satisfied with.  If labor folks are too happy with the bill, it's probably too tough on businesses; if businesses are completely satisfied, it probably means the bill is too tough on employees. 

Some (not so happy) middle-ground resolution is probably our best bet for success.

I'll keep you posted as we wrap up this legislative session.