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Lawmakers won't cut unemployment benefits

May 06, 2009
Thousands of unemployed Indiana construction workers and union members showed up at the Indiana Statehouse last week in an effort to convince Republicans to drop proposals to slash jobless benefits and deny certain construction workers eligibility status for unemployment. House Bill 1379 would have reduced unemployment insurance benefits on average workers by about 25 percent and restrict many workers, especially those who are normally laid off during winter months, from receiving benefits.

But Democrats stood their ground, pursuing a proposal that would raise taxes on employers but not cut unemployment benefits for workers. Gov. Mitch Daniels has indicated he would sign the bill into law despite calls from business leaders to veto it. Republicans have said the bill will hurt businesses and lead to more out-of-work Indiana residents.

The unemployment fund has, in the last few years, been paying out millions of dollars more in benefits than it has been collecting in taxes. But as recently as 2000, the state's unemployment fund had a surplus of $1.6 billion. Since then, lawmakers have increased benefit payments for unemployed workers and reduced employer premiums, which helped drain the fund.

After enjoying reduced unemployment premiums since Daniels has been in office, Democrats say it's time for employers to step up to the plate and provide stable unemployment benefits to workers.

The new bill, approved by lawmakers, will phase in higher taxes for employers and keep jobless benefits at the current level, a maximum of $390 a week per worker.

Most employers now pay out between 1.1 percent and 5.6 percent on the first $7,000 of an employee's salary annually. But companies with a history of more layoffs would pay a higher percentage of taxes. By 2010, companies would have to pay between 0.7 percent and 9.5 percent on the first $9,500 of a employee's salary, and, in 2011, the tax rates would increase to 0.75 percent to 10.2 percent on the $9,500 annual wage.

Companies that lay off few or no workers would pay less under the new law. The minimum payment on each employee now is $77 per employee, but the new bill would decrease that amount to $71.25. Many small businesses in Indiana never use the fund, and lawmakers believe those businesses should be exempt from higher taxes.

The rate increases in the bill are expected to raise about $315 million a year for the fund. There are also administration changes that lawmakers hope will save about $300 million a year. The state has borrowed almost $800 million from the federal government since 2008 to pay unemployment claims.

"I'm really pleased we were able to preserve the benefits for Indiana workers who are laid off," State Rep. Dennie Oxley, D-Taswell, said. "We got pretty much what we wanted with this bill, but it took a lot of hard work.

"The governor wanted to require workers to be on the job 42 weeks a year to be eligible for unemployment benefits. That's 10-1/2 months a year, and there's no way many construction workers can meet those requirements. But I believe we ended up with a good bill.

"There were about 8,000 to 10,000 union workers who showed up at the statehouse in support of this. There were 31 busloads of workers from one area alone. They would only let about 5,000 of those into the statehouse, and there were at least that many still outside," he said.

"This was an important bill. When people are down and out, it's just not the time to step on them."

The unemployment fund took in $579 million in 2008, but paid out $986 million.

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