INDIANAPOLIS — Candidates who win victories in Statehouse races Tuesday may wonder exactly what kind of spoils they can claim.
Awaiting them when the 117th Indiana General Assembly convenes in early January are some billion-dollar problems. The first is a projected $1 billion revenue shortfall for the next biennial budget. The second is a projected $2 billion debt to the federal government — money the state borrowed to pay for jobless benefits for out-of-work Hoosiers.
Trying to solve either dilemma without bipartisan cooperation will be what Indiana House Minority Speaker Brian Bosma recently called “a cagefight.”
Both fiscal problems are linked in part to the recession. Income from the sales tax — which makes up roughly half the state’s general fund — plunged after the recession hit in 2008.
It’s risen 4 percent over the last six months, according to the State Budget Agency. But it’s still not back to prerecession levels.
Meanwhile, the state will have to begin paying millions of dollars in penalties and interest to the federal government on the estimated $2 billion it will have borrowed by the end of this year to cover the state’s unemployment insurance fund, which went broke in 2008.
According to the Indiana Department of Workforce Development, the state will have to pay $80 million to $100 million in interest in 2011, with the first payment of about $60 million will Sept. 30.
The other bad news delivered by department officials: Beginning in January, Indiana businesses will begin paying a penalty of $21 a worker because the state hasn’t repaid the loans.
Indiana isn’t alone. According to the Council of State Governments, 31 states have borrowed more than $40 billion from the federal government to pay unemployment benefits.
But company doesn’t lessen the misery, said Indiana Rep. David L. Niezgodski, a Democrat who’s been working on the issue for the past two sessions.
As he and Bosma point out, even if the state wasn’t facing a deficit, state lawmakers can’t use money from the general fund to return the unemployment insurance fund back to long-term solvency.
The traditional fix is a choice between two painful options: Reduce the benefit payments to the unemployed or increase the unemployment insurance taxes on employers.
Indiana’s unemployment benefits to the jobless have exceeded premiums paid by employers since 2001.
State lawmakers approved an increase in the employer-paid premiums in 2009. But when the recession deepened, they voted to delay its implementation until 2011.
But that decision may be up for reconsideration.
At a recent meeting of the Indiana Fiscal Policy Institute, Bosma questioned whether Indiana’s jobless benefits — which average about $300 a week — are too generous.
He told a story about meeting disgruntled employers who’d offered jobs to workers receiving unemployment benefits only to be spurned.
“People would say, ‘I’d rather get my unemployment check and stay at home,” he said.
Niezgodski doesn’t think the idea of cutting jobless benefits will go over well with his fellow Democrats in the Statehouse.
“We’re not going cut benefits,” Niezgodski said. “Not while we have so many families out there still struggling. We have to find a fix for this, but the real answer is jobs. We need more jobs.”
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