By Eric Bradner, Evansville Courier & Press
INDIANAPOLIS - Republican state lawmakers said Tuesday that they want to delay by a year business tax increases intended to eventually return the state's unemployment insurance fund to solvency.
Such a move would mean Indiana would borrow, and eventually have to repay, an additional $250 million on a line of credit opened by the federal government. But it could help dodge other costs associated with tax hikes during a recession, such as layoffs.
At a time when other states are struggling to overcome the same problem - unemployment funds that are taking in less in tax collections than they are paying out in jobless benefits - a one-year delay also buys time to see if the federal government will decide to provide some sort of bailout, a group of Republican leaders who control the Senate said.
Senate President Pro Tem David Long, R-Fort Wayne, said that pushing back the onset of new tax levels set by the Indiana General Assembly earlier this year "provides more breathing room for Indiana's economy to recover while also giving the state time to see what the federal government intends to do to assist states like Indiana that are struggling with an overwhelmed unemployment systems."
Indiana has borrowed $1.3 billion from the federal government to make unemployment payments so far, a figure which is expected to reach $1.7 billion by the end of this year, said Marc Lotter, a spokesman for the Indiana Department of Workforce Development.
That figure would reach $2.7 billion if the new tax rates go into effect as planned on Jan. 1, 2010, or $2.96 billion by the end of 2010 if Senate Republicans are successful in delaying the onset of those tax rates, Lotter said.
By 2013, Indiana expects its debt to the federal government to top out at $3.5 billion.
"Our jobs are simply not coming back in Indiana like we thought they would be by this time," said Sen. Dennis Kruse, R-Auburn. "It's not right for us to put this burden on the backs of the employers right now who may actually end up going out of business or going into bankruptcy or reducing their work force even further because of these increased premiums."
Democrats in the Indiana House said they wanted to hear more before deciding whether a one-year delay is a good idea.
Rep. David Niezgodski, a South Bend Democrat who chairs the House Labor and Employment Committee and helped write the unemployment fund fix that passed during this year's regular session, said he was open to the proposal.
Sen. Karen Tallian, D-Portage, said Republicans should have brought the idea of a one-year delay up at one of the meetings of the Unemployment Insurance Oversight Commission, an out-of-session legislative panel. The committee held its final meeting on Monday, ending less than 24 hours before Long and other Senate leaders made their announcement.
"The employers that would clearly lose under this proposal are those who were scheduled to get a reduction in their unemployment insurance tax rates under the new structure," Tallian said.
Meanwhile, House Minority Leader Brian Bosma, R-Indianapolis, endorsed the Senate Republican plan but said he thinks lawmakers should reconsider the entire plan to bolster the fund, perhaps lowering benefits to spare employers from bearing the full burden of the higher tax levels.
Currently, employers pay between 1.1 percent and 5.6 percent on the first $7,000 a worker earns, or between $77 and $392 per year.
Under legislation that passed in April, starting in 2010, that will increase to between 0.7 percent and 9.5 percent on a wage base of $9,500. That's between $66.50 and $902.50 annually.
Then in 2011, that again jumps to between 0.75 percent and 10.2 percent on the first $9,500, leaving the final range at between $71.25 and $969 each year.
Unemployment benefits - currently a maximum of $390 per week and an average of $298 per week - are to stay the same.
The plan also includes a provision to increase Department of Workforce Development oversight to ensure no one ineligible for benefits is drawing them.
"The top priority of our state should be saving existing Hoosier jobs during this severe economic downturn," said Patrick Kiely, president of the Indiana Manufacturers Association.
Though the new tax rates take effect on Jan. 1, businesses don't have to pay until after the year's first fiscal quarter. That will give lawmakers time to consider the delay.