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INDIANAPOLIS – The first attempt to fix the state’s broken unemployment insurance system fell flat Monday when Republicans criticized the proposal as inadequate and the Democratic author withdrew the bill before a final House vote.
“I’m not sure how we can pass out an increase on employers that doesn’t make some sort of significant attempt to solve a problem,” said Rep. Dan Leonard, R-Huntington. “This is like trying to bail out a sinking ship with a teacup.”
Rep. David Niezgodski, D-South Bend, said the bill is a starting point and that if Republicans don’t want to participate in fixing the problem the state can just let the fund founder and the federal government can take it over.
“If you want to do nothing, we certainly can accommodate you,” he said before withdrawing the bill.
He has until Feb. 25 to pass House Bill 1721 out of the chamber or it will die. There is no corresponding Senate legislation.
Unemployment payouts to out-of-work Hoosiers have outpaced business contributions to the fund for several years, and the recession has exacerbated the structural deficit.
The fund ran out of money at the end of last year – forcing the state to borrow hundreds of millions of dollars from the federal government and incur interest costs.
So legislators not only have to adjust the tax rates for the long-term health of the fund but also pay back between $1 billion and $1.8 billion, according to varying estimates.
Before it was pulled, the proposed legislation called for an increase in taxes on businesses by about $260 million annually and established a separate surtax to be paid by employers to pay off interest the state now owes to the federal government.
Republican Gov. Mitch Daniels has declined to make a specific proposal on the fund, saying it is a legislative issue.
The agency running the unemployment system – the Department of Workforce Development – also declined to propose a solution, instead saying it would provide information to lawmakers trying to put together a bill.
Democrats in the House finally unveiled a proposal last week that was deemed a good start by various special interests, and it passed out of committee with Republican support.
Niezgodski conceded immediately Monday that it likely doesn’t raise enough money to tackle the entire problem, but he said the bill is a placeholder to continue addressing the issue.
“It’s a fix that will have to be fixed a little more. We could have brought you a bill that would pay for it all and the argument would be that business can’t afford it,” said Rep. Russ Stilwell, D-Boonville . “I promise the alternative is far worse than doing nothing.”
But Republicans said the bill only raises taxes and doesn’t address two other major components of the unemployment insurance system – eligibility and benefits.
House Republican Leader Brian Bosma, of Indianapolis, said Indiana’s replacement rate is third-highest in the country at 54.6 percent.
This is the percentage of a person’s wage replaced by unemployment benefits. The national average is 47 percent.
“This isn’t even a partial solution,” he said. “We’re punting on second down instead of trying to deal with the problem.”
But Bosma also acknowledged his members refused to offer amendments on second reading such as reducing benefits or changing eligibility, saying Democrats would have used the proposals against Republicans in the 2010 election.
“It was made clear that the goal of the majority was to get the minority to lead on this,” he said. “They are in the majority. They are elected to lead.”
