INDIANAPOLIS – Gov. Mitch Daniels on Wednesday signed into law a sizable business tax increase to fix the state’s unemployment insurance system while also vetoing a bill creating a new panel of appellate court judges.
He also approved 22 other bills – the final ones remaining from the recently ended legislative session.
Daniels resisted calls from the business community to veto House Bill 1379, which contains measures to fix Indiana’s broken unemployment program.
The state unemployment insurance trust fund has been running a structural imbalance since 2001, which means taxes paid into the fund by businesses don’t cover unemployment claims paid to out-of-work Hoosiers.
Indiana ran out of money late last year and has borrowed more than $800 million from the federal government to pay benefits. That figure is expected to easily exceed $1 billion this year.
So lawmakers needed to restructure the fund so that it is solvent again and start paying back the federal loans.
It did so by raising taxes on businesses paying into the fund. The current tax rates on the first $7,000 of an employee’s salary range from 1.1 percent to 5.6 percent.
The new law raises the taxable wage base to $9,500 and spreads out the tax rates as well so that businesses who chronically lay off workers shoulder more of the burden.
The tax rates will be between 0.7 percent and 9.5 percent in 2010 and 0.75 percent and 10.2 percent in 2011.
The fix brings in $315 million in new revenue from increased taxes on businesses starting in 2010 and $365 million in 2011.
Lawmakers also hope to save $300 million annually through a variety of measures including allowing employers to more easily fire employees with bad attendance or those who commit crimes at work and by creating a compliance center to catch errors in the system.
Business groups opposed the bill, arguing it focused too heavily on the tax side of the equation and didn’t cut benefits or limit eligibility.
But Daniels said the day after the session ended that he would sign the legislation.
“It’s very imperfect. It doesn’t fix the problem, but it’s some progress, and it begins to make a few reforms that I think will be helpful,” he said. “I will say this on its behalf: It begins to address the unfairness between big businesses, which have been subsidized by small businesses for a long time.”
Also on Wednesday, Daniels vetoed a judicial bill with two major provisions.
House Bill 1491 first would have created a sixth panel of appellate court judges starting in 2011. The cost of three more judges plus related staff is estimated at $2.4 million in 2011.
And it would have required judges in St. Joseph County to be elected in non-partisan elections rather than the merit appointment process that has been used for decades.
Daniels said the St. Joseph County method for selecting judges “is a model to be emulated, not discarded. It is not broken, it requires no repair. It has produced outstanding jurists and contains sufficient measures of public accountability. I believe it neither necessary nor wise to re-politicize the courts of St. Joseph County.”
The governor also said an additional $2 million per year for a new panel to the Court of Appeals is difficult to justify in today’s challenging fiscal environment.
“Moreover, if I were to sign a bill linking these two proposals, it could contribute to public cynicism by creating the appearance that my acquiescence was purchased with more appointments. Whatever the merits of expanding the Court of Appeals may be, they should be considered alone.”
The final version of the bill passed the House 68-22 and the Senate 32-18. To override a veto, legislators merely need a simple majority of 51 votes in the House and 26 votes in the Senate.
Other measures Daniels signed into law include the following:
•House Bill 1514 – Establishes the Allen County-Fort Wayne Capital Improvement Board and funnels tax dollars to it for future economic development projects.
It allows the newly named local panel to capture any revenue from the Allen County food-and-beverage tax that is not needed to pay down debt service on Memorial Coliseum – about $2 million annually starting in 2011.
The legislation also expanded the Allen County Professional Sports and Convention Development Area to include facilities at Indiana University-Purdue University Fort Wayne and sends the bulk of that money to the Coliseum for ongoing maintenance and repairs.
•Senate Bill 391 – Allows Hoosiers to renew their driver’s license through the mail or the Internet as long as there is a computerized photo in the BMV database and the most recent renewal was done in person.
This means the longest a person could go without a new photo on their license is 12 years.
•Senate Bill 160 – Renames the State Boxing Commission the State Athletic Commission and regulates unarmed combat matches and exhibitions, mixed martial arts and professional wrestling.
