INDIANAPOLIS – Legislative leaders reached a hard-fought accord on an unemployment insurance bailout and aid for struggling schools after days of stop-and-go negotiations.

The House and Senate approved the compromise early today and adjourned the 2010 legislative session.

The breakthrough came after days of negotiating that began to mirror the movie “Groundhog Day” – a repeating pattern of optimism and frustration.

“It turned out pretty good for everyone,” said Senate President Pro Tem David Long, R-Fort Wayne. “Timing is everything. You have to wait for the right moment.”

The centerpiece of the deal is a one-year delay of scheduled unemployment insurance tax increases that would save businesses $350 million this year.

Last year, the General Assembly passed an unemployment tax increase on businesses to cope with a bankrupt unemployment trust fund. The state has borrowed $1.7 billion so far from the federal government to continue paying claims.

But Republicans sought to delay the tax increase because the economy is still fragile and the hike could result in more layoffs.

The issue was the GOP’s highest priority.

The Democratic House succeeded in adding several pro-labor provisions to Senate Bill 23, including requiring the Indiana Department of Labor to come up with guidelines and enforcement recommendations on the issue of misclassifying workers. Businesses sometimes wrongly categorize an employee as an independent contractor to avoid paying unemployment or worker’s compensation taxes.

The two sides also agreed to a modest job-creation package that consists of a new employer tax credit to lure businesses to locate to Indiana and tax credits for small businesses that create new jobs.

Rep. Win Moses, D-Fort Wayne, said he isn’t convinced that a one-year delay is the right thing to do. But he said it is understandable given the economy.

“We’re just kicking the problem down the road. We haven’t solved it, just delayed it,” he said.

Leaders also were able to help schools cope with cuts of $300 million in state funding.

House Bill 1367 would give all schools the ability to tap some property tax funds for operating costs. Schools would have access to additional money if they agree to limit raises to school employees.

“We understand the hard economic times, but we need to give schools the ability to keep teachers in the classroom,” said Rep. Greg Porter, D-Indianapolis. “This is real. The layoffs are happening.”

Rep. David Wolkins, R-Winona Lake, said this bill was his first priority for the session. He conceded that in the past, he has been critical of schools for “crying wolf” about cuts. But this year, he recognizes the pain is real.

“They have less money, and I sympathize with them,” he said. “They ought to have flexibility.”

Two other key bills were also approved.

House Bill 1205 begins the process of allowing the Public Employees Retirement Fund and Teachers Retirement Fund to merge their investment strategy. Specifically, the two boards will jointly appoint an executive director to negotiate on their behalf.

Currently each board has its own director.

House Bill 1086 contains an update of the state revenue code and the ballot wording Hoosiers will see when voting in November on whether to make property tax caps part of the Indiana Constitution.

nkelly@jg.net