State officials on Wednesday called off a plan to temporarily suspend the payment of federal unemployment compensation to at least 30,000 Hoosiers.
The Indiana Department of Workforce Development had announced on its website that it would suspend extended jobless benefits beginning Saturday because of federal spending cuts known as sequestration, which begin taking effect Friday.
But Wednesday night, Workforce Development Commissioner Scott Sanders said in a statement that, after receiving guidance from the U.S. Department of Labor, the Indiana agency "will proceed with full payment of extended unemployment compensation until further notice."
Earlier Wednesday, agency spokesman Joe Frank said about the plan to suspend benefits: "We thought it was the best course of action to give people certainty in advance. We can turn it around quickly as soon as the federal government gives us more guidance."
A Labor Department official referred questions to Workforce Development, but said the department had wanted the Indiana agency to remove from its website the announcement that benefits were being suspended.
The announcement, first posted late Saturday night, remained on the website Wednesday evening until it was pulled about the same time as Sanders' statement.
A spokesman for the National Employment Law Project, which advocates for a strong unemployment insurance program, said halting unemployment insurance benefits would be both "cruel" and illegal.
"By suspending the check, they are delaying payment of benefits, which is in direct violation of the federal law," said Maurice Emsellem, policy co-director for NELP.
The Labor Department official declined to comment on whether the benefits suspension is illegal.
State unemployment insurance benefits, which can last 26 weeks, would not have been affected by Workforce Development's original decision. In Indiana, federal extended jobless benefits are paid in weeks 27 through 63 of a person's unemployment.
Federal unemployment benefits are paid to about 30,000 Hoosiers, according to Workforce Development, although Emsellem put the number at about 40,000 in December. The average check is $298 a week.
Under sequestration, the federal government is reducing unemployment compensation grants to states by almost 11 percent. Emsellem said most states are likewise reducing federal benefit amounts, but that Indiana was the first state to say it would suspend benefits entirely.
Workforce Development's Frank said the state was trying to avoid overpaying Hoosiers and then having to recoup the money.
"This is also a Congressional issue. If there is a deal that includes ending federal benefits, we'll have to ask for the ENTIRE amount back," Frank said in an email.
Rep. Dan Leonard, R-Huntington, who has studied unemployment issues for years, said, "I don't know if we can legally deny them benefits."
But after the money is disbursed, "it's very, very difficult to get it back," he said. "It could be a humungous drain on the fund if the federal government doesn't reimburse us."
Sequestration rules for unemployment compensation say that a state "may reduce the (extended benefit) amount by a percentage that does not exceed the percentage by which the federal share of EB has been reduced," according to the Congressional Research Service.
Emsellem said Indiana's plan to suspend benefits "is as unfair as you can get to an unemployed family, to withhold their only limited source of income when there are other options available, including reducing the check, like most states are doing incrementally."