Frugal Café Blog Zone

Posted By Vicki McClure Davidson on January 2, 2011

Indiana's state unemployment is nearly bankrupt.

The unemployment benefits extension that Congress voted on just before Christmas is welcomed news for many unemployed Americans. But for many states which are teetering near bankruptcy, it will quickly add more to the mounting debt. Indiana is facing dire financial problems — especially with increased unemployment payouts.

From Journal Gazette, Jobless fund, redistricting, budget await state legislators:

INDIANAPOLIS – There are lots of issues lawmakers want to address in the legislative session that begins Wednesday.

But only a few must be dealt with – crafting a new budget, drawing congressional and state legislative boundaries for the next decade, and trying, yet again, to address a busted unemployment insurance system.

[...]

Lawmakers will take a third swing at fixing the state’s deficit-ridden unemployment insurance system.

“It is not an unsolvable problem,” Daniels said, noting that businesses will likely have to pay more and some adjustments will have to be made to benefits.

Businesses pay taxes into an unemployment insurance trust fund based on their history of layoffs and the taxable wages of their employees. That fund then pays unemployment benefits when Hoosier employees are laid off. Indiana has had a structural imbalance in the fund – paying out more than it collected – since 2000. The imbalance was eating into the state’s trust fund surplus even before the recession hit and consumed all the funds. Indiana started borrowing money from the federal government to pay claims in late 2008 and currently owes about $2 billion.

Legislators in 2009 passed a whopping tax increase for businesses to start paying in 2010. But lawmakers in 2010 decided to delay the increase because they feared higher taxes would discourage job creation.

Businesses are now mandated to begin paying the tax increase in April.

But Republicans want to revisit the problem to find a way to pay about $60 million in interest owed to the federal government.

From Blogportant, Indiana unemployment changes worry workers, companies:

Indiana has been paying out hundreds of millions more for unemployment than it has been bringing in for years. Since 2000, the state has gone from a $1.6 billion surplus in its unemployment fund to borrowing $1.9 billion from the federal government to keep making payments.

From World News Insight, Indiana Unemployment in State of Bankruptcy:

The Indiana Unemployment fund is out of money and lawmakers are struggling to find solutions to the problem. Businesses owners already facing steep increases in unemployment insurance rates in 2011 are concerned they could see more. The unemployed are worried that Gov. Mitch Daniels has said the state needs to make adjustments in the benefits that are paid.

There are lots of issues lawmakers want to address in the legislative session that begins Wednesday.

But only a few must be dealt with – crafting a new budget, drawing congressional and state legislative boundaries for the next decade, and trying, yet again, to address a busted unemployment insurance system.

State workforce development commissioner Mark Everson said if the correct changes are made, Indiana’s unemployment fund should be back in the black by 2020.

Categories: Business & Economy, Government, Social and Political Climate
Tags: bankrupt, budget, Congress, debt, deficit, Gov. Mitch Daniels, Hoosier State, Hoosiers, Indiana, Indiana unemployment, jobless, jobs, overspending, unemployment, unemployment benefits, unemployment extension, unemployment extension 2010, unemployment rising