From the Statehouse: Legislature Reaches Tentative Agreement on UI Fund

by Joni Howell
Manager, Government & Community Affairs

Indiana Legislators have announced a compromise on the Unemployment Insurance Trust Fund issue. With just one more day before the legislature adjourns for the year it appears that a tentative agreement has been reached.

The plan raises nearly $400 million by increasing taxes on employers. The Conference Committee report calls for an increase in the taxable wage base from the current $7,000 to $10,000. The rate would also change to 0.75 percent to 10.2 percent (currently 1.1 - 5.6 percent).

The "new employer rate" would move from 2.5 to 2.7 percent. The agreement redefines gross misconduct, and creates a compliance center for UI and still provides for administrative law judge training to improve consistency in unemployment rulings.

The proposal doesn't include any cuts in benefits, or changes in the seasonal worker definition, and no employer surcharge (previously proposed to immediately work on bringing the fund back to solvency).

The downside? Business is taking the big hit with this one. Previously offered plans were a more balanced approach, tackling the fund from all sides of the issue. The Conference Committee report will still have to be signed by all four conferees and be passed by both the House and Senate before the deal is done.

The Chamber could support the increase in the wage base that keeps us competitive with other states. There is nothing magical about the current $7,000 base, other than it matches the federal base. Increasing the base will allow taxes paid by employers to be paid out over a longer period of the year. The $10,000 wage base isn't as bad as the previously suggested $14,000 increase in the House D version, but more than the $9,000 base suggested in the Senate version.

We supported tightening up eligibility overall and for seasonal employees (which was removed). Seasonal employers should have to pay more to support their type of business. Eliminating abuse in the system is also a good goal.

While no business likes to pay higher taxes, this is the only way to get the system back on solid financial ground. We are not in favor of any new taxes, including "employee" taxes that would create a new, cumbersome administrative process on employers and employees (which was not done).

In order to prevent this large shortfall in the future, we support a process that will keep rates at a level that keeps the system actually funded at all times. The current system of adjusting rates is not done on a timely basis.