INDIANAPOLIS | State officials have canceled a plan to suspend unemployment payments for more than 32,000 out-of-work Hoosiers that was prompted by automatic federal budget cuts known as the sequester.
The Indiana Department of Workforce Development previously announced it no longer would pay Federally Extended Unemployment Benefits for weeks 27 through 63 of unemployment because of uncertainty over whether the federal government will continue to fund the program once the $85 billion sequester takes effect Friday.
"We have gotten no guidance from the federal government on what to do about the sequestration issue," said Joe Frank, DWD spokesman. "And where it becomes a problem is, according to federal law if we pay people benefits and it's later determined we paid them too much, we have to get that money back from them."
Late Wednesday night, DWD Commissioner Scott Sanders reversed the decision to halt payments after receiving a sequester update from federal officials.
"The U.S. Department of Labor confirmed that unemployment benefits will not be impacted by sequestration through the week ending March 9, and additional guidance will be forthcoming," Sanders said. "As such, the Indiana Department of Workforce Development will proceed with full payment of extended unemployment compensation until further notice."
Prior to the reversal, Frank said it would be hard to tell an unemployed Hoosier using his or her benefits to buy groceries or other necessities that the money already spent must be immediately repaid.
"So we thought the best course of action would be to suspend them temporarily until we get more guidance from the federal government," Frank said.
The U.S. Department of Labor has told states that federally funded benefits, which average $275 a week, must be reduced 9.4 percent because of the sequester. Indiana appears to be the only state that took steps to stop paying extended benefits altogether.
Hoosiers in their first 26 weeks of unemployment wouldn't have been affected, as those benefits are paid using state funds.
Republican Gov. Mike Pence, who oversees the state labor agency, did not mention the sequester's potential effect on unemployed Hoosiers when he met with reporters Wednesday morning. He did call on Congress and the president to replace the sequester's across-the-board cuts with specific, targeted budget reductions.
"I think it is essential that the administration step forward and leaders of both parties in Congress step forward with smarter and better spending cuts," Pence said. "That being said, we are trying to evaluate the impact of sequestration on a number of programs here in the Hoosier State."
As a member of Congress, Pence voted for the 2011 Budget Control Act that included sequestration as part of a deal to increase the federal debt limit and avoid a U.S. bond default that could have imploded the global economy.
The sequester's pain touches nearly every category of federal spending. U.S. Rep. Pete Visclosky, D-Merrillville, said he's concerned sequestration will weaken military readiness.
"The Department of Defense may have to furlough 768,000 civilian personnel, all of whom make vital contributions to our military capabilities; 86 percent of whom are stationed outside of the Washington, D.C., metro area; and 44 percent of whom are veterans," Visclosky said.
U.S. Sen. Joe Donnelly, D-Ind., said he's been working with a bipartisan group of 25 senators on legislation that would give flexibility to federal agencies, including the Department of Defense, to decide how best to cut, rather than having to cut each line-item an equal amount.
The first-term senator, who voted for the sequester as a congressman, said a deal probably won't be reached before the sequester takes effect Friday, but fast action after that could minimize the effect of the cuts.
"Unfortunately with some folks out here they don't really believe it happens until it happens," Donnelly said.
Once it happens though, Donnelly said he's "hopeful that we can reach a thoughtful, smarter way to cut, that we can include revenues as well, and that we can have a long-term agreement."