INDIANAPOLIS | Indiana businesses have won a one-year reprieve from paying higher unemployment insurance premiums, but the delay will put the state's unemployment system deeper in debt.
On Thursday, Gov. Mitch Daniels signed into law Senate Enrolled Act 23, a measure that moves the implementation date of new, mostly higher unemployment rates paid by employers back to 2011.
Businesses are expected to save an estimated $400 million as a result of the delay.
However, the new law also means Indiana will have to keep borrowing money from the federal government in order to continue administering its insolvent unemployment program. So far the state has borrowed nearly $2 billion to pay benefits to unemployed Hoosiers.
Speaking to a state business group on Wednesday, the Republican governor said Indiana needs to completely rework its unemployment program, adjusting both employer premiums and worker benefits.
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"We have been living with a very lopsided system: some of the lowest premiums in America, 40th by the latest measure; some of the highest benefits in America, third by the latest measure," Daniels said. "This system was leaking money when we were at full employment two years ago."
In 2009, the General Assembly approved and Daniels signed legislation hiking unemployment premium rates on businesses with a history of laying off workers. Some 40,000 businesses that rarely lay off workers would have seen their premiums go down this year. The goal was to begin repaying Indiana's debt to the federal government while also refilling Indiana's unemployment fund.
However, the poor economy since then led state lawmakers to agree to delay the premium changes for one year.
Daniels said he also wants to see if in the next year there will be national legislation addressing unemployment insurance. Unemployment is a joint federal-state program and many states, including Indiana, have had to borrow money from the federal government to pay their state share.
Other provisions of the legislation Daniels signed Thursday are intended to create jobs in the state by giving tax breaks to Hoosier businesses that hire new workers and to companies that relocate to Indiana.