Lawmakers are weighing a bill that would keep the taxes — or premiums — companies pay into the state’s unemployment insurance fund the same.
That doesn’t sound like much of a story. House Bill 1111 essentially maintains the status quo. Rates won’t go up; they won’t go down.
But nothing in the unemployment insurance world is ever that easy. You see, if lawmakers don’t act on the legislation, the rates will drop automatically and the amount companies pay into the fund will actually go down.
That’s what businesses have been anticipating since the Legislature approved the current tax schedule back in 2011. Back then, the Indiana unemployment fund was deep in the red, the state had borrowed $2.1 billion from the federal government, and lawmakers had to act quickly to raise taxes and cut benefits to move the system back to solvency.
As a result, the fund is solidly in the black—and has been for several years.
So why the legislation? Why not let the rates drop?
Federal officials are worried that Indiana hasn’t built up a big enough surplus to weather the next recession. And so it put Indiana on a list of 24 states that should increase the contributions to their unemployment trust funds.
Gov. Eric Holcomb’s administration last year proposed raising the premiums companies pay. Lawmakers didn’t act on the idea, postponing a decision until now.
HB 1111, authored by Republican Rep. Dan Leonard of Huntington (who is the Legislature’s foremost expert on the topic), is a sort of compromise between letting the rates drop and raising them above current levels.
We applaud the approach, which pumps more money into the unemployment fund than had been previously projected but protects business from a tax increase.
Andrew Berger, senior vice president of government affairs for the Indiana Manufacturers Association, told lawmakers his organization supports the bill because it provides stability. And we agree.
We don’t want to get too far into the weeds. But Leonard said the unemployment fund balance has been growing $200 million to $220 million annually—and that growth would be expected to continue under his legislation. (The growth would slow or stop if the premiums dropped.) So if the bill passes, the fund could hit $1.8 billion by 2025.
That’s the amount recommended by federal officials—and it’s up considerably from the $856 million fund surplus on June 30, 2019.
If the fund reaches $1.8 billion sooner, the legislation will allow rates to drop. If the fund balance falls to less than $700 million, businesses will be forced to pay more.
However, it’s not enough to pass the bill and forget it.
The Holcomb administration and lawmakers must continue to monitor the fund and be prepared to take additional action if the balance starts to fall or growth slows. A deep recession could decimate the fund’s surplus and leave the state vulnerable to borrowing money again, a move that automatically imposes higher taxes on Indiana business as the feds try to recoup their money.
HB 1111 appears to be a balanced approach we can get behind.
