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Tom Coyne the Associated Press
Published: 28 December 2010

SOUTH BEND — The changes lawmakers will likely make to Indiana's insolvent unemployment system concern construction worker Finis Patterson and business owner Judy Nagengast, though for different reasons.

Patterson worries he and other laborers who claim unemployment benefits during the winter months when they don't have work will see their checks shrink.

"I have a mortgage and a car note, said the 57-year-old Indianapolis resident, who receives $226 a week. "I'm worried that if they cut my unemployment I won't be able to pay my bills." Nagengast, who owns a staffing company in Anderson, said businesses are already seeing their unemployment insurance to go up, and they can't afford to pay more.

"I'm trying to create jobs and my customers are trying to create jobs and this makes it hard on the people who are trying to create jobs," she said. "The system the way it's set up right now with the recession, it's just killing us, absolutely killing us."

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.

Gov. Mitch Daniels has said solving that problem will be a priority in the upcoming legislative session. The problem, Daniels said, is that Indiana has one of the nation's most generous unemployment benefits but ranks 31st in the nation in the premiums it charges businesses.

"If you're going to have the highest benefits, you're going to have to have the highest premiums. If you want moderate premiums, you have to have moderate benefits," he said. "You're going to have to bring those two together somewhere in the middle."

Daniels and Mark Everson, the Indiana Department of Workforce Development commissioner, say businesses have already been asked to pay more and now it's workers' turn. But they also said the plan isn't to cut the payments most workers receive but to fix inequities.

An example, Everson said, is that two people who earn $26,000 a year can receive starkly different benefits.

A retail worker who made that much money and worked every week for a year would receive a weekly unemployment check of $280. A construction worker earning the same annual salary but working only 39 weeks because of winter layoffs would receive $367 a week.

"We're saying the calculation of the benefit ought to be comparable because really what those people earn over the course of a year is the same," Everson said. "We think that should be consistent and fair treatment."

Lawmakers also are looking at "sub pay," where automakers and some other industries supplement laid off workers' unemployment benefits.

"It's literally using the unemployment insurance system to subsidize a collectively bargained benefit," said state Sen. Brandt Hershman, R-Monticello

Union officials, though, argue that seasonal unemployment for certain workers, such as those in construction, and sub pay negotiated through union contracts are just part of those businesses' operating costs. Indiana State AFL-CIO president Nancy Guyott said it makes no sense to penalize workers for negotiating sub pay.

"It's like saying we're going to completely deny you getting Social Security benefits because you happen to have the foresight to put money in a 401K," she said.

The Legislature has been trying to fix the unemployment system since 2009. Lawmakers voted to raise employers' premiums in 2010, but then put off the increase for a year because of the recession. Those changes go into effect in 2011.

Nagengast said the increase means her company will pay $180,000 in unemployment taxes next year, compared to $80,000 this year. Her premiums cover about 200 workers at Continental Inc. The new system will be particularly hard on staffing companies and other Indiana businesses with a history of laying off employees, she said.

"It's hurting the businesses that have struggled the most," she said.

Supporters, though, argue that's the way it should be: Businesses that have a history of laying off workers should pay at higher rates.

The unemployment

fund should be back in the black by 2020 if the right changes are made, Everson said. The state has no choice but to act, he said.

"The fund has got to be generating a surplus in the normal times so it can pay out in the tough times," Everson said.


Associated Press Writer Deanna Martin in Indianapolis contributed to this report.

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