Payback of Indiana Loans for Jobless to Hit Businesses

Indiana will begin paying millions of dollars in penalties and interest to the federal government next year because it has borrowed nearly $2 billion to pay for jobless benefits, an Indiana unemployment official said.

Scott Sanders, deputy commissioner of the Department of Workforce Development, told lawmakers and other members of the Unemployment Insurance Oversight Committee that the state will have to pay $80 million to $100 million in interest in 2011. The first payment of about $60 million was due Sept. 30.

The Journal Gazette of Ft. Wayne, Ind., and The Times of Munster, Ind., reported that Indiana businesses in January will begin paying a penalty of $21 per worker because Indiana has not yet repaid the loans. The business penalty increases by $21 per worker per year until the loan is nearly paid off.

Businesses pay taxes into an unemployment insurance trust fund based on their histories of layoffs and the wages they pay, and the fund provides jobless benefits. However, Indiana’s fund went broke in late 2008, and the state has had to borrow federal funds since then. It currently owes $1.8 billion, a number expected to reach $2 billion by the end of 2010.

Nationally, more than 30 states owe $40 billion to the federal government. Sanders said Indiana has not had to pay interest on the loans until now, but that will change on January 1.

Gov. Mitch Daniels and some lawmakers hope the federal government will take action to relieve states of the loan penalties and interest, which cannot be paid out of states’ trust funds. State Sen. Brandt Hershman, R-Lafayette, said he hopes Congress will pass a law delaying the penalties and interest payments when it returns to Washington, D.C., after the Nov. 2 elections.

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