INDIANAPOLIS (AP) -
Indiana Gov. Mike Pence is deciding whether to use about $250 million of the
state’s surplus to provide relief to local businesses by paying off a
federal unemployment loan this fall.
If the loan is paid
off by Nov. 9, the state’s employers would save an estimated $327 million in
penalties next year.
The governor’s
office and supporters of the plan say it would bring tax relief for job
creators and ultimately help the state’s economy, The Indianapolis Star
reported. The they say money would act as a loan to the unemployment
insurance trust fund to pay off the federal debt, and then the fund would
pay back the state.
But state Rep. Greg
Porter, the Democratic fiscal leader in the Indiana House, believes the
surplus generated by all taxpayers should be used in a way that would
benefit residents.
He hopes Pence will
consider allocating fund from the state’s reserves, which reached $2.14
billion at the end of June, to roads and preschool education.
“With that
surplus,” Porter said, “I think it could help a whole lot of people.”
The $250 million
that could be used to pay off the federal unemployment loan also would be
enough to make up the funding that school corporations are expected to lose
in the new, two-year state budget approved this year by lawmakers. It also
could cover the average salaries of 200 family case managers from the
Department of Child Services for more than 30 years.
If the state
decides not to use the money to pay off the loan, the state’s unemployment
trust fund should be able to pay it off by May. But the state’s employers
would face an increase in the penalty they pay for 2016, bringing the
penalty to $126 per employee, compared to this year’s $105 penalty.
Over the years, the
General Assembly has taken action to make it more difficult for the state’s
reserves to reach the threshold that triggers an automatic taxpayer refund.
The discussion whether to offer relief for Indiana businesses follows those
moves.
The state’s
reserves for the fiscal year ending in June would’ve needed to be $103
million higher to trigger the refund. In accordance with state law, the
reserves must constitute 12.5 percent of the budget before a refund is
offered to taxpayers.
The unemployment
fund could pay the state back early next year, according to state Rep. Dan
Leonard.
“We’re not taking
taxpayer dollars and giving it to anybody. All we are doing is using some of
our funds to avoid a penalty on employers in Indiana,” Leonard said.
The loan was
granted in 2008, when Indiana had to begin borrowing from the federal
government to meet unemployment demands amid the recession.