Presented by Margaret (Peggy) Piety Indiana Legislative Services Agency

NCSL Legislative Summit Louisville, Kentucky Wednesday, July 28, 2010

State Unemployment Funds: Going for Broke?

The Indiana Experience

Indiana Unemployment Insurance Trust Fund(In Millions)

-$2,000

-$1,500

-$1,000

-$500

$0

$500

$1,000

$1,500

$2,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Fund Balance Tax Revenue and Interest Earnings Benefit PayoutData Source: Department of Workforce Development

2009 Characteristics of the WorkforceNAICS Category Sorted by Total Wages

3,532

494

1,253

214

1,267

413

256

4,919

2,028

1,579

12,001

9,440

5,148

7,755

14,894

6,237

12,763

17,681

10,092

13,620

8,629

$11

$321

$344

$359

$364

$911

$1,150

$1,164

$1,188

$1,579

$1,813

$2,893

$3,971

$4,240

$4,798

$5,263

$6,240

$6,821

$7,402

$7,608

$27,597

Not Assigned

Public Administration

Agriculture, Forestry, Fishing, and Hunting

Mining

Educational Services

Company and Enterprise Mgmt

Utilities

Real Estate, Rental, and Leasing

Arts, Entertainment, and Recreation

Information

Other Services

Accommodation and Food Services

Transportation and Warehousing

Admin, Sppt, and Waste Mgt, and Remed Svcs

Professional, Scientific, and Technical Services

Finance and Insurance

Wholesale Trade

Construction

Health Care and Social Services

Retail Trade

Manufacturing

Total Wages (In Millions)

Number of Employers

Data Source: Department of Workforce Development

Change in Number of EmployeesSelected Private Industries

589 546 557

551427 444

395414 413

291262 281

284273 278

139131 130

153118 113

159

149 150All Other Construction Financial ActivitiesLeisure & Hospitality

Profession & Business Services

Private Education & Health Services

Manufacturing

Trade, Transportation, & Utilities

June 2007

December2009

June 2010

Data Source: Department of Workforce Development

Change in Number of EmployeesPrivate versus Government Sector Employment

2,5612,319 2,365

431 440 443

June 2007

December2009

June 2010

Private GovernmentData Source: Department of Workforce Development

Indiana Unemployment RateAverage Annual Rate

5.0%

5.6%

6.1%

5.0%

4.5%4.3%

3.9%

3.3%

2.9% 2.9% 2.9%

4.2%

5.2% 5.3% 5.3% 5.4%

5.0%4.6%

5.8%

10.1% 10.1%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*

*June 2010 Monthly RateData Source: Department of Workforce Development

Indiana Unemployment Claims

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*

Initial Claims

Continued Claims

*Partial Year to MayData Source: Department of Workforce Development

$416.01

$491.13

$600.58

$684.67

$728.13

$187.00 $220.00

$288.00

$390.00 $390.00

$106.96

$178.71 $222.19

$278.07 $306.99

Average Weekly Wages Maximum Weekly Benefit Average Weekly Benefit

Calendar YearReplacement Rate

199030.8%

199548.3%

200049.3%

200553.6%

200956.1%

(34th)

(34th)

(28th)

(3rd)

Indiana Unemployment Benefits

Data Source: Department of Workforce Development

Unemployment Tax SystemContribution Variables

Current After 2010

28 Separate Rates

9 Tax Schedules

Reserve Ratio

2011 Rates Range: 0.7% to 11.5%2012+ Rates Range: 0.75% to 12.2%

24 Separate Rates

4 Tax Schedules

Reserve Ratio

Rates Range: 1.1% to 5.6%

Taxable Wage Base: $7,000 Taxable Wage Base: $9,500

Unemployment Tax SystemNew Employer Tax Rate (Applies to First 36 Months)

Current

2.7%

After 2010

2.5%

Unemployment Tax SystemDelinquent Employer Tax Rate

Current

5.6%

HEA 1379

12.0%

SEA 23

Employer contribution rate plus 2%

Unemployment Tax SystemContributions and Benefits

2009Employer Contributions: $521.4 M

Benefits Paid: $1,865.3 M

2011

2012

Est. Added Contributions: $295.1 M

Est. Added Contributions: $343.5 M

Data Source: Fiscal Note HEA 1379

Legislation to Address ShortfallHEA 1379 (P.L. 175-2009)

Employer Funding•Increased taxable wage base to $9,500

•Expanded definition of "employing unit"

•Restricted new experience accounts

•New tax schedules and rates (Schedule B in first year)

•One-time voluntary contribution by debit balance employers

Legislation to Address ShortfallHEA 1379 (P.L. 175-2009)

Benefits and Claims•Changes to extended benefits

•One work application each week; department waiver

•Changes to minimum wage credits

•Changes to "discharge for just cause" and "gross misconduct"

•Benefit reductions under certain conditions

•Changes to definition of "unsuitable“ work based on length of time benefits paid

•Compliance center

Legislation to Address ShortfallHEA 1379 (P.L. 175-2009)

Other Provisions•Unemployment Insurance Oversight Committee •ALJ training, monitoring, and discipline•Transfer of excess P&I fund balance to Trust Fund •Hoosier Workers First Training Program •Study whether to implement changes for federal

stimulus funding

Legislation to Address ShortfallSEA 23 (P.L. 110-2010)

Employer Funding•Delayed for one year new tax schedules and rates

•Change to delinquent employer contribution rate

•Repealed voluntary contribution provision

Legislation to Address ShortfallSEA 23 (P.L. 110-2010)

Benefits and Claims•Removed one work application each week requirement

•Jury service not disqualifier for unemployment benefits

•Removed compliance center provision

•Charged 50% of overpayments to uncooperative employer's experience account

Legislation to Address ShortfallSEA 23 (P.L. 110-2010)

Other Provisions•ALJ must be licensed attorney

•Study indexing of benefits and taxable wage base

•Helping Indiana Restart Employment (HIRE) program using TANF emergency funds

•Worker classification

•Tax credits/job creation incentives

Repayment of Interest

FUTA Credit Reduction

Immediate Issues

Restore balance in contribution/benefit structure of state unemployment system

Indexing of benefits and taxable wage base

Changes to claim review/overpayment collections

Employee tax

Array system tax rate assignment

Longer Term Strategies