Indiana's unemployment insurance program has stopped borrowing money from the federal government and is now generating enough revenue from taxes on businesses to pay out weekly benefits.
The state still owes $1.7 billion that it has borrowed since the onset of the recession, said Scott Sanders, the commissioner of the Indiana Department of Workforce Development.
But changes the Indiana General Assembly made to boost the premiums businesses pay into the system and reduce the benefits unemployed workers receive have helped bring the system back into balance, Sanders said. An improving unemployment rate — which means fewer workers seeking benefits — has helped as well.
Still, the state won't have fully paid back its loans until 2018, when Sanders said the Department of Workforce Development projects to achieve a "positive balance" in the fund.
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The projections are based on assumptions that the revenue paid into the fund and the benefits paid out will remain relatively unchanged from 2012. Currently, the state's unemployment rate stands at about 8.2 percent, down from a high of nearly 11 percent in 2009. Meanwhile, private sector job growth is up in Indiana.
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The General Assembly passed the unemployment overhaul last year, a decade after the fund's benefits payments began exceeding its tax revenues. A surplus in the unemployment trust fund made that imbalance possible for years. But the state was eventually forced to borrow.
The 2011 law, which took effect as soon as it was passed, caused business to pay about 80 percent more in total taxes than they had in 2010. The law also reduced benefits for unemployed Hoosiers by roughly 20 percent overall. effective July 1.
The law aimed to bring the unemployment fund back into balance by 2013 and repay the federal loans by 2020, deadlines the state is now beating.
Since the law took effect, the revenue from business taxes have fallen just short of projections. But payments to unemployed workers have been less than expected.
Meanwhile, the state paid $132 million in interest in 2011 and 2012 on the money it borrowed from federal officials. The loans have also cost the businesses, which have been paying higher federal taxes to pay back the loans.
Those federal taxes will increase annually until the state's unemployment fund meets several solvency criteria. Sanders said that should happen in 2014, when the tax increases paid by businesses will be capped at $84 per worker until the loans are fully repaid.
