A Little Less Talk, a Lot More Action at Statehouse?

Tuesday morning at the Indiana Statehouse was a good time for catchy phrases. Whether the rest of the week will see substantive legislative action is yet to be seen.

House Speaker Pat Bauer has reconfirmed his plan to adjourn this session by the end of Thursday (10 days before the March 14 deadline date for such action). His closing words to House members (before calling for a recess until 2:30 today) as he urged them to work diligently on conference committees: "If you can make an agreement, so be it; if you can’t make an agreement, so be it."

Prior to that, House Minority Leader Brian Bosma said his caucus was not opposed to a Thursday ending as long as all the needed business was taken care of. He cited five priorities, led by a clean and clear delay in the unemployment insurance tax increase, that would thwart the "go home early" plan. His final comment: "It’s better to be a little slow and right than quick and wrong."

The Senate has not publicly weighed in today (it has a light calendar with a 1:30 beginning), although President Pro Tem David Long has previously stated there is nothing wrong with an early ending, but not before key issues are addressed.

The real work is taking place in conference committees and in negotiations among leadership. Stay tuned for the outcomes.

Cruel Irony for Job Seekers and Employers

The Indiana Chamber has pointed out during the course of the year that one of the unfortunate aspects of the state unemployment insurance tax increase passed into law in April was the likelihood of higher unemployment. Why? Companies already faced with a still sputtering economy would be forced to lay off more people to pay the additional tax.

Fortunately, in Indiana, a one-year delay in that tax increase has been proposed — and hopefully will pass early in the 2010 General Assembly session. In a recent story, the Associated Press described the problem on a national level. It included an interview with a longtime Indiana Chamber supporter (and former board of directors chairman).

A brief excerpt:

Employers already are squeezed by tight credit, rising health care costs, wary consumers and a higher minimum wage. Now, the surging jobless rate is imposing another cost. It’s forcing higher state taxes on companies to pay for unemployment insurance claims.

• Chuck Ferrar, who owns a liquor store in Annapolis, Md., expects to pay $9,000 in unemployment taxes next year, up from $3,000 this year. Health care costs for his employees will rise by $8,000, or 17.5 percent. "When you start adding this up, it turns into real money," he said. "If I lose an employee through attrition, I will not replace him. You can’t afford to do it."

• Sam Schlosser, owner of Plymouth Foundry Inc. in Plymouth, Ind., said his unemployment tax bill could double next year. Revenue at the family-owned company, which makes iron castings for machine parts, has fallen about 50 percent, he said. In case of higher taxes, his company may have to consider layoffs, he said.

• Marjorie Feldman-Wood, president of Al’s Beverages in East Windsor, Conn., which makes soda fountain syrup, said higher taxes would make pay raises less likely. Connecticut is borrowing from the federal government, and employers fear the state will have to raise taxes soon to repay the loan. "There’s only so much money at the end of the day," she said.

Bruce Meyer, a University of Chicago economics professor, said his studies show that higher unemployment taxes usually lead to lower pay for employees.

And this from the New York Times:

It works like insurance. If the government pays a claim, your rates go up. In fact, if your former employee collects $10,000 in unemployment payments, you can expect to pay close to twice that in increased premiums. At least that’s how it works in my state, Illinois.

And now, thanks to the stimulus package, unemployment insurance has been extended as much as an additional 20 weeks. If you’ve had to lay off 10 people, this could easily result in additional taxes of $10,000, $50,000, or even $100,000. It’s a time bomb that won’t go off until after employers get their contribution-rate increase, but it will go off.

And therein lies the final irony: Even after the economy improves, I’m going to think long and hard before I hire anyone. Thanks to the stimulus package — the stimulus package — the costs, paperwork, and legal exposure associated with hiring employees is on the rise. 

An October Present for Hoosiers

I walked into a store earlier this week and the first thing to catch my eye was a vast display of Christmas merchandise. It’s not the retailers’ fault, but for whatever reason that bothers me. Call me a Grinch, but I’m just not in the holiday mood two months ahead of time.

But Indiana companies and employees received, in one sense, an early present this week — one that is most welcome. Senate Republicans announced their intention to seek a one-year delay in the uemployment insurance tax increases that were passed in April. The governor’s office is supporting the move, and it is hoped that Democrats will agree that the last thing needed in these still slow economic times is more Hoosier job losses.

This has been a top issue for the Chamber throughout the year. And while those involved in the lawmaking process thought at the time that they were offering a reasonable answer to a difficult problem, employer feedback and new analysis showed that wasn’t going to be the case.

After the legislative session, the Chamber documented the tax increases that nearly all Indiana businesses would face over the next two years – thousands of dollars on average, nearly $1.7 million for one company that used our online calculator and nearly $500 million for Hoosier companies in total. We shared the clear message that additional employee layoffs would unfortunately be the only way most could pay for the tax hike. We brought in new, independent analysis to demonstrate that despite more money being taken from businesses and more employee jobs being threatened that the unemployment trust fund deficit would actually increase.

The Chamber will continue to lead the way. No, this delay doesn’t solve the problem of a bankrupt UI trust fund, but that is a challenge that an estimated 40-plus states will soon be facing. There will need to be a federal solution. Now is not the time to take $500 million more from Hoosier companies and their employees without fixing the system. 

Unemployment ‘Fix’ Still Needs Fixed

The fundamental debate in trying to pass a new state budget is whether education funding should be for districts or students. Unfortunately, it’s not a new debate. Chamber education expert Derek Redelman can — and will — go in-depth on that topic, one that has been around throughout his 20-plus years in Indiana education policy.

Also unfortunate is that lawmakers are not taking advantage of the opportunity to right their biggest wrong of the regular session — the unemployment insurance tax increase that employers are telling us will simply force more layoffs. You can calculate for yourself how the largest business tax increase in state history will impact your organization and why it doesn’t solve the shortfall that is approaching $1 billion in loans from Washington.

It’s not big businesses vs. small businesses. It’s not employers vs. employees. It’s bad public policy — one that will require a true solution sooner rather than later.