The Indiana State Budget Committee decided last week to approve Gov. Mike Pence’s plan to pay-off the state’s federal unemployment loan early. The loan was acquired during the Great Recession to help the state handle unemployment claims as its unemployment rate topped 10 percent.
The balance being paid-off is $250 million and the funds are coming from the state’s current surplus. Paying the loan before November 10th would allow the state to eliminate a $105-per-employee penalty being paid to cover the loan. If the loan remains, the per-employee penalty will increase to $126 for 2016.
Indiana is an example of a state that contributed to its own fiscal issues during the Great Recession. The unemployment fund had a surplus of $1.6 billion in 2000. Lawmakers raised benefit payments for the unemployed and lowered employer premiums, draining the account. The recession then drained the weakened fund quickly. As a result, lawmakers had to increase business taxes and cut benefit in 2011 in order to rebuild the fund.
Gov. Pence is expected to approve the plan before a November 9th deadline.