Northwest Indiana Discussion

Companies currently pay between 1.1 percent and 5.6 percent on the first $7,000 of each employee's annual salary, with higher percentages charged on companies with a greater history of layoffs.

In 2010, businesses would pay between 0.70 percent and 9.5 percent of the first $9,500 of a worker's salary. Starting in 2011, tax rates would increase to 0.75 percent to 10.2 percent of the $9,500 taxable wage base.

Employers that don't lay off workers would pay less under the new system than current law. The minimum yearly payment is currently $77 per worker, but that would drop to $71.25 under the bill.

Sen. Brandt Hershman, R-Wheatfield, said 40,000 small businesses in Indiana never tap into the fund and it makes sense for them to be exempt from higher taxes.

"Just as high-risk drivers pay higher premiums for their auto insurance than those motorists who rarely have accidents, businesses that are more likely to lay off workers should shoulder more of the burden," Hershman said.

Lawmakers expect the rate increases to raise about $315 million a year. The bill also includes administrative changes that lawmakers hope will save the state about $300 million annually.

The unemployment insurance fund took in $579 million last year and paid out $986 million. The fund - kept separate from the state's main checking account - is expected this year to distribute $900 million more than it collects.

Indiana has borrowed nearly $800 million from the federal government since late last year to continue paying unemployment claims.

Lawmakers aren't sure how long it could take to restore the account to solvency, in part because the health of the unemployment fund depends on the economy. In good times, fewer people collect benefits and more money comes into the account.

The fund wasn't always in trouble. In 2000, the state's unemployment fund had a surplus of $1.6 billion. But lawmakers raised benefit payments for the unemployed and lowered employer premiums, draining the account.