The New York Times has an article about a proposal by President Obama to delay unemployment insurance repayment obligations for states that owe money to the federal government for unemployment insurance. Obviously this doesn’t concern Indiana since we’ve been fiscally responsible and Gov. Daniels has been talking about our surplus and whatnot. Oh . . . wait, we owe roughly $2 billion for unemployment funds we’ve borrowed from the feds. That doesn’t count somehow, I guess.
Anyway, my take from the article was that without this fix, automatic tax increases would hit employers and states would start getting charged on the debt. Congressional Republicans are cool to the idea because it would mean higher taxes in the longer term. But Republican Governors might put pressure on them because their states are going to feel the sting from their debt.
I would expect Gov. Daniels – if he wants to stick to his espoused principles – would have to say that the government, like businesses and households, have to pay their debts and, thanks but no thanks, a deal is a deal so we’ll have to repay the funds in the manner specified at the outset. It’ll be interesting to see if and how he responds on this one — as not only a Governor but a Presidential aspirant.
Actually, the Stimulus already deferred UITF interest payments and interest accrual for 2010-2011 for all states in arrears (i.e. Indiana). Saving our state around approximately $20-$40 Million for their irresponsible behavior. Of course, Indiana took advantage of this and did not, as you now recommend, make those interest payments or decline the accrual deferment. So, Daniels already responded whether or not anyone wants to acknowledge this unfortunate fact. It already happened.
I will just re-post most of my post the last time you mentioned unemployment, Doug. I will add that Governor Daniels and his Department of Workforce Development’s administration of Indiana’s UI program has been disasterous, and the governor is very aware of its problems (though he continues to profess all is well there). DWD has publically stated at an Unemployment Insurance Board meeting they hope the federal government will relieve Indiana of having to pay back the loan (not just not pay the interest) because so many states have bankrupt Trust Funds. Few states, though, can compete with Indiana for losing as much money through sheer incompetence of the UI program’s administration like Indiana’s DWD.
Here’s the original post::
DWD runs one of the worst unemployment programs in the country, and this is based on statistics from the U.S. Department of Labor and not just me talking. Since 2005, DWD has played a massive part in ensuring the Unemployment Trust Fund went bankrupt and also now owes the federal government over $2 BILLION.
According to the Department of Labor, from 2006-2009 (the most recent figures), Indiana OVERPAID claimants (who were not eligible, by law, to collect UI benefits), $1.159 BILLION, which was the 3rd-worst state total in the country after California and Illinois. Of that amount, Indiana ’s (and Mitch Daniels’) DWD OVERPAID claimants $859 MILLION, which is around 3/4th of the total overpayment; this amount was BY FAR the worst in the country by hundreds of millions of dollars.
The “Leadership Team” of DWD, which now consists of 8 people earning over $85,000 per year (3 people used to run DWD less than 10 years ago), keeps saying the main reason for the Trust Fund debt is a “structural imbalance”, but as you can see, they are much in fault themselves. The Commissioner, Mark Everson (who was Daniels ’ #2 at the OMB), said DWD would’ve caused a riot if they had denied all the claimants who were not entitled to benefits. The problem is, these claimants were not doing what is required by law to earn UI benefits — they were not registered with the state’s unemployment services (to help them get work),
and they were not actually looking for work, either. When that happens, they are on unemployment longer,
necessitating extensions in benefits.
DWD has failed claimants in making sure they are seeking and finding work, while simultaneously failing businesses who are PAYING for that unemployment. They are also failing any Hoosier taxpayer, as we are also paying for UI benefits for claimants who are not legally supposed to get them. Because most state and local governments, as well as libraries and public school systems, pay up to 100% of a claimant ’s benefits directly (and not from the UI Trust Fund), any DWD misstep in over-paying an undeserving claimant
results in the money essentially coming from us.
Also, Indiana DWD’s “Adjudication Centers” (Indianapolis and Fort Wayne) have consistently been the worst of states in adjudicating claims the last few years; in the 3rd Quarter 2010 (the last one audited), Indiana was the worst of 53 states and territories by only getting a random-sample of 29 of 100 correct. The quarter before saw Indiana getting 25 of 100 correct. In fact, Indiana ’s DWD has not reached the Department of Labor’s 75% “passing” threshold for both types of decisions (called “Separations” and “NonSeparations”) since 2005.
So if you are an unemployed Hoosier or a Hoosier business, you have every reason to worry if your initial decision will be correct since DWD typically gets only 1/4 of the decisions right the first time. You also have every reason to worry when DWD obviously and blatantly is incompetent in its duty to ensure the people who are, by law, entitled to UI benefits are paid them – and those who are not entitled to benefits does not get them.
Mitch Daniels and his Department of Workforce
Development have failed Indiana in almost every way
imaginable by setting our unemployment system back a decade (oh and there ’s SO much more I could tell, from cronyism and nepotism to fraud and outright breaking the law), but you better believe his silver and fork-tongued spokespeople will keep this information secret so as to not ruin the nearly-beatified image of him as a supposed “fiscal” governor.
You know, it seems to me that the automatic increases in the current law were no big deal. What was it, an $18 increase per worker per month? And it goes up each year until it is paid off?
Sounds good to me. Continue to ignore the problem until it solves itself!
Reminds me of the approach to dealing with Milton in Office Space.
Of course, Milton burned the place down in the end.
We’re having a reorg here at work, and “Office Space” gets recited surprisingly frequently.
You know that if this were a “normal” recession, the UI problem would have already solved itself. If we ever revert to the mean economically, the problem will solve itself. The Feds already have a system of fines that ensure that the problem will solve itself, eventually.
So why exactly do we need to go out of our way to “solve” this problem? Especially when it involves raising taxes on businesses? (raising them higher than what the fines would be).
The moral of the story: don’t make Milton mad! Can I get my stapler back?
Buzzcut — I do not think the problem would have solved itself had there been a normal recession. Even before the effects of the recession hit Indiana, our Trust Fund was dwindling badly. Add DWD’s negligence of overpaying claimants over $859,000,000 (again, most in the country by hundreds of millions of dollars) on top of normal effects of lay-offs and you have a problem. Add those ingredients and a bad recession, and you have a catastrophe.
The raised fines of which you speak, I think, (the $21 per employee per business, with increases each year until Indiana pays back most of the debt) are for increased federal taxes to help cover both the US government’s bailing Indiana out and to partly offset the extensions. The money to help cover the interest payments (starting at $80-$100 million this year and increasing every year afterwards until our debts are paid) cannot come from UI taxes and must come from another source. Otherwise, if the General Assembly did nothing, and the US government did nothing, the gap would increase by perhaps billions of dollars more.
Until the governor removes the remaining cancers plaguing DWD these last six years, the problems from DWD will continue to get worse. Look for DWD to once again lead the country for overpaying claimants hundreds of millions of dollars in 2010 once the statistics are released in the summer.
DWD admitted years ago the problem will not fix itself, and they continue to state as such. There, and maybe only there, they are actually right.
Our reorg consists of creating a lot of positions that entail carrying TPS reports from the engineers to the secretaries.
What is causing the overpayments?
We have some clients across the Ohio River in Southern Indiana. Unfortunately for those employers in Indiana they have to pay an additional 0.003% to the Feds for FUTA (federal unemployment tax reported on Form 940) for 2010. Indiana, Michigan, and South Carolina are the three states who pay an effective rate of 0.011% on the first $7,000 of wages for calendar year 2010 instead of 0.008% due to the fact that these three states borrowed money from the Feds and haven’t repaid it. It makes me have a jaundiced eye towards those who crow about Mitch Daniel’s fiscal ability.
I completely agree, BAW. You are spot-on with the information — a lot of people don’t realize Indiana was the second state to have its Trust Fund go bankrupt during this recession (technically, we were the first during the full country’s recession, as Michigan went bankrupt in 2007 and I don’t believe the definition of recession started until 2008 for the US). Indiana went bankrupt in November 2008, and South Carolina did right afterwards. If Indiana had held-out until 2009, its businesses would not have had to pay increased taxes until next year. This is where DWD comes-in with their overpyaments, and how their errors cost businesses, at very minimum, at least a year’s extra increase in taxes.
Buzzcut — the overpayments were, by and large caused by DWD failing to ensure two basic requirements of claimants to receive unemployment: 1) the claimants were not registered with Indiana’s re-employment services which is “supposed” to help claimants look for work, match them to the job-searching database (IndaianCareerConnect.com, a major joke), get re-employed, and get off of unemployment more quickly, and 2) the claimants were not looking for work, period. The commissioner told the Unemployment Insurance Oversight Committee that if they had tried to enforce those things, they would have had a riot on their hands, which is absolute hogwash. It’s a state law and a basic requirement for receiving UI — enforce it and let the claimants complain. Those laws are in place to try to help them get back to work as quickly as possible and to ensure businesses pay as little as possible (and there would be less needs for people to go on the extensions, theoretically).
I think during this administration, of which the governor’s people at DWD essentially privatized as much as they could (including the local offices which are run by businesses, mostly, and not the state), Indiana has not done a good job of trying to find people work; I know the government part (the adjudication centers in Indy and Ft. Wayne) have done as badly as any state in the union on trying to make sure claimants are even looking (and that’s because of the upper management, not the lower-level folks who try to do good work, mostly),
I cannot emphasize enough, or in enough ways, how badly DWD has ruined Indiana’s unemployment system, because there are so many other ways they have ruined it, too besides being one of the worst states to overpay claimants.
It is interesting that the UI system here has a reputation for being chintzy (compared to Illinois), yet they have a history of paying people who are not eligible for benefits. It’s like the worst of both worlds.