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December 3, 2013

State agency opposes limited unemployment plan

'Work-sharing' legislation faces tough road

INDIANAPOLIS — A coalition of business and labor groups want Indiana legislators to expand unemployment benefits to partially furloughed workers, but the proposal faces opposition from the state agency that would implement it.

So-called “work-share” programs, now in place in 26 states, allow employers facing financial problems to cut labor costs while sparing workers’ jobs. During a downturn, employers could cut back employees’ wages and hours, and those workers would eligible for partial unemployment benefits until the company regains its footing and returns them to full employment.

“As a state, our No. 1 focus is on jobs,” said Kevin Brinegar, president of the Indiana Chamber of Commerce. “Here’s a piece of legislation that would keep people from becoming unemployed and let them keep their jobs.”

Establishing a work-share program is on the chamber’s Top 10 list of priorities for the 2014 legislative session, which starts Jan. 6. Other supporters include the AFL-CIO of Indiana, the chamber’s traditional opponent on labor bills, and the liberal-leaning Indiana Institute for Working Families.

“We’re coalescing with organizations that we don’t normally do,” Brinegar said.

Similar legislation has been introduced over the past two years but failed to gain traction in the Republican-controlled legislature. In 2012, the state’s Department of Workforce Development turned down a $2 million grant from the U.S. Labor Department to start a work-share program.

Under a typical work-share program, employers avoid mass layoffs by reducing their workers’ weekly pay and hours by 20 to 40 percent. In turn the state makes up some of the lost wages out of unemployment funds. A number of states adopted work-share programs after the 2008 recession to blunt the impact of stubbornly high unemployment rates.

In the states that have adopted such programs, the partial unemployment benefits last from 13 weeks up to a year.

Gov. Mike Pence’s administration doesn’t see work-share programs as a panacea but rather a source of potential problems.

Joe Frank, a spokesman for Department of Workforce Development, said work-share programs are difficult to administer, subject to fraud, and create disincentives for impacted workers to find other employment.

“It opens up a lot of difficult questions including, ‘Who’s going to be watchdog on this? And who’s really eligible?’” said Frank.

Cost is a major concern, Frank said. Indiana already owes the federal government roughly $1.7 billion it borrowed for its unemployment trust fund during the economic downturn, to pay benefits to unemployed workers under the traditional benefits system.

Brinegar noted that the federal government has created a grant program to help states launch work-share programs. When Pence was in Congress, he was part of a bipartisan group that supported the Middle Class Tax Relief and Job Creation Act of 2012 that incorporated a provision on work-sharing. Federal grants under the law provide 100 percent reimbursement rates to the unemployment insurance trust fund for up to three years once a work-share law is passed. Estimates are that Indiana could receive $50 million in federal funds over that period.

But Frank said that incentive is temporary, and the state would eventually have to pick up the costs of the program once the federal money runs out.

There’s some disagreement over how much that cost would be. Nationally, only a fraction of employers and workers — about 17,000, according to Frank — have opted into the states’ programs.

A study by the Congressional Research Service concluded that the impact on states’ unemployment trusts funds would result in minimal impact beyond the current level of obligations. The study said the cost of partial jobless benefits for work-sharing employees is roughly equivalent to the cost of full benefits for those who would otherwise be laid off.  

The study also found that businesses, which pay into the unemployment insurance trust fund through state and federal taxes, would be charged higher rates when they entered a work-sharing program, but no higher rates than they would pay if they laid off employees.

One thing both Brinegar and Frank agree on is that designing the details of a work-share program wouldn’t be easy. In past years, work-sharing legislation has been carried by Democrats in the GOP-dominated legislature but has found some Republican support. Brinegar is hopeful that the measure pushed in the 2014 session will find support on both sides of the aisle.

“This is an entirely new concept for Indiana,” Brinegar said. “It takes time to build awareness and understanding of the issue.”

— Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. Reach her at maureen.hayden@indianamediagroup.com or follow her on Twitter, @MaureenHayden

 

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