Ind. Eyes Federal Funds For Jobless Benefits

Indiana is running out of funds to pay its jobless residents unemployment benefits. Officials from the state, which provides the minimum benefits required by federal law, say they will likely need to borrow money from the federal government by next month.

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While President-elect Obama focused today on creating jobs, there are concerns about support for people who are out of work. Last week, President Bush signed a bill that extends federal unemployment benefits for three months. Before the unemployed can tap into federal money, they first have to exhaust their state unemployment benefits, and some states are running out of money. We're going to hear now from Indiana where unemployment funds may run out early next month. Here's Marianne Holland of Indiana Public Broadcasting.

MARIANNE HOLLAND: Seven years ago, Indiana had $1.4 billion in its reserve to pay people finding themselves out of work. Today there's only $40 million left. With monthly payouts topping $66 million, a crisis is at hand. It's happening as the need for money is going up. At an unemployment office in downtown Indianapolis, people are lined up minutes after it opens. Parents with small children are seated waiting to be helped, and there's a stream of people coming through the door.

When Debbie Geralds(ph) finally leaves the office, she hurries to the big silver pickup truck she's borrowed from her dad to get here. Inside, the middle-aged woman with short salt-and-pepper hair shivers while waiting for the truck to warm up. She says she needs this money and doesn't care how the state gets it.

Ms. DEBBIE GERALDS: I don't understand why, but I think whatever they have to do, do it. There's a lot of people out of work.

HOLLAND: Geralds' troubles come at a time of sharply rising unemployment. Nationwide unemployment rates are at a 16-year high. Rick McHugh is the Midwest coordinator for the National Employment Law Project. He says for many of the states that are running out of money, the crush of new applicants is making a bad situation worse. Most funding for unemployment benefits comes from business taxes, and McHugh says they're not high enough.

Mr. RICK MCHUGH (Staff Attorney and Midwest Coordinator, National Employment Law Project): So, for example, Indiana has a taxable wage base of $7,000. So only the first $7,000 of an individual's wages in a calendar year are subject to unemployment insurance taxation. And in Indiana that goes back 25 or more years is how long it's been since they've raised the taxable wage base.

HOLLAND: Many business leaders in Indiana concede the point and acknowledge that these taxes will have to rise. But Ed Roberts, who's vice president of the Indiana Manufacturers Association, says the timing just couldn't be worse.

Mr. ED ROBERTS (Vice President, Indiana Manufacturers Association): Nobody's going to like this much. But what we're going to like less is to have to continue to borrow from the federal government and rack up interest on top of interest on top of interest on borrowed funds when we still have a legal - federal and state legal responsibility to run this plan.

HOLLAND: For each of the states likely to borrow from the feds, it will be their legislature's job to find a solution. Indiana legislator David Niezgodski says with more people applying for unemployment benefits, curbing eligibility would be a mistake.

Assemblyman DAVID NIEZGODSKI (Democrat, South Bend, Indiana): So to cut that now would be a terrible thing to do because you're going to have a lot of families out there that it's going to be very painful for.

HOLLAND: But the fiscal pain for the state is clear too. With tens of millions of dollars of interest likely to be charged by the federal government, the sooner legislators can come up with a plan to replenish their funds, the better. Indiana's part-time legislature doesn't even meet again until January, and it's unlikely it will solve the unemployment funding crisis until early spring. For NPR News, I'm Marianne Holland in Indianapolis.

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