INDIANAPOLIS — Indiana is seeking a federal loan of up to $330 million during the next three months to shore up its unemployment insurance fund, which has paid out $242 million more in claims this year than it has collected in employer taxes.
Gov. Mitch Daniels made the request to the U.S. Department of Labor on Monday. The fund has seen its balance steadily drop from $1.6 billion in 2000 to just $21 million at a time when more than 75,000 Indiana residents are drawing unemployment benefits.
Preliminary numbers released Friday by the Bureau of Labor Statistics put Indiana's unemployment rate at 6.4 percent, its highest level since February 1987, although the state's jobless rate also touched 6.4 percent in August.
Indiana is one of five states whose Unemployment Insurance Trust Fund is insolvent, according to a recent report by the National Employment Law Project, a New York-based advocacy group for the unemployed. Others are Michigan, New York, Ohio and South Carolina. The last time Indiana borrowed from the federal government to cover a deficit in the fund was in 1982-83.
Officials had hoped to delay borrowing for the fund until January to avoid paying interest on the loan. Funds borrowed up to Dec. 31 will carry a 4.8 percent annual interest rate, but money borrowed after the first of the new year is interest-free if paid back by October.
The state hopes to repay the loan after first-quarter tax payments are received.
Lawmakers are expected to change Indiana's unemployment law to fix flaws in the system when the Legislature reconvenes in January.
