Indiana is projected to borrow up to $400 million from the federal government to pay state unemployment benefits to eligible out-of-work Hoosiers through the end of the year.

In the near term, Indiana businesses generally should not be impacted by the borrowing.

But if the debt continues to grow into 2021, and remains on the books on Jan. 1, 2022, companies may be required to pay an additional $21 per employee, per year, on top of their regular unemployment premiums, to help reduce the obligation.

According to the Indiana Department of Workforce Development, Indiana has paid out the entirety of its $1.2 billion unemployment trust fund between mid-March and this week, due to the unemployment surge tied to the COVID-19 pandemic.

Indiana DWD separately has paid $3.8 billion in federal unemployment benefits during the same seven-month period to 682,000 unique claimants, or approximately 1 in 5 Hoosier workers.

That's a massive change from the pre-pandemic period when Indiana generally paid $26 million a week in unemployment to 28,000 claimants.

The state paid out $380 million to 267,000 claimants in August, according to DWD.

At the same time, Indiana's 6.4% August unemployment rate was less than the 8.4% national rate, and well below the record 17.5% Indiana unemployment rate in April, suggesting the demand for unemployment assistance is likely to fall in coming months.

DWD Chief of Staff Josh Richardson said Monday if Indiana unemployment returns to pre-pandemic levels, it's possible regular business unemployment premiums paid next year will cover most, or all, of the borrowing needed to get the Hoosier State through the rest of this year.

Though absent congressional action, starting in January the state also will be on the hook for approximately 2.4% in interest on the debt because the federal government has determined Indiana did not have a sufficient unemployment trust fund balance prior to the crisis.

Richardson said if the interest on the debt, along with the debt itself, is not paid off by the end of 2021, the federal government likely will compel Indiana employers to pay an annually escalating $21 per employee, per year "penalty" until the obligation is eliminated.

Following the 2008-09 Great Recession, when Indiana's borrowing to cover unemployment benefits soared to $2.1 billion, the penalty eventually hit $63 per employee, per year, he said.

Indiana finally eliminated that debt in 2015 when Republican Gov. Mike Pence, now vice president of the United States, chose to pay off the final $250 million using surplus state revenue to save businesses from paying $327 million in penalties.
© Copyright 2020,, Munster, IN