On the 22nd of this month, Indiana Governor, Mike Pence, announced that the state will be paying off their remaining Title XII loan balance to the Federal Government. The repayment of the loan is expected to create a savings of $327 million for Indiana employers in 2016.
To pay the remaining balance, the state will move approximately $250 million out of the state general fund and apply it to the Title XII loan. When employers pay their annual unemployment insurance premiums during the first quarter of 2016, that money will be used to replenish the state general fund. According to Pence, “it’s a short term loan with long term benefits for Indiana’s economy.”
The repayment of the loan comes just in time for Indiana employers as any balance remaining on November 9th would have resulted in an increase in employer taxes from $105 to $126 per employee. Now, with the loan paid off, employers will pay only the base federal unemployment tax of $42 per employee for calendar year 2015, which will be paid in January of 2016. Indiana employers have been paying unemployment penalty taxes above the base federal tax since 2011, so the return to the base rate will be a welcomed relief.
The next goal for the state will be to replenish the state trust fund. The estimated balance needed to sustain the fund through another wave of economic downturn is $750 million to $1 billion, which could be achieved by 2019.
With the retirement of Indiana’s Title XII debt, only California, Connecticut, Ohio and the Virgin Islands continue to have outstanding Title XII balances.