Until the policy reversal, unemployed Hoosiers were among those who would be affected by $85 billion in automatic federal budget unless President Barack Obama and Congress stop them before Friday's deadline. Early childhood education programs, the military, domestic violence shelters and meal programs for the elderly also would be affected.
Earlier Wednesday, Workforce Development spokesman Joe Frank said the agency did not know how much the federal government would reduce benefits so it would suspend payments to avoid inadvertently paying too much and having to collect the money back from beneficiaries later.
The benefits go to workers unemployed more than 26 weeks.
Maurice Emsellem, co-director of policy for the worker advocacy group National Employment Law Project, said cutting off the extended benefits would have been illegal.
"The federal law is really clear. The states have an agreement to pay the benefits," Emsellem said. "You can't delay paying a benefit. ... By definition, by suspending benefits, they are delaying the payment of benefits, which entirely violates federal law."
Sherri Summitt, a 48-year-old unemployed licensed nurse from Unionville, a town near Bloomington, said she had had no time to prepare for a loss in benefits. She lost her job in May and has been receiving extended benefits since December. She has three sons, including two she supports.
"I'm a little panicked, to say the very least," Summitt said before the policy reversal. "That would be two-thirds of my income gone."
Social services agencies in Indiana are also worried about how they'll handle potential funding cuts.
Some Head Start early childhood education programs could be forced to end the school year early, shut down classrooms or reduce the number of spots available next year for children in low-income families, said Diane Baker, executive director of Family Development Services, the provider of Head Start programs for Marion and Hamilton counties.
"Worst-case scenario for us is we would have to cut over 200 children," said Baker, who isn't sure whether the cuts would be effective immediately.
The impact could be broader statewide. A document released by the White House on Sunday says Head Start services would be eliminated for approximately 1,000 children in Indiana if cuts take effect.
Funding reductions would also affect Meals on Wheels programs that deliver food to seniors in their homes and serve hot meals at some locations throughout the state. The White House estimates Indiana would lose about $820,000 in funding for the meal programs.
"That might mean that we aren't able to start new people on the service," said Orion Bell, president of CICOA Aging and In-Home Solutions, which oversees government funds for programs in central Indiana. "We try typically to start a person on the program within three days of when they initially call. We might have to have a waiting list for the service."
Many low-income people ages 60 and older rely on the programs not just for a daily meal but also for social interaction, Bell said.
"For about half of them, the driver who delivers their meal is the only person they talk to some days," he said. "It's their socialization and connection to their community."
Domestic violence programs might also have to deny people services if their budgets are slashed. Laura Berry, executive director of the Indiana Coalition Against Domestic Violence, said the majority of the coalition's funding comes from the federal government.
The White House estimates that Indiana could lose up to $138,000 in funding for providing services to domestic violence victims, meaning 500 fewer people could be served.
Domestic violence programs and shelters in Indiana are already turning people away because they don't have room for them. If the cuts go into effect, even fewer people would have access to services, Berry said.
"It's very realistic that we're going to be turning away services to a higher percentage than we are currently turning away," she said. "We're deciding who's in the most danger, which isn't fair."
Indiana Gov. Mike Pence, who voted for the 2011 bill setting up the automatic cuts while he was in Congress, said Wednesday that reducing the federal deficit needs to be a top priority but that there are better ways to make cuts.