President Trump’s FY 2018 Budget: Impact on Labor & Employment Issues

Among the many pieces of President Trump’s fiscal year 2018 budget are some real whoppers that may affect businesses here in Ohio. Chiefly, these aspects deal with changes to workers’ compensation, unemployment compensation, and mandated paid parental leave. Here is the quick rundown.

Workers’ Compensation

The proposed budget would eliminate workers’ compensation reverse offsets for social security in 15 states, including Ohio,  that was preserved in federal legislation dating back to 1981. This change would have the effect of shifting additional costs to Ohio employers and the workers’ compensation system. The estimated federal budget savings is about $164 million over 10 years across the 15 states that have maintained the offset.

Unemployment Compensation & Paid Parental Leave

Also included in the proposed budget are a number of items that could affect Ohio’s already structurally unsound unemployment compensation trust fund. Namely, the proposal would create six weeks of fully-paid family leave to new mothers and fathers using the unemployment compensation (or unemployment insurance) system as a vehicle. The budget document includes:

Provide Paid Parental Leave. During his campaign, the President pledged to pro­vide paid family leave to help new parents. The budget delivers on this promise with a fully paid-for proposal to provide six weeks of paid family leave to new mothers and fathers, including adoptive parents, so all families can afford to take time to recover from childbirth and bond with a new child without worrying about paying their bills.

Using the Unemployment Insurance (UI) system as a base, the proposal will allow states to establish paid parental leave pro­grams in a way that is most appropriate for their workforce and economy. States would be required to provide six weeks of parental leave and the proposal gives states broad latitude to design and finance the program. The proposal is fully offset by a package of sensible reforms to the UI system—including reforms to reduce improper payments, help unemployed workers find jobs more quickly, and encourage states to maintain reserves in their Unemployment Trust Fund accounts. The administration looks forward to working with the Congress on legislation to make paid parental leave a reality for families across the nation.

The proposal, estimated to cost $18.5 billion over 10 years, would be primarily funded by $12.9 billion in increased state unemployment insurance taxes. This would be achieved by setting a new, presumably much higher, federal solvency standard. Further, it is expected that if a state does not have enough money in the trust fund to cover these additional benefits, the state would be required to raise state unemployment taxes (SUTA) or face the feds raising them via the federal unemployment tax (FUTA).

Given that Ohio’s trust fund is barely able to sustain current benefit levels in good times now, let alone in an economic downturn, it would be inevitable Ohio employers would face some type of increased taxes to fund this program. However, both proposals still must make it through Congress before becoming law so we will be keeping an eye on the budget as it works its way through the process.