As avid readers of this blog know, Ohio’s unemployment compensation system is broken. It has been structurally insolvent for years, taking in little more than it is paying out even in the best of times. However, the Great Recession highlighted how large a problem this can be. In fact, at the beginning of 2009, Ohio had enough in the unemployment trust fund coffers to pay just one weeks’ worth of benefits. Thus, the state was required to borrow over three billion dollars from the federal government in order to pay benefits. This led to significant increases in federal unemployment taxes to repay the loan from the feds. At its highest, employers were paying more than $100 extra per employee per year to repay the loan.
To fix the short-term issue, the outstanding federal debt and escalating taxes, the legislature passed a bill last year to pay off the debt with the state being repaid using a surcharge on employers’ state unemployment taxes. This action saved Ohio employers approximately $350 million. While this eased the financial pain for employers, the structural problems and likelihood that the state would be in the exact same situation during a future economic downturn remained. Since that time, there have been a joint committee, additional legislation, and even a stopgap measure introduced at the end of last year to allow for further discussions. This grew into joint discussions between legislative, business, and labor leaders this year in attempt to craft a solution that would make sense and be agreeable to all parties. Unfortunately, while those discussions were beneficial, an agreement could not be reached.
This week, House Bill 382 was introduced by Rep. Kirk Schuring. It is the latest attempt to continue discussions on this important issue—fixing Ohio’s unemployment system. He has stated that this legislation is a beginning point for further discussions and hearings.
Among the bill’s major provisions, HB 382 would:
- Permanently raise the wage base on which employer’s pay “premiums” from $9,500 to $11,000.
- Permanently increase employers’ state unemployment “premium” rate when the trust fund is below the minimum safe level.
- Charge all employees who meet minimum thresholds to qualify for unemployment insurance a new co-insurance payment of 10 percent of the amount paid by his or her employer, whether they collect unemployment or not.
- Temporarily freeze the amount of weekly benefits for a period of 10 years. Currently, maximum benefits are adjusted up each year with the state’s average weekly wage.
- Reduce the maximum number of weeks benefits can be received from 26 to 24, except for those industries whose unemployment is due to the weather.
- Limit additional payments for dependents in certain circumstances which may reduce payments.
- Change the nomenclature, one of the more labor-intensive changes for the drafters that you will notice if you look at the 200+ page bill, throughout the revised code to make the unemployment system more like an insurance system. Employer contributions or taxes would now be premiums or payments; employee taxes termed coinsurance; the unemployment compensation fund would now be the unemployment compensation insurance fund; etc.
Additionally, a resolution was introduced that, if passed, would allow the voters to decide if the state could issue bonds if the unemployment insurance fund is depleted. This could result in rates that would be more favorable than those provided by the federal government for repayment of debt. This would provide another tool in the toolbox when Ohio’s unemployment compensation becomes insolvent in the future.
The Ohio Chamber appreciates the fact that Rep. Schuring and House leadership recognize that this is still a significant issue for Ohio’s employers that must be resolved. As previously stated, this is only a starting point and will need additional work and significant changes to be acceptable to the business community. Throughout this entire process, the Ohio Chamber has stated, and continues to believe, that any solution needs to be balanced. It would need to address both what is paid into the fund and what is being paid out in benefits. Essentially, looking at both sides of the equation, revenue and spending, to truly fix the system. We will be watching this legislation closely and, if you have any feedback on the legislation, please send any comments to Don Boyd at email@example.com.