House Bill 382, the latest attempt to fix Ohio’s broken unemployment compensation system, has now had three hearings in the House Government Accountability and Oversight Committee. However, testimony was only heard at two of those hearings because no one showed up at the second to testify either in favor or opposition to the legislation. The key components of this legislation include raising both the wage base on which employers pay state unemployment taxes and the rate of the taxes when the trust fund has insufficient funds, instituting an employee tax, and minimal benefit reductions. A more comprehensive overview of the bill can be found on our previous blog post.
This week, the Committee heard testimony from a left-leaning think tank stating that employers in the state should face even higher taxes than those proposed in the legislation and that there should be no changes to benefit structures at all. According to the testimony, the standards to qualify for benefits should also be relaxed to allow more individuals to receive unemployment compensation rather than any benefit reductions. However, we do not believe that expanding benefits and throwing more money at the problem is the answer.
The Ohio Chamber, along with other statewide business associations, submitted a letter to the committee opposing HB 382 as currently drafted but supporting HJR4, a resolution that, if passed, would allow the voters to decide whether the state could issue bonds if the unemployment insurance fund is depleted. This would provide additional repayment options if the system goes insolvent in the future. The letter stressed the need for action on this important issue to provide stability and predictability for Ohio’s employers as, right now, the trust fund is expected to go insolvent in the next economic downturn unless changes are made to better align benefits and contributions. The letter goes on to reiterate the following principles that are needed to truly fix the system:
- Any workable solution must address both spending and revenue to balance the cost of benefits with employer contributions and simply pouring more money into the system without addressing benefits undercuts Ohio’s job-creating economic competitiveness;
- Fundamental changes should take place in the near-term, prior to the next economic downturn when the situation will be even more dire and a resolution even more difficult to craft;
- We are opposed to any employee tax and, with it, the administrative costs and burdens such a tax would bring upon all parties; and
- Any potential solution must be compliant with the U.S. Department of Labor to ensure Ohio’s businesses continue to receive the Federal Unemployment Tax credit.
The employee tax, as drafted in the bill, would be an administrative nightmare for employers who would be required to track when an employee met the eligibility requirements to receive unemployment compensation to know when to start collecting and remitting the tax from that employee’s wages. There are also concerns as to whether both the employee tax and the benefit changes included in the legislation would be compliant with the U.S. Department of Labor (DOL) guidelines. This is important because, if deemed non-compliant, it could put Ohio’s employers’ federal unemployment tax credit at risk. This would raise the possibility that federal unemployment taxes would increase from $42 per employee to $420 per employee. Thus, it is imperative that any solution be DOL compliant.
While we appreciate Rep. Schuring’s leadership in introducing HB 382, we do not believe the bill in its current form is the answer to Ohio’s unemployment compensation troubles. However, we do view it is a vehicle to continue discussions on fixing the system and remain committed to working to address Ohio’s solvency issues.