For several years now, the Ohio Chamber of Commerce has been sounding the alarm bell about the ticking time bomb that is our broke and broken Unemployment Compensation Trust Fund. The Chamber’s public policy priorities included a call to address the causes of rising unemployment compensation taxes as far back as January 2015. Three separate bills have been introduced since that time seeking to fix the problem, but none have passed. Lawmakers are aware of the problem, but still nothing has been done to fix it.
Now, a new report from the U.S. Department of Labor underscores the bleak situation:
Ohio’s unemployment compensation system is on the brink of insolvency according to the U.S. Department of Labor’s 2019 Trust Fund Solvency Report. In fact, Ohio’s unemployment compensation trust fund solvency ranking is ahead of only three other states.
The U.S. Department of Labor report measures solvency in three different ways. First, they measure whether the state’s unemployment compensation trust had sufficient funds to pay unemployment benefits in the previous calendar year. Then the Department looks to see if the trust could withstand paying benefits in the year with the highest benefit payments. Lastly, they determine if the trust could fund benefits for the average cost of the three years with highest benefit payments.
Ohio performed poorly in each metric and was only solvent when the Department measured funding benefits for calendar year 2018.
The good news for Ohio’s unemployment system ends there though because the report shows the trust lacks the funds to cover benefit payments at the next economic downturn. The report concludes that Ohio’s solvency level is at a third of the amount needed to remain solvent when a recession occurs. This puts Ohio in the same spot it was at during the 2008 recession when the state had to borrow over $2.6 billion dollars from the federal government and caused Ohio’s employers to pay higher taxes for nine years in order to repay the loan.
There are many road blocks preventing an easy fix, but the Ohio Chamber will continue to press members of the General Assembly to find a balanced solution that moves Ohio’s unemployment compensation system away from the brink of insolvency.
Insolvency – and the possibility of employers being forced to once again pay higher taxes – is just the next recession away.