As we turn the page to 2021, Ohio employers are still facing numerous challenges stemming from the coronavirus. Many businesses are still operating with a remote workforce, others are experiencing higher costs due to the implementation of sanitization methods at a time when revenues are shrinking and some are struggling to re-hire or bring back their employees.
However, all employers in the Buckeye State are looking at higher payroll taxes for 2022 thanks to Ohio’s now insolvent unemployment compensation trust fund that was ill prepared to cover the costs of benefits during an economic downturn.
Despite the Ohio legislature having over a decade to properly reform Ohio’s unemployment trust fund and put it on a path towards solvency following the last recession, Ohio’s unemployment compensation trust fund was in the minority of states that failed to meet the U.S. Department of Labor’s solvency standard in 2020. It is of no surprise that Ohio employers find themselves facing higher payroll taxes resulting from an insolvent unemployment trust fund since the last time Ohio met the federal government’s solvency target – a standard 31 states met last year – was in 1974.
For employers, this story sounds all too familiar because they only recently finished paying the federal government back over $3 billion dollars in principal and interest to retire the loans issued to pay out unemployment benefits during the 2008 recession. Unfortunately, Ohio borrowed over $1.3 billion in 2020, and the state is planning to continue borrowing for the foreseeable future, so its déjà vu all over again for Ohio employers.
Having an insolvent unemployment compensation trust fund negatively impacts Ohio’s business climate since employers are on the hook for repaying the entirety of the state’s loans with interest. This results in higher operating costs and leaves less revenue available to grow their business or to hire more employees.
Congressional action has aided employers since the Families First Coronavirus Relief Act waived the interest on unemployment compensation loans through 2020 and the most recent coronavirus relief package extended that waiver through March 14, 2021. The current interest rate on these unemployment loans is 2.4%, so federal legislation has saved Ohio employers approximately $31 million in interest accrual. As employers continue doing their part to rebuild Ohio’s economy, the Ohio Chamber stands ready to work with lawmakers in the Ohio House and Ohio Senate to find solutions that put our unemployment compensation trust fund on a path towards solvency and may provide financial relief from the pending payroll tax increases.