Joint Legislative Committee Created to Fix Unemployment Compensation System

A comprehensive plan to pay off Ohio’s outstanding federal unemployment compensation debt to the federal government passed the legislature prior to summer and was signed by the Governor. This is projected to save Ohio employers $400 million. Under the plan, the state will take a loan from the unclaimed funds account to pay off the debt. This will result in the removal of federal penalties that would have raised federal unemployment taxes (FUTA) paid by employers to $168 per employee next year. The removal of these penalties will drop the FUTA back to the base rate of $42 per employee. Employers will then be assessed a flat-rate surcharge, expected to be approximately $45 per employee, in 2017 to repay the loan. The loan repayment surcharge, in addition to the base FUTA of $42, will be approximately $87 per employee. This is nearly 50% less than the $168 per employee employers would paid if nothing had been done.

However, there is still much more that needs to be done to truly fix Ohio’s unemployment compensation system. The system, which has been insolvent and structurally unsound for years, needs comprehensive reforms to both benefit payouts and employer contributions. House Bill 394, an Ohio Chamber priority that was introduced late last year, would make these much needed systemic improvements. Otherwise, employers could be in the same situation next time there is an economic downturn—with the state borrowing from the federal government to pay benefits and employers facing ever escalating unemployment compensation taxes.

To this end, the Ohio Legislature recently announced the creation of the Unemployment Compensation Reform Joint Committee. The committee will be co-chaired by Rep. Kirk Schuring (R-Canton) and Sen. Bob Peterson (R-Sabina). The additional members of the bipartisan committee will be:

•Randy Gardner (R-Bowling Green)

•Bill Seitz (R-Cincinnati)

•Kenny Yuko (D-Richmond Hts.)

•Bob Cupp (R-Lima)

•Gary Scherer (R-Circleville)

•Jack Cera (D-Bellaire)

The committee will meet five times, beginning on August 25th, to examine the unemployment system and focus on a path to long-term solvency. Fixing the unemployment compensation system is critical to ensuring that Ohio’s business climate remains competitive and employers are not unfairly penalized by massive borrowing in the future. The committee will look to pass legislation to fix the system once the legislature returns this fall following the election. Stay tuned for more updates as the committee hearings progress.