In his April 8th press conference, Governor Mike DeWine along with Lt. Governor Jon Husted shared they have been in discussions with the legislature about using American Rescue Plan dollars to pay off Ohio’s current federal unemployment loan. By taking action, the DeWine administration and the legislature can save Ohio employers an estimated $109 million in payroll taxes in 2022.

Due to the Coronavirus pandemic and resulting historic levels of unemployment, Ohio’s structurally flawed unemployment compensation trust fund was unable to cover the cost of benefits for unemployed Ohioans. When the state’s trust fund became insolvent in June of 2020, this required our state to seek a loan from the U.S. Treasury. To date, this loan has grown to approximately $1.45 billion, and employers shoulder the entire burden of paying the outstanding loan balance including any interest.

In order to pay back the loan, federal law dictates that an employer’s federal unemployment tax rate is increased by 50% in the first year, which amounts to an additional tax of $21 per employee. In subsequent years when the loan has not yet been retired, the additional tax increases again by $21, so Ohio employers could pay an additional $42 per employee in 2023 and $63 per employee in 2024. In total, over a three year period, this could leave Ohio employers paying over $650 million in added payroll taxes.

Although, this tax increase can be avoided under Gov. DeWine’s plan because federal law only increases employer unemployment taxes in states with an outstanding loan. Using American Rescue Plan dollars to pay off Ohio’s unemployment loan also recognizes that Ohio’s trust fund was not made insolvent due to economic factors or decisions by employers, but rather it was a once in a generation global pandemic that drove the trust fund into insolvency.

The Ohio Chamber commends Gov. DeWine, Lt. Governor Husted and the leadership in the Ohio House and Ohio Senate for their efforts to avoid a tax increase on nearly every employer in the Buckeye State because raising taxes may jeopardize a strong post-pandemic economic recovery.