Ohio is nearly $1.4 billion in debt to the federal government for its unemployment fund and a special Ohio House committee met at a Springfield manufacturing firm Tuesday to seek a way to make the program solvent.
The state’s Unemployment Compensation Trust Fund, which pays benefits to out of work Ohioans, has been structurally unsound for years, according to experts who testified Tuesday. But the problem came to the forefront at the height of the recession when the fund ran out of cash, forcing the state to borrow from the federal government as unemployment spiked.
The state has been steadily paying off the debt, but still owes nearly $1.4 billion.
That means the state has had to divert money from other programs to pay interest, and Ohio businesses have to pay higher federal taxes that automatically kick in to repay the debt. The tax will increase again next year if the situation isn’t resolved, said Zach Schiller, research director at Policy Matters Ohio, a left-leaning think tank.
“It’s a systematic problem,” said Ohio Rep. Gary Scherer, R-Circleville, the committee’s vice chairman. “We’re in essence paying out more in benefits than the employer taxes being paid into it.”
The committee’s job, Scherer said, is to come up with a solution to make the fund solvent for the long-term.
The meeting Tuesday was held at Pentaflex, a Springfield manufacturing firm managed by State Rep. Ross McGregor, R-Springfield, who also sits on the committee. He wanted committee members to look at the issue from a wide range of views, he said, including from employers.
Numerous options should be on the table to make the fund solvent for the long-term, McGregor said, including having employees chip in to the fund as well as employers, since they receive the benefits.
“I’m saying the solution is going to be a mix of things here,” McGregor said.
Ohio was among more than 30 states forced to borrow money at the height of the recession, according to information from the Ohio Department of Job and Family Services.
But the state’s situation was made worse because Ohio employers have paid less into the fund in state payroll taxes than was paid out in benefits for more than a decade, Schiller testified.
Although Ohio’s benefits are in line with other states, the amount Ohio employers pay into the fund hasn’t increased since 1995 and isn’t indexed to inflation, Schiller said. That amount, he argued, is well below the national average.
Unemployment benefits are important to families because they help cover bills and mortgages while they seek work and pump money into the local economy, Schiller said. He also argued Ohio already makes it tougher to receive benefits than several other states.
“My view is that benefits are not particularly high,” Schiller said. “They’re not out of line with the national wages.”
The committee has additional hearings scheduled in Miamisburg and Toledo later this year, Scherer said. Once those are complete the committee will draft a report. Legislation to address the problem is likely, he said.