The Akron Beacon Journal

If no action is taken to improve the solvency of Ohio’s unemployment compensation trust fund, Ohio employers and the state itself will pay close to half a billion dollars in taxes and interest between September 2011 and the end of 2013. Ohio underfunded its UC system, leaving it among the states least prepared to face bad times and helping generate a $2.3 billion debt to the federal government. This October 2011 report concludes that after years of underfunding this crucial system, Ohio should face up to the need for more adequate financing and a higher taxable wage base.

 Press release

Executive summary

Full report

Executive Summary
Ohio’s unemployment compensation trust fund – the money that pays benefits to unemployed Ohioans – has been broke for more than two years. If no action is taken, Ohio employers and the state itself will pay close to half a billion dollars in taxes and interest between last month and the end of 2013. Employers will find their unemployment taxes going up, beginning with a $21 charge for each employee making $7,000 in January 2012—and employers that have laid off the fewest employees will see the largest relative increases in tax rates. Already, the state has taken $70 million that had been intended first for anti-smoking programs and then for health and human-service programs and diverted it to pay interest on our $2.3 billion unemployment debt. If a long-term plan is not developed to begin rebuilding the fund, the state runs the risk of having a large, long-term debt to the federal government – a debt that will siphon off badly needed state resources, burden employers and could threaten the UC system, weakening coverage for jobless workers and reducing its positive effect on the economy.

Unemployment compensation not only provides a crucial backstop to jobless workers and their families – more than 3 million Americans avoided poverty in 2010 because of UC, according to the Census Bureau – it injects funds into the economy when they are most needed, acting as an automatic stabilizer. This eased the effects of the downturn.

Ohio, however, has underfunded its UC system. For 11 out of the past 12 years, employers have paid less into the fund than was paid out in benefits. Like Ohio, more than half the states are borrowing from the federal government to pay unemployment benefits. But Ohio’s system was among the least prepared to face a serious recession.

Ohio’s trust fund has not met generally accepted solvency standards since 1974. Even in 2000, when Ohio had more than $2.2 billion in its fund, the state had less than two-thirds of the needed reserves to meet the benchmark, recommended by a nonpartisan federal commission. That year, 28 other states met the benchmark, while only six states had a poorer solvency position than Ohio. The situation was similar in 2007, as the recession began. Altogether, if Ohio employers had paid the average tax paid by employers across the U.S. between 1996 and 2006, the state trust fund would have received an additional $1.7 billion, or most of the deficit we currently face. While it’s not unreasonable that Ohio had to borrow during this period of high and long-term unemployment, it’s clear that Ohio’s UC solvency problem is not so much a product of the poor economy as much as poor policy.

Ohio employers pay taxes on only the first $9,000 in each employee’s annual wages, or less than a quarter of wages paid. That amount, which is well below the national average, hasn’t been raised since 1995; if it had risen with inflation since then, it would be $13,330. Sixteen states index their taxable wage bases, improving the likelihood that their trust funds will stay solvent.

Big increases in the number of unemployed and in long-term unemployment increased the benefit payout and contributed to the insolvency of the Ohio fund. Yet benefit levels – and the share of unemployed Ohioans who get benefits at all – are not high. The average weekly benefit is less than $300, below the U.S. average, and has fallen since 2008. While that represents a slightly higher share of average wages than in the country as a whole, it is not enough to keep a family of three above the official poverty line.

Ohio has persistently provided state benefits to a smaller share of its unemployed workers than does the average state. Recently, that share has fallen to a 25-year low of just 22 percent. Yet unlike most states, Ohio did not modernize its system to expand access to benefits and thus take advantage of a federal law that would have pumped $176 million into the state’s trust fund. We need to take measures to improve the share of Ohio unemployed who receive benefits—and avoid cuts to existing weekly benefit amounts or the 26 weeks that claimants can receive them. Ohio was able to avoid such draconian steps during the 1980s, when its debt was relatively higher than it is today, so those kinds of steps should not be needed now.

For the last year and a half, most Ohioans receiving unemployment compensation have been getting it because they have been out of work at least 26 weeks and qualify for benefits to the long-term unemployed paid by the federal government. Since mid-2008, the U.S. has injected $10 billion into the Ohio economy with UC aid, most of it through such extended benefits. However, these benefits are set to be phased out next year if Congress does not approve their extension. More than 57,000 Ohioans face a cut-off of such benefits in January 2012, according to the National Employment Law Project. These benefits need to be maintained.

A report commissioned by the state in 2007 on the solvency issue contains recommendations that would take the state a long ways toward a solid fund. Representatives of Ohio employers and employees made proposals in 2008 to tackle the solvency question, and while they did not reach agreement, their discussions then also provide a basis for a solution. Each of these included an increase in the share of wages being taxed, a temporary freeze on maximum benefits, and a surtax to help pay interest on the debt, as 22 states already provide for in their laws (that way, interest costs fall on employers, as they should, not individual taxpayers).

Legislation introduced in the U.S. Senate would give the states and employers a two-year breather on paying interest and the debt, and provide a long-term path to solvency. Ohio employers on average pay less than a penny for each dollar of wages in unemployment tax. After years of underfunding this crucial system, Ohio needs to face the need for more adequate financing and a higher taxable wage base, in particular.

Press release     Executive summary     Full report

 Press coverage

Toledo Blade editorial, November 7, 2011

Akron Beacon Journal editorial, October 31, 2011

Courting Crisis – Unemployment compensation, in Ohio and across the country, provides a crucial backstop for jobless workers and their families. It also injects funds into the economy when they are most needed, acting as an automatic stabilizer that eases the effects of economic downturns. In 2010, UC helped more than 3 million Americans avoid poverty, according to the Census Bureau.

Unfortunately, Ohio has underfunded its (now broke) UC system and has been among the states least prepared for a serious recession. Unless action is taken soon, Ohio employers and the state will pay close to a half billion dollars in taxes and interest to the federal government between September 2011 and the end of 2013, debt obligations that will siphon off badly needed resources, burden employers and potentially threaten the state’s UC system, weakening coverage for jobless workers and reducing the system’s positive effect on the economy. Ohio should face up to the need for more adequate financing and a higher taxable wage base.

Zach Schiller, Policy Matters research director, has been tracking problems with Ohio’s UC system for years. Read his latest report about how state policy is Courting Crisis.

Unemployment not your issue? - Watch Amy Hanauer debating Issue 2 on Channel 3; listen to us talk about James O’Keefe’s attempted “sting” on public radio; read our job numbers in PolitiFact (ruling: we tell the truth, those who quote us don’t necessarily); or read about giveaways to corporations. 

That’s all!
The Policy Matters Ohio Team 

David Rothstein will present at two upcoming conferences.  He’ll speak on the impact of foreclosures on families at ‘Foreclosures and the Family’, sponsored by Community Housing Solutions on Thursday, October 27, from 8:30 am to 12:30 pm at John Carroll University.  On Friday, October 28, he’ll speak on the Consumer Financial Protection Bureau at Organize Ohio’s ‘The Consumer at the Crossroads’ conference (8:00 am – 4:30 pm at Trinity Cathedral).

Our own Amy Hanauer joined the WKYC debate with Keith Ashmus over Issue 2, discussing worker compensation, employee healthcare and pension, and the Issue’s financial impact on Ohio’s workers. 

Watch Amy in this Between the Lines with Tom Beres clip

Ohio’s Job Outlook Continues to be Weak;
Austerity Policies Not Generating Promised Economic Boost

Data released by the Ohio Department of Job and Family Services (ODJFS) from its survey of employers for September 2011 suggest that the state, like the nation, is seeing a slowing recovery. Overall, the number of jobs in the state is now lower than it was in June and the unemployment rate remained stalled at 9.1 percent. Click here for the full October 2011 JobWatch report.

Policy Matters Ohio previously issued releases on monthly job figures in 2003 and 2004.

These numbers were revised in March 2005 as a part of the government’s regular rebenchmarking of the data.

If you are interested in the historical data Policy Matters reviewed previously, please contact us at (216) 361-9801.

Welcome Aboard - We’re thrilled to welcome Pari Sabety and Ruth Clevenger to our board of directors. Pari Sabety, the Vice Chancellor and Chief Financial Officer for Antioch University, has also served as state budget director, a Brookings Institution fellow, director of Brookings’ Urban Markets Initiative and director of the Technology Policy Group at the Ohio State University’s Fisher College of Business. Ruth Clevenger will join the board this month when she retires from her position as Vice President and Community Affairs Officer at the Federal Reserve Bank of Cleveland, where she has worked for more than 15 years. Clevenger previously worked as a Community Reinvestment Act officer at KeyCorp, marketing manager at Ameritrust (KeyBank), and at several non-profit organizations. These two dynamic leaders will help Policy Matters figure out how our complicated financial, budget and educational systems can better serve the needs of poor, working and middle-class Ohio families.

Quick Change - This week, Policy Matters and the National Employment Law Project did a joint release showing that a revision to the Senate budget bill would roll back minimum wage protection for thousands of currently-covered Ohioans, including homecare workers, some agricultural workers and police and firefighters. The Senate Finance Committee has since removed the changes, keeping Ohio minimum wage protection intact for these categories of Ohio workers. Hear more about it here.

Prison Testimony and Tour - Policy Matters research partner Bob Paynter’s testimony before the Senate Finance Committee last week continued to question the claim that prison privatization has saved substantial sums, saying that calculations used to make this claim were “riddled with errors, oversights and omissions of significant data.” Want to know more about our prison research? Come to the last stop on our prison panel tour on Wednesday, June 22, at 7:00 pm, at Lorain County Community College’s Spitzer Conference Center. RSVP to contact@acluohio.org. Thanks to ACLU-Ohio for phenomenal work organizing this tour, which has raised this issue all over the state.

A Good Tax - Budget proposals to eliminate the Ohio estate tax would wipe out revenues of $230 million to local governments and $55 million to the General Revenue Fund, amplifying the impact of cuts from other directions. Zach Schiller’s report explains why we should keep this progressive tax – and the revenue it generates – in place.

Stop Wage Theft - Pending funding cuts to the Labor and Safety Division of the Department of Commerce would further weaken Ohio’s already cash-strapped enforcement of wage, hour and employee protection laws. Policy Liaison Hannah Halbert’s report finds that the number of wage and hour investigators has been cut from 17 to 7 since 1999.

Don’t Miss - At noon on Wednesday, June 22, the brilliant Patrick Bresette of Demos will discuss the damaging consequences of rampant distrust in government and our shared responsibility for restoring government to its proper role, at the City Club of Cleveland. To register, call 216-621-0082.

Education researcher Piet van Lier joins Cleveland schools interim CEO Peter Raskind, CSU’s Center for Urban Education Director Justin Perry, Meryl Johnson of the Cleveland Teachers Union and Olmsted Falls High School student Pam Keller to discuss what should be done with underperforming schools. Developed by area high school juniors, the forum is Tuesday, June 14 from 4:00-6:30 pm at the Maxine Goodman Levin College of Urban Affairs. 

Join a coalition of community, labor, civil rights, and environmental groups at the Ohio State Fairgrounds from noon to dusk on August 20 to “Stand Up for Good Jobs and Strong Communities.”

Ciao and Welcome - We thank departing communications coordinator Kahlil Huff for a job well done and wish him well at his new position at the Cuyahoga County Council. We’ll miss his sweet, calm, unflappable style. We also say a reluctant goodbye to interns Hasani Wheat, Yat-Shun Tong, Xin Yu, Ashley Leonard and Marci Blue. Former staff member Kate Sopko joins us temporarily to transition us to our new communications set-up. We also welcome new summer interns: Adam Lauretig of Grinnell College, Christopher Murphy of Kenyon College, David Foust and Betsy Ginther of OSU, Sarah Osmer of CWRU Law School, Bryant Futryk of the University of Akron and Elena Ortiz, who just graduated from Smith College. If this isn’t enough to keep track of, our Columbus office has moved. Look for us at 85 East Gay Street, Suite 802, and at the same phone number 614-221-4505.

That’s all
The Policy Matters team

We were amused to read last Monday’s top story in the Huffington Post, titled “This Acorn Won’t Crack“. The story described a caller to our Cleveland office, dangling the bait of having “a lot of money” and trying to get our director, Amy Hanauer, to reveal a desire to release biased research. Maybe it was the offer of a lot of money or maybe it was the leading questions, but Hanauer asked some skeptical questions back and the caller soon hung up. It turned out he’d also tried, as HuffPo said, to “punk” our colleagues at the Economic Policy Institute. Some sleuthing revealed that the phony e-mail he provided was from a domain registered to Project Veritas, which was founded by James O’Keefe. O’Keefe, who is on probation (he pled guilty to a misdemeanor to avoid felony charges for wiretapping), is known for deceptively editing videos attempting to discredit ACORN, NPR, the Medicaid program, Planned Parenthood, the New Jersey Education Association, and public school administrators.

The story, which first broke in the Ohio blog Plunderbund, has since been seen on Daily Kos, Firedog Lake, Columbus Business First, Media Matters, and the Media Briefing.

Policy Matters is not for sale. We do unassailable research (find some here), PolitiFact gave us a (totally) true rating, and we are a go-to source on taxes, budgets, work, wages, economic development, education, social safety nets, energy, manufacturing and consumer issues. Needless to say, we’re is not going to get the windfall that Keefe’s staffer cited – click here to donate $25 to help us keep doing this work, and maybe even upgrade to a phone system with caller ID.

That’s all!
The Policy Matters Ohio Team 

WASHINGTON, D.C. — Among members of Washington D.C.’s think tank community, the Economic Policy Institute (EPI) is known as a den for unbending liberals. The group works to stake out a progressive pole in the national debate. But in the age of President Obama, its influence has been limited. Despite having had an alum in the administration — Vice President Biden’s former chief economist Jared Bernstein — it has found itself, more often than not, disillusioned with the president’s embrace of austerity measures and his willingness to support moderate policies.

Full Article (Huffingtonpost.com)

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