Frayed safety net

Akron Beacon Journal - July 20, 2008

The Ohio unemployment compensation fund faces financial trouble. The Statehouse must step up soon to make the necessary repair.

Akron Beacon Journal

On Friday morning, word arrived that the state’s unemployment rate climbed to 6.6 percent in June, leading to more Ohio households feeling strained, looking to jobless benefits as part of their safety net. What Ohioans should know is that the state’s unemployment compensation fund is feeling its own strain, and the trouble is not due to the increasing numbers of people out of work. Rather, the fund is structurally flawed and now requires repair.

The trouble long has been known, triggering conversations among business leaders and state officials, attention focused particularly on the Unemployment Compensation Advisory Council. On Monday, Wayne Vroman of the Urban Institute unveiled a comprehensive assessment of the system. He is a leading researcher in the field. His analysis and recommendations point the way to Ohio ensuring solvency and bringing stability to its fund.

Vroman put it plainly: The state faces ”an imbalance between the revenue and the benefits sides of the program.” If state lawmakers do not act in the coming weeks and months, Ohio will have little choice but to borrow from the federal government, a turn of events that could prove more costly.

What should be done?

The problem isn’t that jobless benefits are too generous. If anything, Ohio could do more for the unemployed, Vroman recommending that the state broaden access to unemployment compensation, the current threshold of $4,000 in annual earnings higher than just three other states. The glaring flaw in the system is the inadequate financing, the state failing to raise enough revenue to support the level of compensation it has approved.

The fund is supported through a tax paid by Ohio employers on the first $9,000 of an employee’s earnings. That base has not changed since 1995. Vroman recommends the state expand the wage base by $1,000, $2,000 or $3,000. Worth noting is that if Ohio opted for an additional $2,000, it hardly would take an extraordinary or punishing leap. Policy Matters Ohio, a Cleveland-based think tank, recently calculated that the average taxable wage base for the country was $11,482 last year.

Such an expansion would do much to put the unemployment compensation fund on sound financial footing. So would another Vroman recommendation, freezing benefit levels for three years. The reasonable thinking is that both employer and employee contribute to addressing the problem. A three-year freeze would translate into a maximum weekly benefit of $365 as opposed to $400, no small sacrifice for someone out of work.

The hope is, the Vroman evaluation will spur action at the Statehouse. Practically everyone understands the wisdom of the compromise. The moment long ago past for Ohio to expand the taxable wage base for unemployment compensation. To be sure, many employers are hurting. So are many workers. Here is a vehicle for each to do its part, ensuring that Ohio has the resources to help those who have encountered a chapter of hard times.

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