Why Ohio’s Unemployment Compensation Fund is Going Broke, and What We Should Do About It

June 12, 2008

During the next year, Ohio’s unemployment compensation system is likely to borrow from the federal government in order to pay benefits to jobless workers. This backgrounder explores why the UC system is in such poor financial shape and makes recommendation on what should be done. It finds that the system has been underfunded over the past decade. Employers have paid lower taxes than the national average while benefit costs have been in line with those of other states. Ohio currently requires that taxes be paid on the first $9,000 of each employee’s earnings. As a first step to putting the fund on solid ground, the state should increase that taxable wage base and index it to wage levels.

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