$25 million will go to pay interest on Ohio unemployment debt
Posted June 21, 2012 in Press Releases
Download statementSee previous report on UC fund solvency
Employer taxes have not kept pace with needs, leaving Ohio's unemployment compensation trust fund chronically underfunded. Because the state has been unwilling to fix the problem, Ohio is now diverting money to pay interest on money owed the federal government.
Chronic underfunding diverts resources from other needs
When Ohio has so many unmet needs, with schools and local governments seeing major reductions in funding, it is illogical for the state to be forking over tens of millions of dollars in such interest charges. The debt exists because employer taxes over time have not kept pace with needs.
“We have been unwilling to face the chronic underfunding of our unemployment trust fund,” said Zach Schiller, research director at Policy Matters Ohio. “The result is that we continue to have a large debt, and to pay interest charges with money that would be better spent meeting the needs of Ohioans and investing in the future.”
Ohio borrowed from the federal government to pay unemployment benefits when its fund went broke in early 2009. The state has paid some of the money back but still owed $1.79 billion as of June 18. Bringing the fund back to health will mean not only paying off the debt, but rebuilding it so there are sufficient resources to pay benefits when the next downturn comes along.
As a part of the current biennial budget, the General Assembly last year transferred $103.3 million into a fund that is being used to pay interest on Ohio’s unemployment trust fund debt to the United States. This money was used to make a $70.9 million payment last September, leaving about $32.4 million in the fund. The Ohio Department of Job & Family Services (ODJFS) estimates that the trust fund will owe $67.5 million in interest to the U.S. in September.
House Bill 487, the recently approved budget bill, included a transfer of $25 million into the fund, producing a total of $57 million. While state officials haven’t yet come up with a specific plan on where to find the additional $10 million that will be required, ODJFS is confident that the money will be available from other available resources.
Ohio’s unemployment compensation (UC) system is paid for by employer taxes. Ohio underfunded its UC system for many years, so that the trust fund was ill prepared for the 2007-2009 recession. The recession caused the number of unemployed to skyrocket, increasing the amount of benefits that was paid out. Ohio’s unemployment compensation benefits are not overly generous