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Policy Matters Ohio

Legislative Briefing on Unemployment Compensation

April 22, 2010

Legislative Briefing on Unemployment Compensation

April 22, 2010

In an April 2010 event co-sponsored by the Ohio Workforce Coalition, Policy Matters Ohio held a legislative briefing on unemployment compensation.

UC is a crucial support for jobless Ohioans that also helps stimulate the economy. Last year, more than half a million Ohioans – an average of close to 200,000 people a week — received unemployment compensation. With jobless spells lasting longer, nearly 250,000 remained on state benefits so long that they ran out. Importantly, Congress provided extended federal benefits allowing unemployed Ohioans to receive benefits for up to 99 weeks in all.

Ohio needs to take advantage of another federal provision that grants states funds for taking steps to modernize their UC systems. Ohio has received $88 million in such funds so far, but could obtain another $176 million if it implements two of the following four options by August 2011:

1. Benefits to those seeking part-time work;
2. Extended benefits to individuals in approved training;
3. Benefits to individuals who leave work for compelling family reasons (domestic violence, transfer of a spouse, illness of an immediate relative); or
4. A minimum $15/week dependent allowance, up to $50 a week

States across the country have approved such measures. These measures would bring Ohio’s system in line with the realities of today’s workforce, while their cost would be paid for at least several years with the federal money.

Ohio’s UC system needs to be improved in another way, too: It has not been adequately financed. Ohio taxes only the first $9,000 or less than a quarter of each worker’s wage. Many states have moved to pay-as-you-go financing of their UC systems, reducing the financial cushion they used to provide in advance of economic downturns. And Ohio went further than most, keeping taxes below the national average. The system was going broke as a result of this undertaxation. As unemployment grew and people were unemployed for longer periods of time, benefit levels skyrocketed, adding to the deficit.

Like 33 other states and the Virgin Islands, Ohio now is borrowing from the federal government to pay benefits. Yet despite the fund’s fiscal condition, the tax-rate schedule for many Ohio companies was actually reduced this year, costing tens of millions of dollars in revenue.

Ohio should take steps to:
• Eliminate automatic tax cuts such as the one that happened this year
• Create a surtax to pay interest on the debt to the U.S., if necessary
• Phase in a substantial increase in the taxable wage base, and index it to wages
• Support a higher federal taxable wage base and federal relief for states that improve solvency without cutting benefits
• Temporarily freeze increases in maximum benefits, as proposed in 2008

For more information, see the following reports:

Stimulus for Ohio: U.S. Unemployment Compensation Aid

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

Ohio Still Excludes Many from Unemployment Compensation

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