House Bill 394, legislation introduced to fix Ohio’s broke and broken unemployment compensation (UC) system, has been delayed in the House Insurance Committee. HB 394 is strongly supported by the Ohio Chamber. However, labor and anti-poverty groups have expressed opposition to the bill. Some members of the Senate have also expressed concern over some of the bill’s provisions, including decreasing the number of weeks of benefits available, creating Social Security offsets, and disqualifying individuals who are terminated for violating a provision of an employee handbook.
A group of House and Senate members began meeting informally to iron out differences between the chambers on how this massive problem should be tackled. At present, HB 394 includes structural changes to what is paid in to the system by employers and what is paid out in benefits in order to create a sustainable solution to Ohio’s UC system. These changes are intended to prevent the massive borrowing that occurred during the last recession, which has led to a 400 percent increase so far in federal UC taxes on employers. This informal working group is a step in the right direction to address any concerns early on so that this critical legislation can move forward.
In an additional development on the UC front, HB 467 was introduced last week which would provide a loan from Ohio’s “rainy day fund” to pay off the outstanding federal UC debt. Without any legislative action, the debt is projected to be paid off in mid-2017. Currently, the increased federal UC taxes being paid by employers are what is being used to pay off the remaining loan balance.
HB 467 has a number of unknowns, such as when the debt would actually be paid off. The debt would need to be paid off by early November 2016 in order to provide employers with relief for 2017. Further, the bill does not specify the terms of repayment. It leaves the terms of the loan, and any repayment required of employers, up to the director of Budget and Management and the director of Job and Family Services. While it is probable these terms would be more favorable than the current penalties from the federal government, this should be spelled out in legislation and not left to the discretion of state officials. Already, the governor’s office has expressed significant opposition to using rainy day funds to pay down the federal UC debt.
Even if the federal debt is paid off, and the increased federal taxes are removed, HB 394 is still needed to prevent history from repeating itself. Paying off the debt without the structural changes just kicks the can down the road. The next economic downturn will again put Ohio’s trust fund in the same position we were in before—having to borrow from the federal government, potentially leading to higher federal taxes on Ohio employers. Thus, we continue to urge the legislature to work towards passing balanced legislation, like HB 394, to finally fix Ohio’s broke and broken unemployment system.