COLUMBUS, Ohio (FOX19) - The state of Ohio has asked the federal government for $3.1 billion to fill an impending shortfall in its unemployment insurance trust fund.
The state has already paid out more than $1.5 billion in unemployment insurance claims to Ohioans during the pandemic.
Now officials say the state may need as much as twice that amount.
Lt. Gov. Jon Husted said in April he expected the fund to run out in early June, at which point federal assistance could take effect. The Ohio Unemployment Office recently revised that estimate to the end of May.
According to Bret Crow, a spokesperson for Ohio Jobs and Family Services, the fund balance currently stands at around $744 million.
Crow issued a statement to FOX19 NOW, which reads in part:
“Our latest estimate on trust fund depletion shows that it could occur by the end of May. To that end, we have requested $3.1 billion in borrowing authority from the U.S. Department of Labor. That total exceeds what we think we will need to pay out in benefits. It is essentially a line of credit, so we asked for greater authority than we currently think that we will need just in case.”
Crow adds Ohio is obligated to pay unemployment benefits even with an insolvent unemployment insurance fund, necessitating the state’s request for a federal loan.
If the federal government grants the $3.1 billion loan, the state would have to pay it back with interest.
In order for a state to be eligible to borrow without interest, it needs a solvency rate of 1.0 or higher, which means the government believes the state is able to pay for benefits for a year in an economic downturn.
Ohio’s solvency rate is 0.42, tied for 4th worst in the country.
According to the Labor Department, Ohio is one of 22 states that have trust funds that, without help, wouldn’t have been able to survive an economic downturn such as that caused by COVID-19.
Kentucky and Indiana are also among those states.
After the Great Recession, Ohio borrowed $3.5 billion from the federal government. The state paid back that loan in 2016, along with $258 million in interest.
The loan was repaid, according to Crow, from a combination of state unemployment taxes and reductions to the Feral Unemployment Tax offset credit.
Previously Tuesday, DeWine announced $775 million in reductions to Ohio’s general revenue fund for the remainder of fiscal year 2020, which ends on June 30, due to COVID-19.
After being ahead of estimates by over $200 million at the end of February, Ohio’s revenues had dropped below the estimates by $776.9 million by the end of April.
The following budget reductions will be made for the next two months:
- Medicaid: $210 million
- K12 Foundation Payment Reduction: $300 million
- Other Education Budget Line Items: $55 million
- Higher Education: $110 million
- All Other Agencies: $100 million
The budget reductions come on top of DeWine’s March 23 directive to freeze hiring, new contracts, pay increases and promotions at all state agencies, boards and commissions.