COLUMBUS, Ohio (FOX19) - Attempts to address shortfalls widely known for years in Ohio’s unemployment insurance trust fund failed because no one from lawmakers to business owners to laborer wanted to make the hard choices and financial sacrifices to fix it, a local state representative said.
Now, Ohio has asked the federal government for $3.1 billion to fill the fund’s impending shortfall amid the coronavirus crisis.
The state has already paid out more than $1.5 billion in unemployment insurance claims to people during the pandemic and may need as much as twice that amount.
Any federal loan Ohio would receive should come only on the condition that the state take steps to “shore up the fund,” said State Rep. Bill Seitz, R-Green Township.
“It’s been perennially underfunded. I’ve been advocating for a plan to shore it up for over a decade. Nothing has been done."
Three years ago, State Sen. Kirk Schuring, R-Canton, proposed legislation to reform it when he was a state representative and led a task force on it, Seitz recalled.
“Senator Kirk Schuring had a tremendous plan that would have shored it up," Seitz said Wednesday.
House Bill 382 would have increased taxes on employers, reduced benefits and, for the first time, tax employees. Another piece of legislation would let the state issue bonds to pay unemployment benefits or repay advances from the federal government made during times of high unemployment.
But it didn’t even make it out of committee.
“Business didn’t want to have to pay more. Labor didn’t want to to have to pay more. Each side said the other should pay 100% of the cost to shore up the fund," Seitz said.
"We both said ‘a pox on both houses and belly up to the bar and you’re both going to have to take a haircut to shore up this fund.’ Neither side was willing to budge, and here we are.”
Lt. Gov. Jon Husted said last month 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.
Ohio is obligated to pay unemployment benefits even with an insolvent unemployment insurance fund, he said.
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, Kentucky and Indiana are among 22 states with trust funds that, without help, wouldn’t have been able to survive an economic downturn such as that caused by COVID-19.
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 shortfall in the state’s unemployment insurance fund came to light Tuesday when Gov. Mike 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.
“It’s news to me that DeWine is asking the feds for $3 billion,” Seitz said Wednesday.
“Obviously, if we get it that would be wonderful, but I think it’s more likely the federal government will say ‘we will help you folks out, but you have been negligent in attending to the fiscal strength of that fund.’”
“If I was Donald Trump and the federal government, I would tie any aid to requirements shoring up the fund. When your state fund goes broke you are required to continue paying your benefits and you are required to borrow from the federal government and the federal government then loans you the money,” he said.
"We are still in hock to them from the old 2009 recession. Then, they charge you interest and it isn’t cheap and you have to pay it back and how do you pay it back? You pay it back by levying increased charges on all the employers which is the last thing they need after being socked in the mouth during this pandemic.
“So,” Seitz said, “at the very minimum, I think that the federal government should be willing to lend us the money without the rate of interest and I think if I were the federal government I would insist as a condition of any loan forgiveness that the state take steps to shore up the fund which I have been advocating for more than a decade, as has Kirk Schuring, to no avail.”