Ohio borrowing nearly $7M per day on average to pay unemployment benefits

COLUMBUS, Ohio (FOX19) - $1,180,228,997.

That is how much money the state of Ohio has borrowed from the federal government since its Unemployment Trust Fund went dry earlier this year. The money in the fund comes from a tax that employers pay the state. At the start of the year, the fund had roughly $1.3 billion in it. By mid-June, the money was gone, and the Ohio Department of Job and Family Services is currently borrowing $6,983,603 per day on average to pay out benefits.

“We aren’t alone in this,” Ohio Department of Job and Family Services Director Kimberly Hall said. “At least 21 other states are currently borrowing from the federal government.”

That is true, according to the U.S. Department of Labor. Also true is the fact that Ohio will have to pay back all that money, plus tens of millions in interest, because the government said the trust fund didn’t have enough in it in the first place.

At the start of 2020, the U.S. Department of Labor reported that the state would have been unable to pay for benefits for a year if an economic downturn were to happen. The agency deemed the fund insolvent. Any loan the state would ask for, would come with interest.

Enter the pandemic. North Carolina, Michigan and Georgia, states with similar populations, do not need to pay back interest. Their funds were deemed solvent.

During the great recession, Ohio borrowed $3.4 billion from the federal government, then had to pay it back along with $258 million in interest. Department of Labor statistics show Ohio has the fourth-lowest solvency rate in the U.S. The last time the fund was deemed solvent? 1974.

Doug Watts is the CEO of Metalworking Group, a global manufacturing company with locations in Colerain and Fairfield. The company has around 160 employees. His company, like many others, will have to pay more to cover the amount needed to pay back to government loan, which increases as each day passes.

“That’s a huge number,” Watts said. “I think if you’re the state, I think it’s probably really hard to plan for a situation like this, even with the rainy day fund, you know, but it seems like with unemployment, the state never really gets caught up.”

Watts remembers having the same feeling when Ohio had to borrow money from the government during the great recession more than a decade ago. “It’s just part of what you deal with in business,” Watts said. “You try and offset it with efficiency gains in other parts of your business. And live to fight another day.”

The Ohio legislature is the body that decides the strength of the fund. Republican Bill Seitz represents Western Hamilton County. He claims the fund pays out too much money for unemployment benefits and doesn’t bring in enough money from the employers who fund it.

“I’ve been trying since 2005 to get some solutions,” Seitz said.

North Carolina, Georgia, and Michigan all pay out less in unemployment benefits than Ohio.

But those states pay either more in tax than Ohio or the same into their funds.

Democratic State Senator Cecil Thomas of Cincinnati referred FOX19 NOW Investigates to the group “Policy Matters Ohio”, who wrote last year that the state created a review committee to investigate tax loopholes, but claimed it wasn’t effective because it wasn’t given the staff and budget to do its job.

“The answer to fixing this fund is not doing it on the backs of the workers who rely on it.” Democratic State Representative Bridget Kelly of Cincinnati said. “It has to be a thoughtful balanced approach with input from both workers and businesses to find a solution.”

Representative Seitz believes it didn’t have to get to this point.

“Nobody wants to eat their spinach you know,” Seitz said. “They all want ice cream and they don’t want to eat their spinach.”

State Senator Bob Peterson represents Clinton and Highland counties and has a different approach that he says would help the state pay back less in interest. Take the loan, but then issue bonds to pay it off. This is the model that Texas has used.

Peterson introduced Senate Joint Resolution 4. The resolution passed the Senate but has been sitting in the House Finance Committee since August.

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