Some bills we pass in the Ohio Senate generate front-page headlines and constituent emails by the hundreds, while others travel through the legislative process with little fanfare. Sometimes it’s legislation that flies under the radar that makes the greatest impact on the lives of ordinary Ohioans.
Legislation we recently passed to erase Ohio’s unemployment compensation debt is a perfect example.
This spring, the Ohio Senate passed a bill to level the mountain of debt that Ohio’s employers had to climb in order to fund unemployment benefits for Ohioans out of work. Ohio had borrowed heavily from the federal government during the Great Recession, and it was time to pay the piper.
In early 2009, Ohio’s unemployment compensation fund went completely broke after months of staggeringly high unemployment. During that economic downturn the state’s unemployment rate had spiked to a 26-year high, and we had squeezed every last penny out of our unemployment compensation fund. In response, the businesses in the state borrowed more than $2 billion from a federal trust fund in order to continue paying jobless benefits struggling families needed to get by. At the beginning of this year, the state’s businesses still owed $300 million on that debt.
A debt of $300 million may not sound like much to citizens accustomed to a federal government that owes trillions, but Ohio’s job creators feel the direct impact through the unemployment taxes they pay.
Ohio businesses under normal conditions pay $42 per employee per year in unemployment taxes. Because of the outstanding debt, the federal government was set to increase those penalties from $147 per employee per year to $168 per employee for 2017. After accounting for Ohio’s roughly 5 million employees, we were looking at a total of a half a billion dollars in unnecessary federal taxes on Ohio businesses.
We know that every dollar paid in unemployment taxes is one less dollar for employers to invest in Ohio’s people and economy. When small businesses employ half of the workforce, extra taxation can mean the difference between hiring and firing, expanding or shrinking. As a state, we’ve come too far to let that happen.
When employers asked the legislature to act to eliminate their debt, we listened. We worked with local and regional businesses and partnerships to develop a solution to the mounting problem. We formulated a plan to temporarily use a portion of Ohio’s unclaimed funds in order to pay back the original federal loan this fall. The solution allows the state to repay the remainder of the federal debt, which then reverts unemployment taxes on our businesses to normal levels and avoids the crushing new federal penalties. All tallied, this will save Ohio businesses an estimated savings of over $400 million, that instead of being sent to Washington, can now be used to hire, train and invest in the workforce and our economy here in Ohio.
Widely praised by the business community, the plan to repay Ohio’s unemployment debt burden is an essential piece of the legislative effort to lighten the burden on job creators. When job creators have the resources to expand their operations and bring more employees on board, our economy grows. Our state thrives. We still have work to do, but we’re on the right track.
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