Ohio’s jobless program: Still broken
Business, labor don’t agree on solution
Ohio’s unemployment system is a giant mess, bogged down by rickety financing, antiquated computer systems, an historic spike in claims, horrible customer service and rampant fraud and theft.
Business groups, labor leaders and state officials have seen the problems for nearly two decades but have failed to muster the political will needed to craft a comprehensive fix.
It is a surprise to no one who has been paying attention.
“The political hurdles are – it’s really tough to cut benefits, that’s not something I personally would find acceptable. It’s even harder to require more resources coming into the system,” said former Ohio governor Ted Strickland. “That’s true about so many things that government does. There is a tendency to delay, to put off, to look after this afternoon instead of tomorrow afternoon. It’s a flaw within the system of how we govern ourselves.”
On Strickland’s watch, the
unemployment compensation system went broke in January 2009 during the Great Recession. Ohio borrowed $3.3 billion from the federal government to keep jobless checks flowing. The massive loan, which wasn’t paid off until 2016, cost Ohio $258 million in interest.
Fast forward to June 2020. The economy tanked amid a global pandemic and the system went broke again. Ohio borrowed nearly $1.5 billion to keep it afloat.
The most difficult time to fix the system is during active crisis. Once the economy rebounds, leaders have an opportunity to revamp and rebuild.
Ohio has not taken those opportunities.
“We just keep kicking the can down the road,” said Tim Burga of the Ohio AFL-CIO, an umbrella group of labor unions.
The delay boils down to a years-long stalemate between business and labor groups who differ over how best to make the system solvent.
“Until the policy leaders in this state have the courage to seek an additional fair funding system, it’s going to continue to be a problem,” said Republican Kirk Schuring, a long-time Canton-area lawmaker who tried to broker reforms five years ago.
A battle between business, labor
State officials have pushed the two parties to hash out an agreement, but they can’t seem to move past the debate over whether to increase taxes or slash benefits.
“I don’t think the whole burden should be on businesses,” said Ohio Chamber of Commerce CEO Steve Stivers. “I think it should be a give and take between businesses and labor.”
Business leaders contend Ohio’s unemployment benefits are more than generous and have extra fat that could be trimmed, such as a provision that doles out money based on whether the person has children. But Zach Schiller of Policy Matters Ohio said the state’s average benefits are below the national average and not enough to keep a family of three above the poverty line.
According to the U.S. Department of Labor, benefits paid last year as a percent of total wages sat at 1.56% in Ohio compared to 1.87% nationwide. The gap between those two figures was not as significant in 2018 and 2019, although Ohio was still slightly lower than the United States overall.
Schiller also argued that Ohio claimants tend to find work before maximizing their benefits out at 26 weeks.
“The notion that unemployment is somehow allowing people to maintain some high lifestyle, nothing can be further from the truth,” he said.
In 2015 and 2016, the Ohio House gave serious consideration to a bill that would have cut benefits and tightened eligibility rules.
Rather than pass the bill, then-house Speaker Cliff Rosenberger announced in December 2016 that a working group would try come come up with another plan by April 2017. That didn’t happen.
Schuring, who was tapped to lead that effort, said labor wouldn’t go for benefit cuts, which businesses insisted upon. “We never could get the consensus to do something that would make the fund solvent.”
Again, another Ohio governor – this time Republican Mike Dewine – is calling on business and labor to hammer out a funding agreement.
“This is going to take some sacrifice on both sides of this issue. This is going to take discussions with the General Assembly,” Dewine said. “Look, this has to be a political solution in the sense that there has to be a coming together of business and labor to get this done.”
Ohio Job and Family Services Director Matthew Damschroder, who is Dewine’s point person on the system, said if he had a magic wand to remake the system, he’d start with stable funding and a better way to convey complicated information to unemployed workers seeking benefits.
“A stable method of funding the program so that in times of high employment, which is great for a state, that there is a funding floor so we can maintain services and be prepared for that next situation and invest in technology when the (work) load is low,” Damschroder said. “That to me as a major lesson over, really, the last 10 years.”
“Until the policy leaders in this state have the courage to seek an additional fair funding system, it’s going to continue to be a problem.” Republican Kirk Schuring
19 states with insolvent funds
An audit released Thursday found Ohio uses more state revenue to administer its unemployment system than any other state, spending an average of $26.4 million between 2017 and 2019. That covered over 25% of the program’s costs, while other states kicked in just 5.8%.
The next highest spender, Washington, has a dedicated employer tax to cover these expenses.
But Ohio does have something in common with other states: Insolvency during economic recessions.
Each state runs a trust fund for the benefits, which are paid for with employer taxes. Legislatures set the tax rates, benefit levels and eligibility rules so the systems vary state to state.
Twenty-three states borrowed to keep their unemployment systems solvent in the early 80s recession and 31 states borrowed in 2010, according to the National Employment Law Project. Ohio is among 19 states with insolvent trust funds this time around.
When a state owes money to the feds, employers pay higher unemployment taxes until the debt is erased. Stivers estimates that would cost Ohio employers $650 million in higher premiums over three years.
The first week of September, Ohio sidestepped that by paying off the $1.47 billion federal loan using federal grant money given to Ohio. Damschroder said paying off the loan removes the “sword of Damocles hanging over us right at this moment.”
“By taking the pressure of increasing tax rates off the table, it gives space for the parties to work,” he said. “I think that’s a major accomplishment to get the ball rolling again.”
Reporter Jessie Balmert contributed to this report.
Laura Bischoff and Haley Bemiller are reporters for the USA TODAY Network Ohio Bureau, which serves the Columbus Dispatch, Cincinnati Enquirer, Akron Beacon Journal and 18 other affiliated news organizations across Ohio.