Fix for state fund would take more from paychecks, cut unemployment benefits

By Doug Livingston - The Akron Beacon Journal (TNS)

AKRON — Top House Republicans have taken to the road this month, speaking to the public and newspapers in an uphill effort to sell a thankless solution for Ohio’s troubled unemployment compensation fund.

The fund provides about 15 weeks of financial assistance on average to workers who find themselves employed at no fault of their own. At most, these payments to out-of-work Ohioans range from $443 for individuals to $598 for families.

Ohio’s economy has improved. But even with a declining rate of unemployment claims, the $600 million in the fund today will last four years at best, and maybe only months in the event of a recession.

If the fund goes belly up, as it did in 2009, the state will have to borrow billions from the federal government. That will send a lot of money down the drain, like the $257 million in interest Ohio paid Uncle Sam from 2009 to 2014.

Only a last-ditch effort by state lawmakers in 2016 prevented the federal government from slapping fees on businesses in states like Ohio, which failed to repay its loans on time.

To fix the fund, House Speaker Cliff Rosenberger and Rep. Kirk Schuring of Canton are asking workers and employers to pay more while cutting then freezing unemployment benefits.

“This is about as fair and balanced as we’re going to get because nobody is going to like this bad boy,” Rosenberger said of House Bill 382, Schuring’s compromise to shore up the state’s unemployment compensation fund.

The plan doesn’t have the endorsement of big labor or big business — each not happy to have members pay more. But after asking state accountants to crunch the numbers, Schuring said his plan evenly divides the pain, taking about as much from companies as their employees’ paychecks or future benefits.

The solution, if accepted, would take billions from paychecks while balancing the competitive of Ohio’s business climate with neighboring states.

A new deal

Republicans in control of state government for the past decade have not filled vacancies on an advisory council that steers the unemployment compensation program.

The group hasn’t met in nearly seven years, during which the unemployment compensation fund went bankrupt amid a terrible recession. Lawmakers were warned.

Since before the Great Recession, they’ve weighed concerns from labor and business about the fairest, most equitable way to achieve solvency in the fund. Schuring took the lead in 2016 after Ohio passed a plan to settle the last of the federal debt. His 2016 proposal, compared to his current plan, would have more deeply cut benefits, a nonstarter for labor groups that are willing to see membership pay more to avoid any cuts for unemployed workers.

Reform breakdown

HB 382 shifts terminology in state law to treat unemployment benefits less like a tax on payroll and more like an insurance against job losses.

The bill would:

• Freeze for a decade annual cost-of-living increase on weekly benefits.

• Shrink from 26 to 24 weeks the time eligible workers can collect unemployment cash benefits.

• Require employers to pay a percent of the first $11,000 each worker makes. Ohio’s threshold increased to $9,500 this year after being stuck at $9,000 since 1995. Schuring’s proposal matches neighboring states, but is below the $13,782 national average organized labor would like to see implemented in Ohio.

• Require employees to match 10 percent of what employers pay.

• Relax the contribution rate once the fund is stable.

After stiff opposition from the building trades groups, Schuring included a carve out he said will allow construction workers to collect the full 26 weeks of unemployment if Mother Nature has put them out of work. He’s also allowing supplemental benefits through “high risk pools.” Essentially, dues collected by unions could shield members from benefit cuts.

“It would be benefits that are unique to the labor unions,” Schuring said.

Companion legislation, House Joint Resolution 4, would permit the state to sell bonds in the event that the fund goes bankrupt, avoiding federal interest payments.

The fiscal cliff

Nonpartisan researchers with the Legislative Service Commission (LSC) estimate that Schuring’s bill would add $4.5 billion to the state’s unemployment fund for the next 12 years. Roughly 49.5 percent would be paid by business and 50.5 percent by labor.

As Schuring explained it, employees would be divided into three tiers, making additional weekly contributions of up to 50 cents, $5 or $10 according to wages and the likelihood each group would need unemployment compensation someday.

Along with increasing revenue, benefit cuts and freezes will take $3 billion to $4 billion less out of the state fund, depending on whether there’s another recession between 2019 and 2030.

Even if Schuring’s compromise passes this year, it’ll take a decade to build up the unemployment compensation fund to a level that might sustain a recession. But the cost of inaction could be greater.

Without a course correction, the LSC estimates the state fund will be empty by 2021. In the event of a “moderate recession” — defined as something between the painful Great Recession of 2008 and modest dip in 2001 — the fund would last only months.

Most economists predict a recession in 10-year forecasts. If the jobs decline starts this year, the fund could run dry by January 2019, before Schuring’s bill would take effect.

By Doug Livingston

The Akron Beacon Journal (TNS)

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