Ohio lawmakers have a new plan to help the state’s near-insolvent unemployment benefits system

Ohio Statehouse

With Ohio's unemployment benefits system nearing insolvency, Ohio Republicans are drawing up legislation that would allow privately purchased bonds to be sold to bring more money into the system. (Laura Hancock/cleveland.com)

COLUMBUS, Ohio—As Ohio’s unemployment insurance program nears insolvency, some Republican state lawmakers are preparing to introduce legislation allowing the state to sell employer-backed bonds to help stabilize the system.

The legislation, which lawmakers say they expect to introduce in the next week or two, would mark the first significant change in years to shore up the state’s unemployment insurance program, which had been underfunded even before the unprecedented strain put upon it in recent weeks because of the coronavirus crisis.

Ohio’s unemployment system is currently funded through taxes paid by employers. When the system is overwhelmed with claims during times of economic crisis, such as now or the Great Recession of 2008, state officials borrow money from the federal government and pay it back (with interest) when the economy improves. To get the money to repay the feds, the state raises taxes on employers.

Under new draft legislation, when Ohio’s unemployment insurance fund runs out of money, the state could either borrow from the feds as before, or issue privately purchased bonds.

While Ohio law requires that any bonds backed by the state must first be approved by voters, state Rep. Craig Riedel, one of the lawmakers drafting the bill, said no ballot issue would be needed to issue these bonds, as they would be backed only by employer premiums, not the full faith and credit of the state.

State Rep. George Lang, a West Chester Republican who’s also working on the issue, said the proposed bonds system is based on how Texas has paid for its unemployment benefits in the past.

Employers would still be charged more money to pay off any bonds that are issued, just as they do with federal government loans. But if the bond interest rate is lower than the federal loan interest rate, issuing bonds would save Ohioans money, Riedel and Lang said.

The lawmakers behind the measure are also working on a separate bill that would make additional reforms requiring both employers and workers to pay more into the system, as well as reduce benefits.

That proposed legislation is on the back burner for now, Riedel said, as industry groups and labor unions are as deadlocked as ever on such reforms.

But for Ohio’s unemployment system to be permanently fixed, some agreement has to be reached about raising taxes on employers and/or slashing benefits, said Andy Doehrel, president and CEO of the Ohio Chamber of Commerce.

“That’s all fine and good, but it doesn’t fix the problem,” Doehrel said of the bond idea. “It’s a fresh coat of paint on a bad wall.”

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