The Star Beacon; Ashtabula, Ohio

July 8, 2013

Report

Ohio debt causes higher taxes for employers

y Lee Romney and Laura J. Nelson
Associated Press

COLUMBUS — Ohio employers have been paying millions in higher taxes for the state’s failure to repay a federal loan to cover unemployment benefits during the recession, a newspaper reported Sunday.

The state’s failure to repay the $1.5 billion federal debt has left Ohio employers with a $272 million tax increase over the past 18 months, The Columbus Dispatch (http://bit.ly/15odJ6L) reports. Ohio taxpayers have paid an additional $136.5 million in interest on the debt since 2011, with another interest payment of $48.5 million due in September.

Employers pay state and federal payroll taxes to fund jobless benefits. But Ohio was among 36 states that didn’t have enough reserves when the recession hit and were forced to borrow from the federal government to keep paying jobless benefits.

U.S. Department of Labor figures show Ohio is among 22 states owing a combined $21 billion. While Ohio has repaid about $1 billion in principle the past two years, its $1.5 billion debt is bigger than every state but California, New York and North Carolina, the newspaper reported.

A panel of business, labor and legislative leaders created to oversee the state’s unemployment trust fund hasn’t met in more than three years and the lone remaining member’s term expired Sunday.

The Unemployment Compen-sation Advisory Council is to include six representatives of business and labor appointed by the governor and six lawmakers named by House and Senate leaders, but no appointment has been made in at least two years.

In that time, Ohio’s federal employment tax rate has been increased twice, with a third increase set for Jan. 1. Those increases equate to an additional cost of $63 per employee, according to the Ohio Department of Job and Family Services.

“This is painful because it starts adding up,” said Andrew Doehrel, president of the Ohio Chamber of Commerce and a former council member.

He says other states have approved bonds to pay off the debt so employers are not paying as much and some shored up their unemployment funds by raising taxes on employers and cutting benefits.

“The biggest thing the governor can do is create jobs,” said Gov. John Kasich’s spokesman, Rob Nichols. “We’ve been able to drive down the debt by $1 billion and will continue to look for ways to pay it down.”

Nichols says Ohio began borrowing two years before Kasich took office and the governor plans to make appointments to the council soon, when he has assurances members will work toward a reasonable plan.

Former board members say agreeing on a plan to ensure that Ohio’s unemployment trust fund doesn’t pay more in benefits than it collects in tax revenue and getting lawmakers to approve it won’t be easy.

States failing to repay their loans within a certain time automatically will have a reduction in their tax credit on federal unemployment taxes paid by employers, with the revenue used to pay off their debt.

Sen. Capri Cafaro, a Youngstown Democrat and former council member, said proposed tax increases have been met with resistance because policymakers worry about the effect on businesses.

“It’s a very delicate balance, but the time might be right for us to really engage and get this resolved,” she said.

Vermont officials last week announced a plan to pay off that state’s $53 million debt, three years after the state reduced benefits to unemployed workers.  

Other states have done things like structuring their systems to increase employer taxes when the trust fund reaches a certain level, enacting special assessments to repay loans, and scaling back benefits.