Ohio lawmakers are pushing new legislation that would slash unemployment benefits and impose new eligibility requirements to help strengthen the state’s insolvent unemployment benefits system.
House Bill 394 would reduce the maximum time Ohioans could get unemployment benefits from 26 weeks to as few as 12 weeks – tied for lowest in the nation. It would also require drug testing for some recipients and would stop benefits to Ohioans who receive disability benefits or who were fired because of drug use.
Proponents of the reforms, including major business groups, say they are urgently needed to ensure Ohio’s unemployment system can withstand a future recession better than the last one, when the state borrowed $1.6 billion from the federal government – a move that has resulted in higher taxes on employers.
Liberal groups and unions criticize the bill, however, saying it wouldn’t do enough to shore up the state’s unemployment benefits system. What the bill would do, they say, is make jobless people pay for a tax cut for employers.
The legislation, which has the support of House Republican leadership, is likely to pass the Ohio House in January, according to Rep. Barbara Sears, the Toledo-area Republican sponsoring the measure.
Cuts in unemployment benefits
Overall, the bill would reduce unemployment benefit payments by an average of $475 million each year between 2018 and 2025, according to an estimate by the non-partisan Legislative Service Commission.
Here are some of the proposed reductions:
- Fewer weeks of benefits: Under the bill, the number of weeks a worker would get unemployment benefits would be reduced to between 12 and 20 weeks, depending on Ohio’s unemployment rate. If the bill were in effect today, Ohio would offer 12 weeks of benefits – which would tie it with North Carolina and Florida for the shortest benefits period in the nation.
- Drug testing: Benefits applicants would also have to pass a drug test if they were fired for drug use or are only able to work jobs that require regular drug testing. Federal law limits states’ ability to impose drug-testing requirements, and it’s unclear whether this part of the bill, if passed, would be tolerated by the federal goverment, according to an Legislative Service Commission report.
- Reduced eligibility: Under the bill, Ohioans would be disqualified from receiving unemployment benefits if they receive most types of workers’ compensation payments. It would also reduce unemployment benefits by the amount a person receives in Social Security retirement benefits. Ohioans would also be ineligible to receive benefits if they were fired for violating the terms of an employee handbook, are unemployed because of a labor lockout, or were absent from work for at least three days without contacting their employer.
- No additional benefits for dependents: Ohio currently raises the maximum weekly benefit limit for recipients who have dependents. HB 394 would have everyone follow the limit currently set for people with no dependents – which, this year, is $431 per week.
Tax relief for employers
Employers would save an estimated average of $313 million in taxes per year if HB 394 passes, according to the Legislative Service Commission. That’s in part because employers pay unemployment taxes based on how many benefits have been paid out to their former employees. Reducing benefits would mean lower taxes on employers.
In addition, HB 394 would cut contribution rates for most new employers from the current 2.7 percent to 1 percent whenever the state’s unemployment benefits fund is at or above a set “minimum safe level.”
The bill would require employers to pay unemployment taxes on the first $11,000 of each employee’s salary, up from $9,000 right now. But that limit would gradually return to $9,000 once the unemployment fund reaches its minimum safe level.
Employers have already been paying additional unemployment taxes for years as result of the insolvency of Ohio’s benefits system. Because the system is in arrears, employers automatically have to pay a higher state tax rate and have had federal tax credits reduced by more than $100 per worker, according to the Ohio Manufacturers Association.
The case for and against the bill:
Rep. Barbara Sears, the Toledo-area Republican, said it’s vital for Ohio to overhaul its unemployment system now, when unemployment rates are falling and the state can more easily pay off its debt to the federal government. Ohio is projected to pay off its $775 million in remaining debt by 2017.
“I think it’s very urgent,” Sears said. “I think we need to have a plan put in place before we go into another recession.”
Sears said it’s “appropriate” to cut benefits, noting that Ohioans now collect unemployment benefits for 14 weeks, on average.
Under her plan, she said, if Ohio’s unemployment rate goes up, so will the number of weeks that benefits are offered. And that doesn’t include times when the federal government extends federal benefits beyond then – such as in 2008, when Congress approved benefits for as long as 99 weeks.
Sears said she understands that her bill might give the “appearance” that employers would benefit while workers see their jobless benefits cut. But while employers would save money under her proposal, she noted that they have been paying more money in penalties for years because the state system has been insolvent.
As for the drug testing provision, Sears said it will help identify people who need treatment – which, she added, they can now afford because of Medicaid expansion.
“This is about making sure that able-bodied people are able to work,” she said.
Zach Schiller, research director for Policy Matters Ohio, a left-leaning think tank, said while the bill makes “some progress,” Sears’ own statistics show her plan won’t make the fund solvent.
A chart submitted by Sears to an Ohio House committee, Schiller said, shows that the bill would dramatically raise the state’s “minimum safe level” but not provide nearly enough money to reach that amount.
“So what we’re doing is we’re sharply cutting benefits for unemployed workers in order to provide a tax cut for employers,” he said. “What’s left over is improving solvency, but not nearly enough to make a solvent fund.”
Ohio AFL-CIO president Tim Burga echoed Schiller’s concerns in a statement.
“Historically, changes to the unemployment compensation system have been a joint venture between labor and business,” Burga said. “This bill does not represent any concession from employers, and it is clear that working people are the sacrificial lambs in this misguided attempt at solvency.”