Each state has a trust fund into which is deposited unemployment insurance payments levied on employers based on their payroll and benefits paid to its former (unemployed) workers, similar to commercial merit-based insurance programs. It should be to no one’s surprise that Ohio’s state fund is insolvent as payrolls dropped and claims skyrocketed. Ohio’s fund deficit of over $2.4 billion has been temporarily remedied with federal loans so that checks to unemployed can continue.
This problem is not unique to our state. Altogether 37 state trust funds are upside down over $38 billion. The US Department of Labor forecasts that by the end of 2012 the debt will exceed $90 billion.
And the loans are being called. For Michigan, interest payments on $3.4 billion started in 2009. California ($7.4 billion), New York ($3.2 billion) and Ohio payments are due next year 2011. Non-payment of the loan principal also kicks in federal penalties.
The only legislative answer on the books today to collect this debt is to crank up the insurance rates charged to Ohio employers, increasing expenses, reducing working capital and their ability to hire more employees. No one disputes the need for a comprehensive unemployment program but any plan to resuscitate it cannot be solely funded by employers.
Gordon Friedrich is the Vice President, Corporate Counsel for The Reserves Network, a provider of “Total Staffing Solutions” in the office, industrial, professional and technical markets. To contact Gordon, email email@example.com.