Senate Bill 116: Revising Ohio's Unemployment Compensation Law

In 1932, Ohio joined a handful of states that began studying ways to give workers a helping hand should a sudden loss of work occur, and drafted a state unemployment compensation plan well before the federal program was created in 1935. Unemployment compensation provides a temporary cash benefit to assist displaced workers and their families during periods of unemployment. These modest benefits also support the local economy by providing some preservation of purchasing power during a period of displacement. Senate Bill 116 represents a dramatic step backward by seeking to shore up the unemployment compensation trust fund on the backs of displaced workers through the dramatic reduction of eligibility and benefit awards.

Historical Neglect to Properly Fund Ohio’s UC System

Ohio’s Unemployment Compensation Trust Fund has been insufficiently funded for many years, prompting the state to commission an independent study to address solvency issues. The state commissioned renowned economist and issue expert, Dr. Wayne Vroman, to complete the study in 2008. The report recommendations centered on the need to substantially increase the taxable wage base required by employers to fund the system. As a result of legislative inaction, the fund was not positioned to handle the following recession or the more recent Covid pandemic, forcing the state to borrow money, with interest, from the federal government to provide benefits for workers that were displaced, through no fault of their own. Because of this legislative inaction, Ohio employers continue to pay a state tax percentage into the system on the first $9,000 an employee earns, an amount that has not changed in 28 years and is well below the national average of $15,000. If the taxable wage base had grown by inflation since the last increase in 1995, it would now be well over $17,000.

Reduces the Maximum Number of Weeks Workers Can Receive Benefits

If SB 116 becomes law, the maximum number of weeks an Ohioan could receive UC benefits would be cut from 26 weeks to somewhere between 12 and 20 weeks, depending on Ohio’s unemployment rate. Although Ohio has provided 26 weeks of relief to displaced workers since 1949, as 37 other states continue to offer, during a typical economic down-turn, just over one in four Ohio recipients exhaust their benefits. This reinforces the common narrative that was heard during the 2014 Ohio House field hearings: that Ohio’s workers are not seeking unemployment compensation as a lifestyle, but as a life necessity, and they are eager to get back to work when work is available, get on with their lives, and pay their own way.

Imposes Large Cuts on Ohioans Who Have Dependents

Ohioans’ average earned unemployment benefit is on par with the national average and simply serves as a safety net to help pay utility bills, put food on the table and prevent the bottom from falling out altogether, which then becomes a greater cost for all of society to bear. SB 116 makes drastic cuts by eliminating dependency benefits and setting a single maximum rate at 50% of the state average weekly wage. Currently, that would be $561. This maximum rate would apply to Ohioans who have one or two dependents (currently eligible for $680) and those with three or more dependents (currently eligible for $757).

Formula for Determining the Length of Benefits is Unfair

SB 116 would set the number of weeks Ohioans can receive benefits based on the average unemployment rate for the two quarters before each six-month period. For example, determining a worker’s benefits between January and June of this year would be based on the average state unemployment rate between July and September of last year. Thus, if a recession occurs and unemployment rises at any time during the remainder of the year, under SB 116’s formula, workers would only have 12 weeks of benefits. At the height of the covid pandemic, had this formula been in place, Ohioans would have only had 12 weeks of benefits at a time when unemployment averaged 8.2%.