COLUMBUS, Ohio (AP) — Ohio paid off the remaining $271 million on its recession-era debt to the federal government last week, a move officials say will save employers hundreds of millions of dollars in tax penalties.
The debt came from a loan needed to cover benefits to jobless workers and was paid off prior to last week’s deadline to avoid additional interest payments from the state, The Columbus Dispatch reported. It also means the state dodged another tax hike on the state’s businesses ahead of a November deadline.
The payoff will help employers, who have been paying higher federal unemployment taxes under a mandatory repayment system. Employers will save about $351 million next year, said Bruce Madson, assistant director of the state Department of Job and Family Services.
Under the repayment system, businesses in the state have paid higher unemployment taxes since 2012 to pay down the loan’s principal, and the state has paid interest on it. The debt reached $3.4 billion at one point.
Ohio and other states were forced to borrow from a federal loan to continue paying unemployment compensation after the recession hit because they didn’t have sufficient reserves. Lawmakers have appointed a panel to address structural issues to prevent future borrowing.
“We’re really happy, but we still need (lawmakers) to focus on the trust fund,” Madson said.
State law calls for the minimum adequate reserve for its unemployment compensation fund to be at $2.8 billion, but the current balance is $620 million and could drop to $180 million in 2017, Madson said.
Gov. John Kasich said the payoff is “good news for Ohio businesses and workers” and said lawmakers “are right to be looking at long-term solutions to Ohio’s broken unemployment compensation system that are fair to both employers and workers.”
A solution would likely require adjusting taxes paid by employers to fund the system and benefits paid to jobless workers.