09/02/2021

Ohio Pays Off Federal Unemployment Loan

This will protect employers from an unemployment tax increase

Yesterday, Governor Mike DeWine announced the state of Ohio has initiated the repayment of nearly $1.5 billion borrowed from the federal government to pay unemployment benefits to eligible Ohioans during the pandemic. This repayment will prevent future tax increases for Ohio employers that would have been needed to pay off the loan.  

Repayment of the loan to the United States Treasury is being paid in its entirety with funds from the American Rescue Plan Act (ARPA). Had the $1,471,765,771.37 loan not been fully paid by Sept. 6, the federal government would have charged approximately 2.28 percent interest on the debt, which would have led to increases in unemployment taxes for Ohio employers. 

“I'm not willing to let our employers bear the unemployment debt burden caused by the pandemic," said DeWine. "By repaying this loan in full, we ensure that Ohio businesses won't see increases in their federal unemployment payroll taxes. Without this added tax burden, our employers can invest more money into their businesses and hire more staff. I’m grateful that we were able to work with the legislature to use this federal recovery money to avoid further hardship for Ohio’s businesses.” 

DeWine recommended to the Ohio General Assembly in April that ARPA funds be used to repay the loan before the accrual of interest to prevent the increase in unemployment taxes. The General Assembly included the repayment provision in House Bill 168, sponsored by Rep. Mark Fraizer (R-Newark) and Rep. Mike Loychik (R-Bazetta); DeWine signed the bill into law June 28, 2021. 

“Paying off this loan will reduce the cost of hiring for Ohio employers, especially small businesses that can’t easily assume the additional cost,” said Lt. Governor Jon Husted. “When we make it less expensive to put people back to work, it creates more jobs now and for years to come.”

This fiscally conservative strategy to repay Ohio’s loan and prevent tax increases is in stark contrast to the approach used to repay Ohio’s unemployment loan resulting from the economic downturn in the late 2000s. 

“During the previous recession, Ohio borrowed funds through another federal loan to cover unemployment payments, and was forced to pay more than $258 million in interest over time,” said Ohio Department of Jobs and Family Services Director Matt Damschroder. “By repaying this loan and avoiding interest, we are strengthening Ohio’s economy which is good for employers and employees alike.”  

Repayment of the loan began on Monday and requires several cooperative steps between the Ohio Department of Job and Family Services and Ohio Office of Budget and Management (OBM). These include certifying the debt by OBM and transferring the funds by OBM to the Ohio Unemployment Insurance Trust Fund. The final transfer from the Ohio Treasurer to the United States Treasury is expected to be complete by today.