ODJFS director warns Ohio unemployment trust fund could go negative by 2032 without policy changes; proposes IT replacement and lists solvency levers

Matt Damschroder, director of the Ohio Department of Job and Family Services, briefed the House Public Insurance and Pensions Committee on May 20 about the structure, funding and projected solvency of Ohio’s unemployment insurance trust fund, and described tools lawmakers can use to shore up the fund.

Damschroder said the trust fund balance is about $1,700,000,000 and that, on current assumptions and assuming no recession, the fund is projected to go negative in 2032. “It is projected to go negative or insolvent by 2032, and that assumes that we do not experience a recession,” he told members. He emphasized projections vary with different economic scenarios and that a recession would accelerate insolvency.

Damschroder reviewed how unemployment insurance is financed and administered in Ohio. He explained two federal-state tax streams: the Federal Unemployment Tax Act (FUTA), a federal tax on employers that funds administration through the U.S. Treasury, and state-level SUTA taxes that pay benefits. He described two employer categories: contributory employers (most private-sector employers, which pay experience-rated taxes) and reimbursing employers (typically government and nonprofits that reimburse benefits dollar-for-dollar).

Key numbers presented to the committee included: - Trust fund balance: about $1.7 billion (current). - Projected negative balance: 2032, under baseline assumptions with no recession. - 2025 state Minimum Safe Level (MSL) target: about $4.4 billion. - Taxable wage base: $9,000 (established in 1995; not indexed). - Average weekly benefit (2024): about $484; average duration (2024): 13.7 weeks. - Maximum benefit weeks available in Ohio: 26 weeks (about 23.3% of claimants exhaust full 26 weeks). - Dependent benefit cost (2024): about $27,800,000; dependent add-on is available only to claimants with an average weekly wage above $1,200. - Experience-rated employer brackets: 40 brackets; about 72% of employers have positive account balances; tax rates range from 0.4% to 10.1% depending on experience. - Mutualization tax (pandemic-related surcharge): currently running at the statutory maximum 0.5% in 2025 and projected to end after calendar year 2025.

Damschroder recounted past borrowing: Ohio borrowed nearly $3.4 billion during the 2008 financial crisis and paid interest of about $258 million; that loan was repaid by 2016 using state unclaimed funds. More recently, the state borrowed $1.5 billion in 2020 and repaid it in 2021 using federal ARPA funds to avoid interest accrual and higher FUTA rates for Ohio employers.

He outlined statutory and administrative levers that affect solvency: raising the taxable wage base (he estimated each $1,000 increase in the taxable wage base would add about $45–50 million annually), adjusting employer experience-rate brackets and rates, changing maximum weeks of benefits (Damschroder said moving from 26 to 25 weeks would add about $6.1 million annually; moving from 26 to 20 weeks would add about $155 million annually in savings), and the state’s minimum safe level and mutualization taxes, which alter employer rates depending on closeness to the MSL.

Damschroder also discussed program integrity and technology. He said Ohio had implemented substantial anti-fraud measures after pandemic-era fraud and noted the agency uses an older mainframe system. The agency awarded a contract to replace the system with a commercial-off-the-shelf product; the new system is in implementation with a planned go-live in fall of next year. He said the governor’s introduced budget included a temporary employer fee (2.15% of the taxable wage base) estimated to raise about $74,000,000 per calendar year to pay for the new system for roughly two years.

Committee members pressed the director on fraud impacts, capacity to handle another large-scale surge in claims, the practical effects of dependent benefits, and the policy choices that would be most durable. Representative Young asked for historical year-by-year comparisons about pandemic fraud; Damschroder said the state’s use of federal ARPA funds reimbursed the fund to February 2020 levels and that additional security measures were put in place. Representative Brenner raised concerns about garnished tax refunds and asked whether the agency could do more to relieve individuals incorrectly identified in fraud investigations; Damschroder said the agency has clawed back many overpayments through coordination with the Attorney General and Department of Taxation and that many cases have been resolved, but he acknowledged some may remain and that the agency would assist constituents who contact them.

Damschroder told the committee that the mutualization tax enacted after the pandemic is due to end in 2025 and said that creates a window for the legislature to act now on taxes or benefits so employers still see a rate reduction when the pandemic surcharge expires. He noted a structural imbalance in the program design: benefits are indexed to inflation but the taxable wage base is not, and he said had lawmakers indexed the wage base in the 1990s the base would be roughly $14,000 today and would materially improve solvency.

No formal action or votes were taken during the hearing. The committee asked the agency to provide follow-up materials, including scenario projections for a recession, year-by-year comparisons on fraud and overpayment resolution, and comparative experience-rating data for other states.