Ohio employers have been shelling out millions in higher taxes for the state's failure to repay a massive federal loan to cover unemployment benefits during the recession.

Ohio employers have been shelling out millions in higher taxes for the state’s failure to repay a massive federal loan to cover unemployment benefits during the recession.

While legislators just handed small businesses an annual income-tax break of roughly $550 million a year in the budget, the state’s failure to repay the $1.5 billion federal debt has saddled all Ohio employers with a $272 million tax increase over the past 18 months.

Ohio taxpayers have paid an additional $136.5 million in interest since 2011. Another interest payment of $48.5 million is due in September.

“Why give money back (to businesses) in one pocket and take it out of the other? It doesn’t make sense,” said Sen. Joe Schiavoni, D-Boardman.

So what’s the plan for paying off the debt?

Ohio doesn’t have one.

In fact, the Unemployment Compensation Advisory Council, a panel of business, labor and legislative leaders tasked with overseeing the state’s unemployment trust fund, hasn’t met in more than three years.

If the council were to gather, it’s unclear whether anyone would show up because it has no members. Donald E. Blatt, of the United Steel Workers, was the lone member, but his four-year term expires today.

The 12-member board is supposed to include six representatives of business and labor appointed by the governor and six lawmakers named by House and Senate leaders, but there hasn’t been an appointment made in at least two years.

During that time, Ohio’s federal employment tax rate has been bumped up twice, with a third increase set to kick in Jan. 1. Those increases equate to an additional cost of $63 per employee, according to the Ohio Department of Job and Family Services, which oversees the state’s unemployment-compensation program.

“This is painful because it starts adding up,” said Andrew Doehrel, president of the Ohio Chamber of Commerce and a former member of the council.

“What a lot of other states have done is passed bonding to pay off the debt so employers are not paying as much.”

In addition, several states, Doehrel noted, have shored up their unemployment funds by raising taxes on employers and cutting benefits by reducing the amounts paid or the length of time benefits are paid.

Employers pay state and federal payroll taxes to fund jobless benefits. But without sufficient reserves when the recession hit, 36 states were forced to borrow from the federal government to keep paying jobless benefits.

According to the U.S. Department of Labor, Ohio is among 22 owing a combined $21 billion. While Ohio has repaid about $1 billion in principle the past two years, its $1.5 billion debt is bigger than every state but three: California, New York and North Carolina.

Under an automatic repayment system, states that fail to pay back their loans within a certain time will have a reduction in their tax credit on federal unemployment taxes paid by employers, with the revenue used to pay off their debts. As a result, Ohio’s federal tax credit has been reduced twice with a third reduction coming Jan. 1. In all, tax rates have been bumped up in 18 states and the Virgin Islands, according to the Department of Labor.

“The biggest thing the governor can do is create jobs,” said Gov. John Kasich’s spokesman Rob Nichols. “We’ve been able to drive down the debt by $1 billion and will continue to look for ways to pay it down.”

Businesses also got a $1 billion workers’ compensation rebate under Kasich.Stressing that Ohio began borrowing two years before Kasich took office, Nichols said the governor plans to make appointments to the council soon, “but we’re seeking assurances from whoever we appoint that they work (for) a common sense and reasonable plan.”

Former board members agree, but say reaching agreement on a plan to ensure that Ohio’s unemployment trust fund doesn’t pay more in benefits than it collects in tax revenue and getting lawmakers to approve it, is a heavy lift.

“We’re still kind of stuck in the mud,” Doehrel said.

The advisory council submitted its most-recent recommendations to legislators in 2006. At that time, Ohio’s fund had been paying out more than was coming in for six years. Business and labor interests agreed to increase taxes on employers, freeze worker benefits at about $300 a week, and eliminate extra compensation for dependents. But, under pressure by business groups, GOP Senate leaders rejected the plan and the issue has been ignored since.

Sen. Capri Cafaro, a Youngstown Democrat and former advisory-council member, said proposed tax increases have been met with resistance because policymakers worry about the impact on businesses. “ It’s a very delicate balance, but the time might be right for us to really engage and get this resolved,” she said.

Schiavoni proposed tapping some of the state’s rainy-day fund. “It’s like having a high-interest credit card and money in the checking account. Let’s use some of it to pay down the debt,” he said.

Vermont officials last week announced a plan to pay off the state’s $53 million debt, three years after the state cut benefits to unemployed workers. The maximum weekly benefit was capped at $425 and workers had to wait a week with no income before benefits were available. Other states have: structured their systems to trigger an increase in employer taxes when their trust fund reaches a certain level, enacted special assessments to repay loans, and scaled back benefits. Texas, Pennsylvania, Michigan and others sold bonds to pay off loans.