There is no shortage of unfortunate news on unemployment fraud in Ohio.
Even beyond the recent announcement of the departure of Ohio Department of Job and Family Services’ (ODJFS) director, a leading expert from LexisNexis found that Ohio suffered greatly in preventing fraudulent unemployment claims compared to other states.
This widespread fraud is attributed to record-high, pandemic-related unemployment claims, and has even affected Gov. Mike DeWine and Lt. Gov. Jon Husted. No one is safe from fraudsters including Ohio reporters and the deceased.
Of course, unemployment fraud isn’t a new issue for Ohio.
In 2016, the state discovered more than 1,500 prison inmates received unemployment benefits. One reason for this was Ohio’s improper unemployment benefit payment rate, which was 30 percent higher than the federal standard between 2016 and 2019.
All this adds up to Ohio paying at least $330 million in fraudulent claims, requiring an additional $1 billion from the federal government to shore up their system after having borrowed $3 billion as recently as the Great Recession.
Of course, not all blame lies on ODJFS. During the pandemic, entire sectors of the American economy were directly shut down, leading to record-high layoffs and an overwhelmed unemployment office.
Congress, in its haste to address constituent concerns, took the predictably wrong approach by grafting stimulus and economic relief programs onto state unemployment systems. Originally, this made sense; the unemployed needed periodic economic relief, and states had systems in place to deliver assistance.
However, state unemployment systems are developed only to provide temporary and limited assistance to active jobseekers – none of which were checked or required during the pandemic to qualify.
Federal unemployment bonuses also lacked many of the procedural guardrails that states rely on to detect and prevent fraud in traditional unemployment.
The result of congressional action was a disincentive to return to work. Between the increased weekly unemployment benefits of $1,000 per week and large federal bonuses, additional income became attractive to those transitioning to new jobs, people not actually searching for new jobs, and even the most sophisticated fraudsters.
Regardless of how Ohio got here and what the root causes are though, “unemployment system defrauded” is on the verge of becoming a “dog bites man” story, so ubiquitous that it is no longer newsworthy.
But make no mistake — there is good news.
Last Thursday, the Ohio Unemployment Compensation Modernization and Improvement Council met for a public hearing to speak with individuals representing business and policy organizations during an ongoing process to fix Ohio’s broken unemployment system.
One reform gaining popularity among the states is database cross-matching, where ODJFS can perform weekly checks of publicly available data on new hires, prison records, and other systems to determine eligibility. This reform is federally recommended, both under the Trump and Biden administrations.
Improper payment recovery and annual progress reports are other recommended reforms for ODJFS to consider while improving Ohio’s unemployment system.
Ohio might consider taking a cue from Florida, which began indexing unemployment benefits to the state unemployment rate after the Great Recession. When Florida implemented this policy, its unemployment system was billions in the red. However, by aligning the unemployment benefit period with job availability, Florida was able to cut claim durations in half, slash spending, and cut unemployment taxes.
This single high-impact reform could modernize Ohio’s unemployment system by adapting benefits to its job market. Like Florida, this could result in jobseekers returning to work faster and a competitive cut in unemployment taxes.
Ohio is taking problems related to unemployment incredibly seriously, and with the formation of this Commission, legislation hopes to flip the unemployment narrative to one of hope and prosperity.
Joe Horvath is a Senior Fellow with the Foundation for Government Accountability. His work has appeared in National Review Online, The Hill, and the Washington Examiner. Learn more at thefga.org.