Michigan Democrats Propose Massive Unemployment Benefit Increase; Chamber Voices Strong Opposition

February 20, 2017

Michigan’s Unemployment Insurance Agency (UIA) has come under sharp fire recently over a string of issues, ranging from using a computer system to automatically determine if claimants had committed fraud to a sharp increase in identity theft claims to an internal data breach. House and Senate Democrats are now trying to turn this crisis into opportunity by proposing legislation to not only fully compensate those harmed by false fraud allegations, but also massively increase the unemployment insurance (UI) benefit duration, weekly maximum benefit amount and dependent allowance, and reduce penalties for those found guilty of fraud.

The Democrats’ plan would:

  • Increase the maximum duration of benefits from 20 to 26 weeks;
  • Increase the weekly maximum benefit amount from $362 per week to $483 and tie weekly benefits to the rate of inflation;
  • Increase the dependent allowance from $6 per week per dependent (up to five dependents) to a $120 payment;
  • Reduce penalties assessed for claimant fraud from a maximum of 400 percent to 100 percent;
  • Increase the penalty to employers that are more than 30 days late with unemployment tax payments by 100 percent; and
  • Reimburse all costs incurred by victims of false fraud allegations, including lost benefits, fees, penalties, legal fees, late fees and other expenses (e.g., bankruptcies and divorces).

The Democrat’s plan is flat out irresponsible. Michigan’s 100 percent employer-financed UI system is still rebuilding from the last recession. During the last downturn, Michigan’s UI system amassed a nearly $4 billion debt with the federal government to pay benefits. Although the state bonded for this debt, employers continue to pay higher UI taxes to repay the debt services on the bond. This 10-year bond isn’t expected to be repaid in 2021. As a result, Michigan job providers are paying some of the highest UI tax rates in the nation

There is no doubt that the Michigan Unemployment Insurance Agency is facing many challenges and needs to clean up its act. We are not defending its actions on the auto adjudication of claims, its failure to put timely systems in place to better track identity theft, or its most recent data breach. However, these mistakes do not justify fiscally irresponsible benefit increases for claimants as these increases will drain the UI Trust Fund and ultimately lead to significant UI tax hikes on employers.

The Michigan Chamber continues to seek legislative solutions to address the ongoing issues with the UIA and proper oversight by the Legislature. Please contact Wendy Block at wblock@michamber.com if your company is experiencing any issues with the UIA or has any ideas on how to fix the problems outlined in this article or otherwise.