Legislation supported by the Michigan Chamber in late 2011 to authorize the Michigan Finance Authority to bond for Michigan's $3.2 billion debt to the federal government for its employer-financed Unemployment Insurance (UI) system will save Michigan job providers over $1 billion in penalty and interest charges and other costs over the course of the bond transaction. These savings will be shared by the approximately 213,000 contributing employers in the state.
The state recently announced the successful closing of the largest fixed rate bond deal in the state's history. The long-term financing deal has a scheduled maturity of seven years with a rate of 2.270 percent and an expected maturity of 4.56 years with a rate of 1.805 percent. This compares to a federal rate of 2.945 percent. The deal received AAA ratings from each of the three major U.S. credit reporting agencies.
The deal allows the state to repay the $3.2 billion federal debt to the U.S. Treasury. While the financing deal comes with a minimum $42 per employee base "obligation assessment" on employer UI tax bills, doing nothing would have been the most expensive option for job providers. Without this solution, the state faced ever-increasing and unpredictable federal penalties, beginning with increased liabilities of over $739 million in federal UI taxes in 2013. Also, had the State not utilized the bonding solution, it was projected that the Federal debt would not have been repaid until 2019.
As a result of the comprehensive structural solution, which includes a range of new job searching and eligibility requirements for claimants and cost-saving reforms for job providers, the Unemployment Trust Fund is expected to have a positive balance of approximately $2.5 billion by the end of 2019. This balance is intended to allow the state to avoid a repeat of this crisis in the next economic downturn.
Please contact Wendy Block, Director of Health Policy and Human Resources, at 517/371-7678 or firstname.lastname@example.org for further information on this issue.