Michigan Chamber Foundation Releases Major Study on Michigan's Bankrupt Unemployment Insurance Program

April 27, 2011

The Michigan Chamber Foundation today released a major nonpartisan, economic study identifying up to $550 million in cost-saving reforms to Michigan’s bankrupt unemployment insurance system (UI).The study identifies strong and bold policy options to make Michigan more competitive and offset the need for additional employer taxes to pay down the nearly $4 billion Michigan owes to the federal government for its employer-financed UI system. 

Conducted by the nationally recognized experts at The Lucas Group in Boston, the study found that Michigan’s high unemployment rate explains only about 18 percent of Michigan’s UI problems. In fact, after factoring out the impact of the state's high unemployment rate, Michigan's UI trust fund is still $2.5 billion below where it should be. Currently, Michigan’s UI debt is the second highest in the nation, behind California. Click here to view a summary of recommendations by Dr. William Oliver, a partner at The Lucas Group.

The study points out that Michigan’s UI program is simply is too costly, too slow and inaccurate. The study identifies legislative and administrative changes to attack these core problems, begin to eliminate the debt incurred and put Michigan’s employer-financed UI program on the road to long-term solvency. Because UI taxes vary from state to state and Michigan’s average tax rate on total wages are already 47 percent higher than the US average, the study identifies solutions that aren’t focused on higher taxes on job providers. 

Given the size and scope of debt incurred - and the job-killing taxes on job providers that will follow to repay the debt plus up to $1 billion in interest - doing nothing is not an option. We look forward to working with legislative leaders and the Snyder administration, who inherited this $4 billion problem, over the coming weeks and months to enact the recommendations. 

Working together, we can overhaul the system and offset the need for additional taxes, thereby allowing job providers to redirect their financial resources to rehire those currently receiving assistance and create more jobs statewide.

Watch a video interview of Dr. Oliver here.