Legislation introduced by Senate Democrats in the fall of 2017 would massively increase the 100 percent employer-financed unemployment insurance (UI) weekly maximum benefit amount and dependent allowance. It would also compensate those harmed by false fraud allegations. These changes could more than double an employer’s maximum exposure for a former employee, increasing potential benefit charges from $7,840 to $14,060 per claimant. While not contemplated by the legislation, there is no doubt that this legislation would lead to sharp UI tax increases on employers.
The proposal would:
- Increase the weekly maximum benefit amount from $362 per week to $603 per week and put annual increases on auto-pilot by tying the weekly benefit rate to the rate of inflation (SB 531);
- Increase the dependent allowance from $6 per week per dependent to $20 per week per dependent and increase the number of dependents that can be claimed from five to six (SB 531);
- Increase penalties on employers who commit “fraud with the intent to avoid payment” of taxes from 50 to 100 percent (SB 534).
- Reduce the state’s ability to garnish wages to recover payment of benefits improperly paid (SB 532).
- Compensate those harmed by false fraud allegations, allowing individuals to recover benefits, interest, damages, penalties and interest in addition to recovering out-of-pocket expenses for litigation and bankruptcy proceedings and credit monitoring and repaid services (SB 538).
Where We Stand:
This Democrat-backed 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. Lawmakers should resist the urge to turn the state’s mistakes into an opportunity to change the fundamental scope of the UI program from a short-term, partial wage replacement program for individuals who are unemployed due to no fault of their own to a general welfare system that rewards and incentivizes people not to work.
Michigan needs to continue to focus on policies that will fill the skills gap, put people back to work and rebuild the UI system for the next downturn in our state’s economy, not increase benefits that will bankrupt it.