Traverse City Record-Eagle

Opinion Columnists

May 15, 2009

Forum: Unemployment insurance costs

By Wendy Block

Michigan has a high jobless rate. However, a plan being pushed by Gov. Granholm and passed by the Democratic-controlled State House last week to increase unemployment payroll taxes on employers isn't going to solve the problem; it is going to make it worse.

A provision contained in the federal stimulus legislation allows states to adopt costly and permanent expansions of the state's 100 percent employer-financed insurance law in exchange for a federal appropriation of approximately $138.9 million in one-time funding.

The proposal (introduced as House bills 4785-86 and Senate bills 444-45) is a raw deal for Michigan employers and employees because after two years the money from the federal government will run out, leaving job providers to foot the bill of the expanded programs through higher unemployment insurance taxes to the tune of $67 million or more per year.

Consider this a double whammy for job providers of all shapes and sizes who are already bracing for their unemployment insurance taxes to go up in January 2010 as the federal government requires the state to begin paying back the more than $1.944 billion they've loaned the state to meet its unemployment obligations and issue checks to claimants.

This proposal won't just impact employers. It is also bad news for Michigan workers because, as employers struggle to pay their high tax bills and meet current payroll obligations, they may be forced to lay off additional workers who otherwise would have kept their jobs if these proposals had not been enacted.

Yes, we should do all we can to help displaced workers. Many other provisions in the stimulus legislation do so, such as a $25 increase in everyone's unemployment checks, and an extension in benefit duration, meaning unemployed workers are now eligible for up to 79 weeks of benefits.

However, a better alternative to expanding Michigan's unemployment insurance program in order to accept this one-time money would be to look for cost-saving reforms within the current unemployment system.

For example, U.S. Department of Labor data tell us that Michigan's Unemployment Insurance Agency paid approximately $98 million in 2007 to individuals who were working while fraudulently collecting an unemployment check.

If the state did a better job of detecting fraud and double-dippers, the unemployment agency could keep these dollars in the state's unemployment system, thereby reducing the need for additional borrowing from the federal government and/or expanding benefits to accept the one-time federal stimulus dollars.

The long-term costs associated with harmful efforts to permanently expand the employer-financed unemployment insurance system will further weaken the already bankrupt unemployment insurance system by increasing claims. That's bad news for Michigan job providers, workers and the economy as a whole.

About the author: Wendy Block is director of Health Policy & Human Resources for the Michigan Chamber of Commerce.

About the forum: The forum is a periodic column of opinion written by Record-Eagle readers in their areas of interest or expertise. Submissions of 500 words or less may be made by e-mailing letters@record-eagle.com. Please include biographical information and a photo.

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