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Sharon Rabe


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Unemployment Insurance

Discussions have recently surfaced on the issue of unemployment insurance (UI) reform. Michigan is in debt to the federal government for over $3 billion. As such, employers are paying more in terms of a solvency tax and interest payments are scheduled to rise. Some in the business community would like to bond for the debt thereby paying off the feds without additional interest payments. The bonding scenario still does not fix the cushion needed in the UI fund but increasing the taxable wage base would provide the needed revenue. Another recession blip is expected around 2018 and without some cushion in the UI fund, Michigan could be in the situation of borrowing from the feds again.

There are a lot of unknowns with owing the federal government money. They can accelerate our repayment schedule and the interest they charge can rise. In addition, there is some general discomfort not knowing how they might make states take certain actions such as extending benefits etc.

In order to make bonding more palatable, because it is essentially a tax increase, the legislature is looking at several UI reforms. Most of the reforms do not have a dollar amount associated for savings but are more along the lines of creating a fairer playing field which should have the effect of reducing costs to employers.

The following documents are provided to help in understanding how the UI fund operates, the situation Michigan is facing, the bonding proposal and legislative proposals. Documents are listed in recommended reading order.

  1. The Unemployment Insurance Fund
  2. Michigan's Unemployment Insurance Situation
  3. Unemployment Insurance Fund Bonding Proposal
  4. Unemployment Insurance Legislative Reform Proposals
  5. Unemployment Insurance Case Study