Michigan first to act as states weigh reductions in
unemployment benefits
By Peter Whoriskey and Michael A. Fletcher, Thursday, March 24, 9:36
PM
Michigan moved Thursday to significantly cut its unemployment program,
becoming the first of what could be a flurry of debt-laden
states to reduce aid even as high jobless rates persist.
The Michigan measure reduces the maximum period a person can receive state
unemployment benefits from 26 to 20 weeks, the lowest in the nation, officials
said. Gov. Rick Snyder
(R) indicated Thursday that he would sign the bill.
The statefs economic troubles, aggravated by the recession and its shrinking
manufacturing base, have turned Michigan into a bellwether of bust. Its
unemployment rate stands at 10.7 percent — one of the worst in the country.
The move comes as other Republican-dominated legislatures, including in
Florida and Arkansas, are weighing similar efforts to restrict payments to the
jobless, and states such as Wisconsin,
Ohio and Indiana are implementing far-reaching, controversial plans to close
budget gaps.
Although critics have decried the benefit reductions during a time of high
joblessness as part of a political gwar on the unemployed,h advocates of the
cutbacks say they are necessary to ease the burden on employers, who pay for the
programs through a payroll tax.
The cost of providing unemployment payments rose rapidly as the jobless ranks
grew with the recession. Some states, including Michigan and Florida, face
multibillion-dollar debts as a result, according to Labor Department
estimates.
When state unemployment funds are depleted, they borrow from the federal
government. Michigan owes the federal government $3.9 billion for the
program. By comparison, the statefs proposed budget for next year is $45.9
billion.
gIf we donft solve the deficit problem, there wonft be any benefits for
anyone,h said Wendy Block of the Michigan Chamber of Commerce, which lobbied for
the bill. gThis insures that employers wonft be taxed through the roof for
unemployment benefits.h
Opponents, however, argue that it makes little sense to reduce benefits now
when many Americans are finding it difficult to get work. The nationfs
jobless rate stood at 8.9 percent in February, and nearly 44 percent of
the countryfs jobless have been out of work for more than six months, according
to the Labor Department.
Moreover, opponents fear that Michiganfs approach on unemployment benefits
could be copied by other states with energized Republican majorities, just as
the collective-bargaining restrictions approved in Wisconsin have been
entertained by other states.
gThis is frightfully shortsighted for the individual families,h said U.S. Rep. Sander M.
Levin (D-Mich.). gIt turns back the clock on 50 years of these benefits.
What concerns me is that it could go viral.h
Since the 1950s, nearly every state has offered at least 26 weeks of
unemployment insurance.
Federal measures enacted in response to the recent economic downturn extend
those benefits to as long as 99 weeks in states with the highest jobless rates –
the longest period since the programfs inception. The extended federal benefits
expire in January.
Most state unemployment funds have been depleted, and they are now borrowing
from the federal government to make their portion of the payments.
The shortfalls can be traced to a failure during the economic boom to
properly prepare for a downturn, experts said.
Unemployment benefits are funded by a payroll tax on employers, collected at
a rate that is supposed to keep the funds solvent. Firms that fire lots of
people are supposed to pay higher rates. Over the boom years, the drive to
minimize state taxes on employers reduced revenues, and when the ranks of the
unemployed grew during the crisis, the funds could not meet the need.
Collectively, the states owe the federal government $46 billion for the
shortfalls in their unemployment funds. Those deficits put pressure on the
states to reduce benefits or raise the payroll taxes.
This month, the Florida House approved a measure reducing the maximum benefit
period from 26 to as little as 12 weeks while curbing increases in unemployment
taxes paid by employers. The jobless rate in Florida is 11.9 percent.
gWe are sending a message to the business community that Florida is quickly
becoming the most business-friendly state in the country,h said state Rep. Doug
Holder (R-Sarasota), the sponsor of the Florida bill.
It would go into effect Aug. 1.
In Arkansas, lawmakers are moving toward freezing unemployment benefits
levels while trimming the maximum benefit period for state benefits from 26 to
25 weeks.
gThe more that states look at the severity of the solvency problems, the more
measures like this will be seriously considered,h said Douglas Holmes, president
of UWC, an organization that provides advice on unemployment policy to
businesses and some states.
The federal extensions — the latest one pushed forward by President Obama in
December — have led to criticism that the unemployment program has morphed from
a temporary bridge for laid-off workers into an expensive entitlement, a
critique that angers advocates for the unemployed.
gWe have had such high unemployment for so long, people maybe donft have as
much sympathy for the jobless as they did in 2008 or 2009,h said Rick McHugh, a
staff attorney with the National Employment Law Project.
Pointing out that the maximum unemployment benefit in Michigan is $362 a week
and $275 a week in Florida, McHugh added that it is unlikely that many people
are financially comfortable just collecting unemployment benefits.
The Michigan measure was part of a bill that was necessary to ensure jobless
people could receive a 20-week federal extension of unemployment benefits, the
governorfs office said. Without it, about 35,000 people would have lost their
benefits as of April 1.
A spokesman for Snyder said that he will sign the bill because it ensures
that presently unemployed workers will continue to get benefits but that he
would have preferred not to reduce the maximum benefit period.
gThis makes sure we have that lifeline still in place,h Snyder spokeswoman
Sara Wurfel said. gIt was a necessary compromise. The votes to do anything else
werenft there otherwise.h
© 2011 The Washington Post Company