Michigan Owes The Federal Government A Lot of Dough
Michigan owes the federal government roughly $3.96 billion. The state borrowed it to pay unemployment benefits during the worst economy since the Great Depression.
This deficit does not include unemployment tax that businesses and other employers must pay.
Because of growing cost, Republican-led legislature approved a new law that extends unemployment benefits this year. Next year legislature will reduce Michigan's maximum unemployment benefits from 26 weeks to 20 weeks. This means Michigan employers will pay lower unemployment tax in the future.
Michigan governor Rick Snyder signed the law Monday, as he and lawmakers struggle to erase a $1.4 billion state deficit. The law guarantees 20 extra weeks of federal unemployment benefits that were about to be cut off.
"We have people suffering today," Snyder said to reporters Tuesday, after his speech to the Michigan Association of Counties. He mentioned nothing of the shortened benefits next year.
Snyder said to reporters after a speech to the Michigan Association of Counties, "Let's focus on bringing our unemployment rate down so we don't have people on unemployment that's going on for 20 to 26 weeks or 99 weeks."
Democrats say the change will not speed up the payback of Michigan's $3.96 billion IOU to the federal government.
Michigan must pay $117 million to the federal government by September 30. That is one payment on the interest alone for the $3.9 billion in loans. The state is $52 million short for it's first payment, according to current projections.
Michigan's debt is the second largest among the nation. California is first on the list owing $10.5 billion.
The new law extends unemployment benefits by 20 weeks through the year. This will help 35,000 unemployment recipients immediately.
Because Michigan's maximum unemployment period will be shortened, someone laid off after January 1 would be entitled to 16 fewer weeks of extended federal unemployment.
Wendy Block, spokeswoman for the Michigan Chamber of Commerce, said the new law also calls for measures to reduce unemployment fraud that totals hundreds of millions of dollars.
There were over $300 million in overpayment and fraudulent claims over a three year period ending last September, according to a recently conducted audit.
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