Michigan unemployment benefits cut short: 'Huge win' or 'reckless'?

Starting next year, unemployed workers in Michigan will have six fewer weeks to collect benefits – the result of a bill passed Monday by the state’s Republican-led legislature.

The measure, which goes into effect in January 2012, is being touted as fiscal responsibility in the face of Michigan's $1.4 billion deficit, but Democrats and labor advocates say it is particularly unfair in a state where the unemployment rate has consistently sailed above the national average.

Republican Gov. Rick Snyder signed the bill, which was originally drafted to extend federal unemployment benefits through the end of the year. The added measure will reduce state-funded benefits from 26 weeks to 20 weeks, which should benefit Michigan employers by lowering the unemployment taxes they will pay next year.

Michigan is the first state in the country to cut benefits to 20 weeks, but others may follow suit – starting with Florida.

The Michigan Chamber of Commerce called the bill’s passage “a huge win” and estimates the resulting savings will total $300 million each year.

Michigan currently owes the federal government $3.9 billion in loans to support its unemployment benefit program, $117 million of which is due Sept. 30. The state is not alone in looking to the federal government for help; the US Department of Labor reports that by 2013, the 50 states will have borrowed a total of $65 billion for their unemployment programs. California, carrying $10.5 billion in unemployment debt, tops the list, followed by Michigan.

Donald Grimes, an economist at the University of Michigan in Ann Arbor, says Michigan’s historic unemployment rate – above 10 percent since December 2008 – depleted the state’s unemployment trust fund and forced the state to borrow federal dollars. Increasing federal taxes on businesses is "regressive," says Dr. Grimes, and will work against fostering a healthy economic climate.

“It’s a pretty onerous sort of tax, and you’re imposing it on firms at the same time you’re asking them to start hiring again,” he says.

In a “more equitable approach,” he says, the federal government would forgive the debt, to allow states to avoid cutting programs while lessening the burden on business.

Labor advocates say the bill will hurt the long-term jobless workers in the state.

"Gov. Snyder's decision to sign this reckless measure cutting the lifeline for Michigan's unemployed will reverberate for years," said Rep. Sander Levin (D) of Michigan in a statement. "Republicans ... gave Michigan the dubious distinction of becoming the only state in the union with 20 weeks of state unemployment insurance," he said, adding that the bill will “affect hundreds and hundreds of thousands” of future unemployed workers.

Michigan may not be unique in that for long. Earlier this month, the Florida House passed a bill that will similarly reduce the duration of unemployment benefits to 20 weeks. The bill is currently under consideration in the Republican-controlled Senate, and Republican Governor Rick Scott strongly supports it.