Michigan Steals Millions From Its Workers In Unemployment Insurance Scam

Steven Attewell over at Lawyers, Guns, and Money details the state of Michigan's theft of millions of dollars from unemployed workers in the state. The theft was deceptively simple. After Michigan's governor Rick Snyder's tax cuts for corporations and the wealthy blew a hole in the state budget in 2011, Snyder paid a technology firm $47 million to develop the MIDAS program, an acronym for Michigan Integrated Data Automated System. The MIDAS system took over the investigation of unemployment claims in the state and, remarkably, the state's Unemployment Insurance Contingent Fund started to grow from $3 million in 2011 to $155 million this year. The beauty of the Contingent Fund, as opposed to the actual Unemployment Insurance Trust Fund, is that the money can be used for other purposes, such as helping to balance the budget after devastating tax cuts. The reason Michigan was able to build this remarkable next egg in the Contingent Fund was because very little was actually being paid out of the Trust Fund. The MIDAS program was accusing 93% of cases investigated as fraudulent, a number that beggars credulity. In essence the state was making sure that it paid out as little as possible and used the MIDAS system to deny worker the unemployment insurance they were due. Already, over 2,500 workers have received over $5 million dollars in back compensation. There are an additional 22,000 cases outstanding and another 30,000 cases that still require investigation. This is criminal theft on a massive scale. Of course, so far, no charges have been brought and there is no indication that any local, state, or federal prosecutor is looking into the case. Attewell kindly provides the number of the US Attorney's office in Detroit if you would like to encourage them to take some action.

Attewell goes on to describe the pathetic state of Unemployment Insurance across the country. Basically, average unemployment compensation is just barely above the poverty level for a family of two across this country and, in high-rent areas such as major cities, it is not nearly enough to survive on. States across the country "abuse their UI systems in any number of ways: restricting eligibility such that a minority of workers can actually get access to benefits, keeping benefit levels as low as possible, but especially deliberately underfunding their Reserve Funds." The idea is to keep costs down in order to attract business by having a lower payroll tax which is what funds unemployment insurance. Of course, underfunding turns out to be a real problem when a downturn hits because costs go up while revenue decreases and the states are required to run balanced budgets. In 2014, 23 states were still underfunded to the tune of $28 billion due to the financial crisis that began in 2008.

Attewell has three ideas for fixing the problems with unemployment insurance. First is to nationalize "by simply eliminating the offset of Federal Unemployment Tax by state UI taxes, by eliminating the wage cap on unemployment taxes (currently, we pay UI taxes only on the first $7,000 in wages)." Next is to universalize. Right now, because of part-time workers and "contractors", only about 48% of workers are actually covered. Lastly, implement a mandatory minimum payment to unemployed workers that is indexed to inflation.

Please read the whole article as it is eye-opening. Sadly, it is highly doubtful that any of Attewell's excellent suggestions will be implemented by the incoming Trump administration and Republican Congress. Rather, I think we can expect more state theft along the lines of what happened in Michigan.