MICHIGAN BALANCES BUDGET ON THE BACK OF ITS UNEMPLOYMENT POOL

By December 19, 2016 Blog

Michigan lawmakers have passed a bill that balances the state’s budget with money from its unemployment insurance fund.

The $10 million being transferred from the unemployment pool to the state budget is from the unemployment insurance system’s “contingent fund.” This fund is made up of money obtained from fines associated with fraudulent unemployment claims.

However a new audit of the state’s unemployment insurance claims filing system, requested by the Department of Labor, has found that Michigan falsely accused more than 20,000 individuals of fraudulently seeking unemployment payments and collected penalties from those individuals. The problem appears to be associated with Michigan’s automated claims filing system. That system reviewed and denied 22,427 claims the state audit now says were legitimate. That means the Michigan unemployment filing system has an error rate of more than 93% when identifying fraud.

The Detroit Free Press has more details.

“Sen. David Hildenbrand, R-Lowell, chairman of the Senate Appropriations Committee and sponsor of SB 1008, said the legislation developed when he was working on balancing the state budget earlier this year and looking for state funds with large balances that could be tapped. Hildenbrand said he’s aware of potential liabilities arising from the false fraud findings, but doesn’t believe there will be a problem because the $10 million being withdrawn from the fund is a small portion of its overall balance.

If it did become an issue, ‘I would work very hard to replenish that fund, so we could meet those obligations,’ Hildenbrand told the Free Press on Wednesday, adding that he expects [Gov.] Snyder will sign his bill because the administration signed off on the transfer as part of the overall budget plan for 2017.”

Nonprofits have options

The above applies to all Michigan employers except 501(c)(3) organizations. 501(c)(3)s do not have to pay state unemployment insurance taxes. Many Michigan nonprofits could save as much as 30 percent on their unemployment cost by opting out of the unemployment insurance tax system – an advantage provided to them by the IRS. Doing so affords nonprofits unique avenues that allow them to strategically handle unemployment claims administration and unemployment insurance taxes in ways that for-profits can only dream about.

Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.

 

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