As Michigan limps out of the recession, it may have to face yet another obstacle: the expiration of federal aid to state unemployment programs in the beginning of 2011. Michigan’s unemployment programs will be left scrambling to find new funding. And as the state’s jobless rate sits at 13 percent, these job programs are essential for Michigan residents. A large number of people depend on insurance checks to make ends meet, so terminating benefits isn’t an option. Though the U.S. Congress must extend assistance as the state recovers, the Michigan legislature must find stable internal funding for these benefits to help the state’s residents.

Currently, part of the federal stimulus package allows states to borrow interest-free from the federal government specifically to fund unemployment programs. This measure is scheduled to expire in January, which will make it difficult for the state to pay for unemployment benefits. According to an Oct. 19 article in The Michigan Messenger, the state’s federal interest bill will reach $150 million in the 2011 fiscal year if the relief isn’t extended. To keep the budget in order, the state may be forced to cut some unemployment benefits.

Maintaining funding for unemployment benefits is especially important in Michigan — the state’s unemployment rate was 13.1 percent in August, according to the U.S. Bureau of Labor Statistics. That makes Michigan’s unemployment rate second only to Nevada’s, which was 14.4 percent in August. And Michigan’s rate is greater than the national average by about 4 percent.

The state has a responsibility to its citizens to help them through periods of economic strife. And cutting unemployment benefits in the current economic climate would be tantamount to abandoning the people who lost their jobs as a result of the recession and who depend on unemployment insurance.

To combat the potential loss of funding, money could be redirected to unemployment programs from the state’s other expenditures. For example, some of the state’s planned $2 billion spending on the Department of Corrections for the 2011 fiscal year could be used to help fill the gap left by the withdrawal of federal aid.

But any redistribution of funds will probably need to be accompanied by a tax increase. Targeted increases of sin taxes — taxes on “sin items” like cigarettes and liquor — may be good options to minimize negative impacts on the state’s budget. Such increases could help tide Michigan over until the economy recuperates and other tax revenues recover enough to fund the essential roles of the state.

Though Michigan should be financially independent and fiscally responsible, the federal aid shouldn’t be allowed to expire yet — some states, like Michigan, aren’t yet ready to fend for themselves. The U.S. Congress should vote to extend the lending deal until states’ economies are more stable.

Michigan’s economy isn’t ready to stand on its own two feet yet. To protect those hit hardest by the recession, the state and federal government should take incremental steps in the short term to ensure that those in need of aid aren’t left stranded.

Leave a comment

Your email address will not be published.