|1A 2.2% interest rate was used in these calculations; this rate was obtained using average current yield on 10-year AA-rated municipal bond.|
Making a comparison of the three scenarios above is somewhat difficult. One of the primary reasons is that the current repayment scheme uses net SUTA tax revenue to assist with repaying Title XII loans. Net SUTA tax revenue is the SUTA revenue left over after paying UI benefit obligations for the year. Because bonds are used to fully repay the Title XII advances in the scenarios from Tables 2 and 3, it is not necessary to use net SUTA revenue for this purpose, and at the end of repayment in the bonding scenarios, the Unemployment Compensation Fund (UCF) would be left with a substantial balance. Under the current repayment milieu, a relatively small UCF balance will be left when repayment is finished. Having a larger UCF balance reduces the likelihood of future borrowing to pay unemployment insurance benefit obligations.
Another difficulty in comparing the three scenarios is the treatment of FUTA tax collections. Regardless of what happens to Michigan's Title XII balance, there will always be some level of FUTA collections; therefore, to do a marginal analysis of these repayment schemes, a baseline amount of FUTA collections must be subtracted from each scenario's assumed FUTA collections.
Finally, Senate Bill 483 (S-2) would appropriate $1.0 million in GF/GP revenue to the MFA for the administration of the Act, and any unused appropriations would not lapse at the end of the fiscal year and would be available for administrative expenses in future years.
Fiscal Analyst: Josh Sefton
Analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. sb483&484/1112