The State of Michigan began borrowing money from the Federal Unemployment Trust Fund Account for its unemployed workforce in 2006, earlier than any other state in the nation. For the first few years Michigan was able to keep up with the loan payments, but when the economic recession hit, its repayments and interest increased too quickly for the state to pay them.
Michigan looked into refinancing the $3.32 billion owed to the federal government as it faced a series of penalties that would be triggered by the end of 2011. In addition, the rates on municipal bonds were at 40-year lows, which would save Michigan tens of millions of dollars.
In order for the refinancing deal to be put into effect, Michigan’s legislature and Governor Rick Snyder had to pass legislation that created a tax on Michigan’s employers. Although difficult to pass, the bill succeeded on short notice.
Shortly after the governor signed the legislation, our partners, Debbie Ruskin and Fred Marienthal, served as letter of credit bank counsel and as underwriter’s counsel on the transaction and the entire refinance was completed in less than six weeks.
