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Wis. proposal would reduce benefits to unemployed

Scott Bauer, Associated Press

MADISON, Wis. (AP) -- Benefits paid to unemployed people in Wisconsin would be more difficult to receive, thereby saving the state $37 million over the next two years, under an expansive Republican-backed plan approved Wednesday by the Legislature's budget committee.

The changes, fought by Democrats, are part of a broader plan by Republicans to plug a shortfall in the state's unemployment reserve fund that was caused by an increase in claims during the recession. Other portions of the plan are included in a separate bill moving quickly through the Legislature.

The Republican-controlled committee voted 12-4 along party lines to add the new unemployment benefits provisions to the state budget as proposed by Gov. Scott Walker. The committee hopes to have its work completed next week, and then the budget will go to the Senate and Assembly for approval before heading to Walker.

The governor was supportive of the committee's actions, "because they improve the system by removing waste and fraud in the unemployment insurance program, while maintaining the safety net for people in need," Walker's spokesman, Tom Evenson, said in a statement.

Democrats railed against the tougher restrictions on those seeking unemployment benefits.

"Instead of talking about getting people back to work, you're talking about how to cut people off of unemployment insurance," said Rep. Cory Mason, D-Racine.

Republicans said they were common sense reforms that would put the state in a better position to attract business and pay off its debt to the federal government.

Various changes approved by the committee would make it more difficult to receive unemployment benefits by changing rules regarding voluntary termination of work, misconduct and substantial fault, and searching for work.

The changes affecting misconduct at work are the most egregious because a new standard is created making it easier to deny people benefits, said Bob Andersen, staff attorney for Legal Action Wisconsin. The state's current model was based on a 1941 Wisconsin Supreme Court opinion and has become the standard nationwide, Andersen said.

The new model "eviscerates" the old one by creating a "substantial fault" standard that will punish people for making innocent mistakes rather than gross misconduct, Andersen said.

Other changes eliminate a number of exceptions that allow people who voluntarily leave their job to receive unemployment benefits.

"This really amounts to kicking people when they are down," said Rep. Jon Richards, D-Milwaukee.

Additionally, taxes on employers would go up by $49 million over the next two years and $32 million a year after that. The increases would affect employers that frequently lay off their workers most, according to the nonpartisan Legislative Fiscal Bureau.

The construction and manufacturing industries will be the most hard-hit under the change, Mason said.

Another $26 million in federal interest payments now paid by employers would instead come from the state's general fund, which includes contributions from all taxpayers.

At the height of the recession, Wisconsin borrowed from the federal government to help pay benefits when claims exceeded the state's reserves. Wisconsin has also increased payroll taxes on employers and restricted unemployment benefits to help pay off the debt. By the end of this year, it was projected to owe the federal government about $446 million because of the increase in claims during the recession.

Under all the changes approved by the committee on Wednesday, the state's unemployment reserve fund would go from having a projected $10 million shortfall next year to a $15 million positive balance, according to the Fiscal Bureau.

The provisions approved by the budget committee were not endorsed by the state's Unemployment Insurance Advisory Council, a group made up of business and labor representatives that the Legislature has relied on for 75 years when making changes to the system.

Moving forward with changes not supported by the council is a gross abuse of the normal process, Democrats argued.

"Instead of working with labor and management, you know better," said Democratic Sen. Bob Wirch to Republicans. "The extremists have taken over, to hell with compromise."

But the council has refused to do enough to address fraud and abuse in the system, requiring the Legislature to act, said Rep. John Klenke, R-Green Bay.

A separate Republican-sponsored bill, which includes recommendations supported by the UI Council, is speeding through the Legislature. It would make a number of changes that would save $8 million over two years, including allow state officials to check private bank accounts of the unemployed to recover any overpayments of benefits. It would also require financial institutions doing business with the state to disclose information about accounts held by people who owe money to the unemployment system.