Er, well, not necessarily so. You do not have to arbitrarily accept a demotion or not qualify for benefits. It is sort of dependent on the circumstances. If it's not a reasonable position they're offering, if it's done not company wide to meet the needs of the company, but specifically to you only, with intent to get rid of you, that's another story..
If you refuse a significant demotion, one that was done with rather obvious intent to force you to quit, say for instance you used to be an office manager and they want you to be the janitor now, or cut your wages by $20,000 a year, or make you part time so that you no longer will be eligible for health care, you should not work at that new job a second. Just decide immediately if you don't want to keep the job while you look for a new one, and if the answer is no, then walk off right then. File for unemployment, and you may be able to qualify.
If they want you to go back to being a general worker instead of a supervisor, take a cut in pay, though not a huge one, and still work full time, keep your seniority, continue your benefits as they are, you may want to think long and hard about it. If you quit, it would be many weeks until your unemployment claim was approved and you began receiving money, even if it IS approved, which is certainly no sure thing. Even though PA is a pretty generous unemployment state, it will be less than $573 a week, even if you are approved and actually qualify for the max. And as I said, it stops very soon.
If they terminate you based on what you're telling us, without offering you a demotion or any other job, just tell you to hit the road, your chances of being approved to draw unemployment will be pretty good. But you must remember, even under the best of circumstances, unemployment benefits are not much money, probably nowhere near what you were making while working, and they will end in 26 weeks or less, no matter what your situation.
The worst thing to do would be to accept a demotion in salary or position, work at it for any portion of time, and then decide you didn't want it because it doesn't pay enough, and quit. This practically guarantees you'll not be eligible for unemployment benefits while looking for another job.
So really, there's no way you can demand to keep your position and salary or to walk out of this situation with your head held high after righteously telling them to stuff it. That mistake you made many years ago has caught up and could cost you, and that's just the way it is. But play this smart, don't demand your rights, try to work this out so it goes best for you. Hopefully they are not doing this to target you or get rid of you particularly and will be willing to work with you since you are such a long term employee.