SPRINGFIELD, Ill. (WCIA) – The pandemic drained the state’s unemployment trust fund. Over two years, the 2-billion-dollar reserve was wiped out – and then the fund went an additional $4 billion dollars in debt.
Tuesday, Governor J.B. Pritzker announced the state will be paying off all of that debt.
“Republicans and Democrats are delivering a historic state investment of $1.8 billion to the Unemployment Trust Fund,” the governor said. “This bipartisan agreement eliminates the final portion of the $4.5 billion debt forced upon our state during the pandemic and saves Illinois businesses and taxpayers hundreds of millions of dollars over the next decade.”
This is the third major payment this year for paying off the debt this year. In March, the state paid off $2.7 billion using ARPA grants and in September, the state paid off an additional $450 millions.
“Paying off the unemployment insurance trust fund debt is a crucial step in our state’s continued recovery from the fiscal crisis brought on by the COVID-19 pandemic,” Rep. Marcus Evans (D-Chicago) said.
If the state did not step in, the responsibility for the debt, would have fallen on businesses, who pay a designated rate to the fund based on their history of laying off people and a list of other factors.
That rate would have increased dramatically, and unemployment benefits would have likely been cut, too.
“The rates are going to go up no matter what, given the economic impact we had on employers,” Illinois Retail Merchants Association President Rob Karr said. “And I think no one is in the position to be cutting benefits for unemployed workers. That’s not necessarily good for business either.”
Now, businesses will still pay back the money, but it will be to the state instead. The $1.8 billion is an interest-free loan from the state, meaning it will end up costing businesses significantly less over the ten years than if they were paying off the debt.
As businesses pay back the state, the money will go to the state’s Rainy Day Fund. The Pritzker administration is aiming to have the fund reach 5% of the state’s annual operating budget, so they can pull from it during difficult economic times to avoid budget cuts to key programs.
The money for this proposal comes from a surplus of over $3.6 billion the state announced earlier this month. The surplus comes from additional tax money collected due to inflation and other one-time revenue streams like federal money from the pandemic.
Republicans long criticized Pritzker’s plan to only pay off a piece of the debt back in the Spring, but they stood with him today, saying this was a bipartisan decision.
“I’m proud of the long hours negotiators on both sides have put into creating this agreement,” State Senator Sue Rezin (R-Morris) said. “It’s good to know we’re working together to pay off debt and even better to know that the funds previously allocated to paying down that debt will now go to shoring up the state’s Rainy Day Fund.”
The plan has full support from both labor and major business groups, including the Illinois Chamber of Commerce.
“Today’s agreement illustrates the results that can be achieved when everyone works together cooperatively to tackle the big issues facing our state,” Illinois Chamber of Commerce President and CEO Todd Maisch said. “As we head into an uncertain economy, employers will benefit from the minimization of tax increases.”
The AFL-CIO also approved of the idea.
“Taxpayers will be spared millions of dollars in interest payments and our unemployment trust fund will move from a state of deficit to solvency – now and in the future,” AFL-CIO Treasurer Pat Devaney said. “Illinoisans can rest easy knowing that the future of our state’s unemployment system will reflect the needs of working people and those facing economic hardship.”
The legislature is expected to pass a bill writing the agreement into law this week.