Illinois Lawmakers OK $2.7B for state’s indebted unemployment fund

By Illinois Digital News On Jul 6, 2022

Lawmakers at the state Capitol have been working to find a solution to a $4.5 billion problem. The state’s unemployment insurance trust fund, the pool of money used to pay out unemployment insurance benefits, sank $4.5 billion into debt during the pandemic.

On Thursday, the Senate gave final approval to paying $2.7 billion of funds from the federal government’s American Rescue Plan Act to address the problem, though it still leaves the fund $1.8 billion in the hole.

The funding is coming through a piece of legislation, SB 2803, sponsored by Rep. Greg Harris, D-Chicago, and Sen. Linda Holmes, D-Aurora. Both hold leadership roles in the General Assembly’s budgeting and financial process.

The bill passed the House of Representatives on a 68-43 vote Wednesday night with solely Democratic support. It passed the Senate Thursday afternoon on a 39-16 vote. It now goes to the governor for final approval.

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Heated partisan arguments on the bill were common, with some lawmakers breaking their usual decorum to express frustration.

“I wish to be recorded as a hell no,” said Sen. Terri Bryant, R-Murphysboro, after a technical issue prevented her vote from being initially recorded.

The bill, in addition to appropriating $2.7 billion of ARPA funds to the unemployment insurance trust fund, also allocates $898 million to unpaid group health insurance bills, $280 million to go to unfunded liabilities to the College Illinois program and $300 million to pay down the state’s pension liabilities beyond the statutory requirement.

The $1.4 billion outside of the unemployment insurance trust fund would come from the general revenue fund, according to Harris.

These programs are all part of Gov. JB Pritzker’s financial plan for the state and he characterized the spending as a move towards financial responsibility.

“Our recovery from the pandemic has been strong and we have demonstrated prudence in our priorities — paying down debt, committing to increasing our reserves and making historic pension payments to reduce our overall pension liabilities,” said Pritzker on Thursday afternoon.

Pritzker also took aim at Republicans who opposed the package, saying the opposition was motivated more by politics than governance.

“Republicans chose talking points over real solutions,” he said. “Every Republican voted against paying down our state’s debts.”

Pritzker committed to singing the bill “as soon” as it gets to his desk on Thursday.

During the debate over the bill, Democrats also rejected criticism from Republicans that this spending plan would result in increased taxes.

“What is before you today is not about raising premiums or cutting benefits,” said Rep. Carol Ammons, D-Urbana.

Despite Democrats’ characterizations, Republicans and independent groups have questioned what the long term plan is for the unemployment insurance trust fund. Federal law requires that the trust fund be fully funded.

“Either the state needs to put money in or employers will have to,” said Carol Portman, president of the Illinois Taxpayers’ Federation, a nonpartisan think tank that researches and advocates on tax-related issues.

The unemployment insurance trust fund is typically paid for by a tax to Illinois business owners, with businesses that have a track record of firing employees, increasing the fund’s use, paying a higher amount than some other businesses, according to Portman.

The $1.8 billion of debt the state will still carry if the bill is signed will be paid off, though the method is not yet finalized. Harris said the funds “will likely come from changes to premiums, benefits or bonded borrowing and repayment over time.”

The decision on how to handle the remaining debt will be handled through an “agreed bill process,” one in which representatives of labor-related groups and business related groups negotiate the details along with lawmakers.

“Illinois employers appreciate the Governor and members of the General Assembly for taking this positive step in addressing the massive $4.5 billion in outstanding debt,” said a group representing employers in a statement on Thursday. “We’re hopeful that negotiations will continue to resolve the remaining balance of this unprecedented deficit.”

The group includes the Illinois Retail Merchants Association, Illinois Manufacturers’ Association, Illinois Chamber of Commerce, Chicagoland Chamber of Commerce, the National Federation of Independent Businesses of Illinois and the Associated General Contractors of Illinois.

If a deal isn’t reached by July 3, an automatic increase in taxes on employers and a cut to unemployment benefits will go into effect, according to Rep. Jay Hoffman, D-Swansea, who is on the negotiation team for this process.

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States around the country have struggled with indebted unemployment insurance funds during the pandemic due to record levels of unemployment.

Republicans used the fact that other states fully funded their unemployment insurance trust funds as a way to criticize the Democrat’s spending plan.

“Texas used almost half of their ARPA funds, 7.2 billion, to fix their unemployment trust fund deficit,” said Sen. Win Stoller, R-Germantown Hills.

House Republicans also criticized the plan.

“It’s a lose-lose scenario,” said Rep. Tom Demmer, R-Dixon. “Taxes go up, benefits go down because the fund is in debt.”

The state received just over $8.1 billion in funds through ARPA, according to reports from Governor’s Office of Management and Budget. The governor’s budget proposed using these funds in several places and state lawmakers have already allocated

When the governor signs SB 2803, there will still be $800 million of the original $8.1 billion that is unallocated, according to Carol Knowles, a GOMB spokesperson.

The other ARPA funds went to dozens of state programs and local governments, according to GOMB’s most recent monthly report. These include $5.06 billion to schools, $566 million to rental assistance programs, $497 million to childcare block grants.

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ARPA funds have also been used on smaller projects, such as $424 million to broadband and sewer infrastructure projects around the state, $122 million to Lake County for regional storm water management projects, $4 million to legal assistance for undocumented residents of Illinois who are part of the Deferred Action for Childhood Arrivals program, $14 million in grants to mass transit systems and $100,000 to the “Black and Gold Initiative,” a mentorship and violence prevention program that is part of the Illinois State Board of Education, among many other projects.

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