By: Mark Glennon*
Gov. JB Pritzker on Tuesday announced the terms on which Illinois will finally repay the remaining debt owed by the state’s unemployment insurance trust fund to the federal government. His press release is here and video of his press conference is here.
It was political theater — spin and fiction — with lawmakers slapping themselves on the back for yet another supposed triumph of fiscal prudence. Illinois has been derelict on repaying the loan, letting interest costs rack up, but it had no trouble finding election year goodies, namely the rebates on income and property taxes, the suspended grocery sales tax and delayed gasoline sales tax. The loan repayment was made possible by federal bailout money that should have been used for that purpose long ago.
And it by no means solved the problem with its unemployment trust fund.
Before comparing the political claims to the facts, here is some background: Unemployment claims are paid out of that state’s dedicated trust fund, the balances on which are regulated by the federal government. Money for the trust fund comes from taxes on employers.
The pandemic depleted those trust funds in many states. Twenty-two of the worst-off states, including Illinois, had to borrow from the federal government during the pandemic to prop up their trust funds and continue paying unemployment claims.
Only four states, including Illinois, still haven’t fully repaid their loans. Illinois initially borrowed $4.6 billion of which $1.36 billion remains unpaid. Repaying the loans and restoring the trust fund to solvency must be done through higher employer taxes, reduced unemployment insurance or direct cash assistance from the state.
“I’m proud to announce,” Pritzker said on Tuesday, “that together, we’ve reached a historic, bipartisan agreement to eliminate pandemic-induced UI Trust Fund debt, replenish the fund for the future, protect benefits for working families, and further fuel Illinois’ strong economic trajectory.”
A line of self-adoring lawmakers followed Pritzker at the press conference. “This monumental agreement is an example of what is possible when sound financial choices are made,” said State Representative Jay Hoffman (D-Swansea).
Repayment of the loan is hardly historic or monumental. It should have been done long ago with the federal money Illinois is awash in. Illinois paid one of the bills it owes, and it paid late. Whoopee. And the terms of the entire deal raise troubling questions yet to be answered.
Here are the facts:
Illinois is among only four states that are derelict on their federal loan repayment, all of which are fiscally troubled, the others being California, New York and Connecticut. Financially sensible voices, here and around the country, have long been saying Illinois should use its federal bailout money to repay the loans.
We wrote about those voices in June of 2021 when the state simply ignored the debt in its supposedly “balanced” budget. Illinois Republican lawmakers have consistently been asking that the loan be repaid in full.
Pritzker initially fibbed about it, claiming the federal money could not be used for that purpose. Last month, Illinois Congressman Darin LaHood and the Republican leader on the US House Ways and Means Committee wrote an open letter to Pritzker telling him to pay up.
Repayment of the loan doesn’t solve the problem. Aside from paying off the loan, the trust fund must be restored to a positive balance sufficient to cover claims. The fund depleted a little over $1 billion that it had before the pandemic, which was already insufficient at the time. It now needs another $1.7 billion to be restored to solvency, which came out in the Q &A at the Tuesday press conference.
Where will that additional $1.7 billion come from? Nobody said and no reporter asked. Pritzker did say that, aside from paying off the loan, the state will provide the trust fund with another $450 million towards that $1.7 billion which, he said, will “replenish the fund for the future.”
But that additional $450 million is only a loan to the trust fund, to be paid off over ten years. In other words, the state is just swapping one debt for another.
And how about the remaining $1.25 billion the fund needs? Nobody addressed that on Tuesday.
We did get one indication of where that additional money may come from: “expanding the tax base” on which employers pay into the fund, which was mentioned in the Q&A at the press conference. Translated, that means a tax increase on employers. Just what Illinois needs.
We will get answers to the open questions once the required legislation is available. In the meantime, ignore the spin.
*Mark Glennon is founder of Wirepoints.
From ADP to all clients affected. the truth comes out: 2022 Federal Unemployment Tax Act (FUTA) Tax Assessment Hello, Our records indicate your company will be assessed additional Federal Unemployment Tax Act (FUTA) tax by the federal government for 2022 because you have employees working in one or more FUTA Credit Reduction states: California, Connecticut, Illinois, New York. This means a state has taken loans from the federal government to meet its unemployment benefits obligations and has not repaid the loans within the allowable time frame. As a result, the usual credit against the full FUTA tax rate… Read more »
Another perfect example of uninformed, lazy Illinoisans being duped by a flat our lie. And the lazy, just as ignorant Illinois press, not understanding it either. It is getting awfully easy to tell whoppers to Illinois with absolutely no repercussions.
Clown show as usual here. Making things up so your loon followers can play with themselves as they read it.
And, of course, Rich Miller is 100% correct.
As you would expect, Rich Miller at Capitol Fax has completely mischaracterized this column. He says the portion of the trust fund problem that goes beyond repayment of the loan is taken care of, and that I was wrong to say otherwise. This column in fact says only that repayment of the loan does not solve the whole problem (which is true) and that we need to see the full legislation to see how the rest is addressed. He is shameless. https://capitolfax.com/2022/11/30/yeah-no/
Rich Miller is a loyal and obedient parrot of the Democrat Pravda Media. Miller truly is the poster child of “Whatever he says, be certain that the truth is the opposite.” Funny how he trolls Wirepoints to down vote any opposition.
Miller’s just saying “IDES projection showing the end-of-year net trust fund balances produced by the deal” will makeup the $1.25 bill? But there’s no plan? just hope & a prayer projections for fairy-tail growth, I assume based on the fed covid $bucks$ will keep flowing and no recession?
Mark,
Did you hear the one about the drunken sailor? His credit cards were maxed out; he was paying inflated interest rates and teetering on the brink of bankruptcy. Then he found a lottery scratch-off on the sidewalk.
It was a winner and he went directly to his payday advance loan office and made payment on his account.
He immediately began to boast of his newfound financial repsonsibility and his friends lined up to pat him on the back.
And he bought new toilets on layaway
Are lies and half-truths simply a method for starting negotiations from a better opening position? He knows he is lying or withholding material information and is implicitly acknowledging he’s willing to plead guilty if he can avoid jail time? A bit like plea bargaining? It sounds to me like the bombast that typically precedes some concessions at a later point. A bit like Ukraine and Russia at the moment.
While unemployment taxes are borne by the employer, its cost factors into the total compensation calculation. The more employers spend on UI, the less they have to spend on employees’ gross wages and other benefits.
So surprising that the assembled press would not ask any challenging questions. They just eat at up and applaud when prompted.
Today’s Springfield and Chicago press corps are essentially comprised of stenographers. They are not about to jeopardize their jobs by asking questions that obviously beg an answer but would embarrass the pontificator.
Thank you for the information, and especially for the context.
I think jb & the machine realize all possibilities of feds excusing or bailing out state unemployment funds is 100% dead in the water especially now that elections are over and reps have slim majority in house…so now, as everyone said, they have to use up some of their fed “free Stuff” covid bucks to bailout fund instead of more endless rainbows & lollipops. but still doesn’t solve long term problems with fund
A depleted unemployment fund, which will most likely result in increased taxes on employers. On the cusp of recession, with the highest unemployment rate in the nation. What could go wrong? Pure genius.
The ongoing and unmitigated fraud, waste and abuse of Illinois taxpayer Medicaid and SNAP dollars likely dwarfs the unemployment fund debacle. Like the unemployment mess, Illinois Medicaid is a vast “everyone is eligible, no one is accountable” vote buying-n-influence-bribing boondoggle lacking even the thinest veneer of due diligence or responsible stewardship of taxpayer dollars. Big Doc loves it, however. As does Big Hospital, and Big Pharm and the Managed Care Organizations (MCO’s) who go through employees like you-know-what goes through geese because none of them have an adequate understanding of how Illinois Medicaid Waivers actually are intended to work, nor… Read more »
Illinois is in a downward financial spiral, incapable and/or unwilling to take the steps needed to correct its many problems. We recommend each resident create a plan to leave the state and implement it without delay. Above is the paragraph that Wirepoints always omits. Why? Perhaps it is because they still hold out hope for a miracle, and each taxpayer that leaves makes that miracle less likely. Perhaps it’s because those taxpayers that leave are more likely to stop following Wirepoints. More than likely, Wirepoints recognizes each resident has their own unique set of circumstances, and Illinois just might still… Read more »
Former, we’ve actually been quite open about saying that, all other things being equal, it is wise to leave. As you said, however, many people have personal or professional reasons for staying. We do what we do for a number of reasons. Things will bottom out eventually, though it will get much worse, and we hope we will have put up the needed reforms to be ready for that date. In the meantime, IL is serving as a laboratory for bad government. Interestingly, it is our out-of-state readers who have grown the most recently. We see the numbers every day.… Read more »
It generally sounds more like schadenfreude than pity.
There’s certainly a lot of that. Small minded people do a lot of it.
Yep. Its regular thing here.
I freely admit that those who leave, like me, do enjoy watching their decision become validated by following Wirepoints. For the most part, I do not feel sympathy for those left behind. The decision I made is also available to everyone in Illinois. I don’t buy the argument that Illinois residents are stuck due to jobs or family. That’s just an excuse for doing nothing.
As a new out of IL resident, I read Wirepoints first thing in the AM. Yes, I feel pity but no sympathy for those staying behind. Went back for Thanksgiving, when I told people $10K less in property taxes, gas at $2.89/gal, 7% sales tax, lack of crime, and no indictments of public officials, I get looks of disbelief-IL is a paradise! 2 family members are on move to FL by mid 2023 waiting on real estate.
Waiting on real estate is a key. The places I want to move would mean lower paying jobs and more expensive real estate, even if the overall taxes and cost of living is lower.
Spot on Mark. Obama wanted to do for the country what Dems have done for Chicago and Illinois.
“Things will bottom out eventually, though it will get much worse”
Looking at this from the perspective of a progressing, it seems things are only getting better, and in future, progress may plateau (not bottom out) and then they can double-down even further on what has been working so well to make this state an island of progressive paradise in a sea of red deplorables.
Such a mope!
The truth is, there’s tons of potential here in Illinois and some adults management is all that’s necessary to turn things around. The ballot initiative process should be used to turn out voters.
ban lobbyists and PAC money
School choice
pension reform
property tax caps
end sales tax on gasoline, groceries, clothing.
If 60% plus vote in favor of some of these things, they’ll have do some of it.
All good ideas that will not happen in Illinois. The political landscape for reform doesn’t exist. If you want change, leave Illinois. Low taxes and safer streets are available, but you have to go to them, they won’t come to you.
Diaspora looking back in disgust and relief that they escaped, more likely. I resemble that remark. All that said, the good people in Hellinois remain lab rats for JB’s experiments.
Let me know if you need a ride to the airport. You would fit in in Florida and also serve to raise the average IQ both there and here.
I believe the future of Illinois is a welfare state fed with federal money to buy the State’s Electoral votes. It is accelerating to that end more by the day as businesses and taxpayers move out of state leaving behind the mess created by all of this.
JMHO
Any advocacy group recommending and prioritizing an exit strategy will lose any and all credibility in their research and reform proposals.
Disagree.
When your enemies leave the state, you are very happy to see them go, as you gain power to stay in office.
Isn’t that a win/win? The people that leave become better off and the people that stay are happier.