By: Ted Dabrowski and John Klingner
There’s a battle brewing in the Illinois Senate over how much of the state’s remaining $3.5 billion in federal COVID aid should be used to repay the state’s $4.5 billion in unemployment debts. Illinois’ Unemployment Insurance Trust Fund, normally financed by taxes on state businesses, was wiped out after hundreds of thousands of Illinoisans filed unemployment claims as a result of the pandemic lockdowns. The federal government loaned Illinois the $4.5 billion so the state could issue unemployment checks.
Senate Republicans reportedly want to use the entire $3.5 billion in aid to help pay down the debt, while Democrats have recently passed a bill to use just $2 billion of the aid.
The decision should be an easy one. Every penny of remaining federal aid should go to repay the state’s debt. Otherwise, the burden will increasingly fall on employers through higher payroll taxes, making Illinois even less competitive when it comes to creating jobs. Illinois already had the 14th-worst unemployment rate in the nation in January 2022, according to the BLS.
In the short term, the state needs about $5.5 billion for the trust fund – $4.5 billion to repay the debt and another $1 billion to begin building a positive balance for future unemployment claims.
The Tax Foundation in late 2021 urged states to repay their unemployment insurance debts with federal American Rescue Plan Act (ARPA) aid: “Given the restrictions on the use of this federal funding, and the significantly higher tax burdens on employment that will result if trust funds are not replenished, applying federal aid to these trust funds should be an urgent priority.” (Emphasis added.)
Thirty-one states across the nation heeded similar advice and used their aid to fully pay down their unemployment insurance debts. Illinois ignored such advice and is one of just nine states that has not yet repaid its debts. The state is now accruing interest costs.
From the U.S. Treasury:
Other states like Nevada and Ohio were smart enough to avoid paying interest. From the New Jersey Monitor:
With the additional interest cost looming, officials in Nevada and Ohio paid off what those states owed just days before interest was set to begin accruing, sidestepping not only additional interest costs but greater costs on businesses within those states.
“By repaying this loan in full, we ensure that Ohio businesses won’t see increases in their federal unemployment payroll taxes,” Ohio Gov. Mike DeWine said in a news release Wednesday announcing a payment to the U.S. Treasury of nearly $1.5 billion. “Without this added tax burden, our employers can invest more money into their businesses and hire more staff.”
Illinois originally received $8.1 billion in total ARPA aid, an amount more than sufficient to have repaid the state’s full $4.5 billion unemployment insurance debt. Instead, Illinois used that money on other spending and today there is just $3.5 billion left.
The difference between the Republican and Democrat proposals matters to Illinois employers. The less federal COVID aid that’s used to pay off the debt, the bigger the unemployment taxes on businesses will have to be to fill the hole.
More taxes on employers will simply chase even more jobs out of Illinois. The state already lags the rest of its neighbors in job creation. Illinois’ unemployment rate of 5.0 percent in January was far higher than that of its neighbors. Indiana’s unemployment rate stood at just 2.4 percent and Wisconsin’s at 3.0 percent.
If Illinois’ January unemployment rate had been the same as Indiana’s, over 160,000 more Illinoisans would be employed today.
That fact alone should push both sides of the aisle to act as quickly as possible to use all available COVID aid to pay down the state’s unemployment insurance fund debt.
Anything less is a bad idea. State Sen. Win Stoller (R-Germantown Hills) asked the right question recently on Illinois’ Senate floor: “If we put this on the backs of our employers, it begs the question. How much do we hate jobs in this state?”
Read more from Wirepoints:
- Lightfoot’s big problem
- Gov. Pritzker should cut Illinois’ state gasoline taxes. They’re up over 100% since he took office
- Illinois School Mask Controversy Isn’t Over, And An Important Cook County Decision Has Gone Unnoticed
- Another pension sweetener? State lawmaker proposes a week of paid mental health leave for teachers
- Illinois used to have one competitive advantage over its neighbors: its flat tax. Now that’s largely gone
- Gov. Pritzker can’t take credit for Illinois’ improved budget projections when it’s the feds that bailed the state out
With $162 billion more from taxpayers, couldn’t you deliver a few bond upgrades, too
Audio and summary 
A largely unasked question is becoming glaring: Is Illinois doing all it should to use artificial intelligence to make government cost less and work better? So far, the evidence says no.
I am guessing the insurance costs in Cook County are probably one of the highest as well. Our company has seen a 150% increase in health care over 10 years, not to mention real estate taxes, gas taxes, sales taxes. Great job Dems. Counting down the days when we can get out of here.
And Indiana just passed ANOTHER tax cut!
That’s why the smart ones are moving here.
As an employer here, I expect to get fully shafted on this. It is basically a stealth tax, and Illinois Democrats love stealth taxes, or taxes that are difficult to explain to the public. They also know that there are more public union employee voters and other voters than business people, so the politicians don’t care. To add insult to injury, I remember receiving dozens of envelopes in the mail, all with debit cards for fraudulent “ghost employees”. These were not real people, but scammers who applied for unemployment online and used various addresses to receive the debit cards to… Read more »
Thanks for sharing and let your comment be a warning to others considering doing business in Illinois.
Very sad to hear this.A lot of people like you trying to run a business,making the best life possible,then to hear about so many scumbags scamming the system,and the scumbag politicians who simply care about nothing more than fattening their own bank account and receiving an exhorbinant pension at the cost of the tax payers,these people have no shame
The sympathy well is dry.
The same drum has been beaten for over a decade. Yet you chose to remain in Illinois.
Now suffer the consequences.
Is it true that the name of the Titanic’s captain was Pritzker?
Captain Ahab??
these people involved are so f-ing shady-yet,the dopes keep voting for the same slimeballs,so here ya go illinois,ya get what you vote for
The choices for the voters are usually bad versus awful. That’s assuming there is a choice because sometimes there isn’t. That’s why myself and others recommend packing up and finding a better state.
No one in government actually represents the taxpayers. I hate to sound like Shaun Thompson, but he’s right, especially about Illinois. Everyone wants a piece of the action. They’re running a Ponzi scheme in this state and it will keep running until the money runs out, or we actually take the government back from these crooks. There are too many in on the grift. Every state, county, city employee, every teacher, cop, firefighter, they’re all in on it. I mean, who’s gonna vote to cut their own salary, pension, benefits? Those who work for the state are making more than… Read more »
well said
This short article from 4 days ago on Unemployment loan repayment–SB2803 (https://www.wgem.com/2022/03/11/illinois-senate-starts-appropriation-process-address-growing-debt-unemployment-insurance-fund/), states——–“The bill appropriates $2 billion from American Rescue Plan funds to address the deficit in the unemployment fund. Bill sponsor Sen. Linda Holmes (D-Aurora) said this isn’t the final version or amount of the bill. She said negotiations are ongoing between labor and business representatives. However, the agreed bill process is confidential and cannot be disclosed at this time. Holmes said the group meets at least twice a week to discuss how to pay down the unemployment debts. She also explained that introducing legislation now will “keep all… Read more »
mighty fishy—apparently SB2803 is being negotiated in confidentiality between “the agreed groups, which are representatives from the labor community and representatives from the business community,”?
Who are the “agreed groups”? Why is the state leaving deciding on how to pay back $4.5 billion in unemployment insurance loan left up to the “agreed groups” and not legislature? Is any other state that took out a unemployment insurance loan from feds leaving it up to undisclosed “agreed groups” on how to pay back loan and not their legislature?
https://www.news-journal.com/illinois-lawmakers-debate-measure-that-would-use-federal-funds-to-pay-down-unemployment-debt/article_f567d99e-9e31-5025-82e3-63aa423a661b.html
You stay, you pay. It’s that simple for Illinois businesses (and residents). The only surprise is that so many do stay. Go figure.
It’s a classic example of severe cognitive dissonance.
Or Stockholm Syndrome as I prefer to call it.