Illinois Still Derelict On Its Federal Loan For Unemployment Fund. US Rep. LaHood Says Pay Up. He’s Right. – Wirepoints

By: Mark Glennon*

Illinois Congressman Darin LaHood and the Republican leader on the US House Ways and Means Committee last week signed a letter to Gov. JB Pritzker urging Illinois to pay up on the $1.3 billion pandemic-era loan it still owes to the federal government.

LaHood’s reasons for urging repayment are solid enough, but there’s more to it: This is a great illustration of how Illinois deceitfully manipulates its claims to be paying its bills and balancing its budget.

Twenty-two states borrowed from the federal government during the pandemic to prop up their unemployment funds. However, just four still have loans outstanding – Illinois, California, Connecticut, and New York, which got similar letters from LaHood.

LaHood’s letter lays out the reasons Illinois should pay up. “Without repayment,” he wrote, “Main Street businesses are at risk of facing higher taxes that will undercut job creation and drive prices higher just as families and small businesses are struggling with record-high inflation and a looming recession.” The mechanics of how that happens are described in LaHood’s letter. Employers must pay more taxes when unemployment trusts are underwater. Tens of millions of dollars in interest charges are also running up, though the precise amount is unclear and will depend on deadlines for payment.

“This self-imposed pain is preventable,” LaHood wrote, and he’s exactly right. Illinois is still sitting on a pile of federal cash that should be used properly by paying off the federal loan, as most other states have done. And just last week the state reported that an additional $764 million in revenues is coming in that was not anticipated in the current budget year. That money is through ARPA, the American Rescue Plan Act — the obscenely excessive and inflationary federal “pandemic relief.”

Pritzker outright fibbed on this matter earlier. Last July, Pritzker was asked directly why he wasn’t using ARPA money to pay off the unemployment loan. Pritzker claimed that ARPA money could not be used for that purpose, which was simply untrue, as we described here.

The deceit doesn’t end there. Illinois’ supposedly “balanced” 2022 budget entirely ignored the unemployment trust fund hole, which was over $5 billion at the time. That deceit is made possible because the trust fund is in an account separate from the General Fund, which is where the balance is claimed. Even for the General Fund, our foolish budget accounting simply ignores growing debts, as we’ve often explained.

It’s also important to remember that Illinois must not only pay off the federal loan, but is obligated by federal rules to restore the unemployment trust fund to a positive balance reasonably projected to cover routine unemployment claims. That will cost at least another billion dollars.

This chapter also illustrates why the constant bragging by Pritzker and Comptroller Susana Mendoza about paying down the state’s bill backlog is meaningless.

The widely reported bill backlog compiled by Mendoza simply doesn’t include bills, like the unemployment fund loan, owed by the state outside of its General Fund. Those other bills include not just the unemployment loan but unfunded pension liabilities, which is Illinois’ 800-pound gorilla. It’s easy to pay down one set of bills if you ignore another set. The bill backlog was also reduced by the 2017 income tax increase, the biggest in Illinois’ history, and by bond borrowing of $6 billion, which was just moving debt from one credit card to another.

The Volcker Alliance is nonprofit fiscal watchdog. Bill Glasgall, its director of public finance, said this: “Illinois is very flush with funds now, but the state has a long history of using one-time actions, budget gimmicks, budget maneuvers to balance the budget.”

LaHood’s letter got almost no press coverage, just like the state’s constant budget tricks, which is why they persist.

The cash bailout should be used for reducing Illinois’ debts, which is the source of its financial crisis, and some of the bailout money has been properly used for that. But too much of it has been used for one-time gimmicks and election year voter bribes.

*Mark Glennon is founder of Wirepoints.