Less than two weeks ago, JB Pritzker’s administration told us we would soon see a “plan” for addressing the gaping hole in Illinois unemployment trust fund. It’s the source of money for unemployment claims but it is underwater by something well over $5 billion. Most of that hole is in the form of the repayment obligation of about $4.5 billion for money borrowed by the trust fund from the federal government during the pandemic.
Wirepoints and others earlier criticized the state for ignoring the problem and not using earlier federal assistance to fill the hole, which many prudent states have done. In its current budget and future budget projections, Illinois simply pretended that the cost of fixing the problem does not exist.
Interest on the loan was waived until September 6, but it’s now running up, and it’s a big number. Over $100 million of interest will accrue within a year. The interest tab is already nearly $20 million.
Don’t worry, we were told. Deputy Governor Andy Manar went on radio to tell us “the governor’s office will have a plan” to address the trust fund problem. And never mind Wirepoints, Manar said, because it is partisan and not reputable.
Well, on Tuesday we saw the first step to address the problem. Comptroller Susana Mendoza was the lead signatory on a letter sent by officials of seven other states asking the federal government to reinstate the interest waiver. The letter, sent to Treasury Secretary Janet Yellen, argues waiving interest is appropriate because the pandemic is continuing.
“Taxpayers should not be on the hook for interest just because the pandemic is lasting longer than projected,” Illinois Comptroller Susana Mendoza said in her press release, referring to Illinois taxpayers.
What about federal taxpayers, including Illinoisans, whose loan she is asking be made interest-free? No mention of them. Federal money is just manna from heaven, as some people see things.
Most other states have already dealt responsibly with any unemployment trust fund problems that arose from the pandemic. Only ten have loans to their funds from the federal government that remain unpaid; many used earlier federal assistance money for that repayment. Pritzker earlier lied about that, claiming federal rules prohibit that use.
You would think some of those other states would be getting upset over how federal bailout money has gone disproportionately to Democratic states, particularly those who manage their finances poorly. A Wednesday column in the Washington Post has the latest on that. In it, a senior fellow at the American Enterprise Institute summarized detailed research showing that out-sized checks were written to blue state governments.
That is, Democratic states generally got bigger bailouts (and so did smaller states). Most states, he also showed, are awash in federal cash because the bailouts were unnecessarily large. We previously warned about that here.
That pattern is playing out in the new request for the interest waiver on federal loans. The other states signing on Mendoza’s letter were New York, Colorado, Pennsylvania, Connecticut, New Jersey, Massachusetts and Minnesota. California didn’t join on the letter, though its unemployment fund has by far the biggest loan owed the federal government, so it presumably approves of the interest waiver. All those states are heavily Democratic.
For Illinois and some other states, it’s never enough.
There’s more to Illinois’ unemployment trust problem than just interest on the federal loan. The $4.5 billion of principle must be repaid somehow, and a positive balance must be restored that will cost at least another billion. For those items, we’ll have to wait to see the rest of the plan.