(Editor's note: This article was published first at Illinois Policy Institute)
Gov. J.B. Pritzker announced a bipartisan plan to pay off a $1.36 billion deficit in the state’s unemployment insurance trust fund with $1.8 billion in state funds.
Illinois originally held $4.5 billion in unemployment insurance debt from federal loans during the pandemic. Lawmakers from both sides of the aisle still must send a bill to Pritzker’s desk to save taxpayers $20 million in interest.
“This bipartisan agreement eliminates the final portion of the $4.5 billion debt forced upon our state during the pandemic and saves Illinois businesses and taxpayers hundreds of millions of dollars over the next decade,” Pritzker said Nov. 29 in a press release.
Businesses and taxpayers would have been on the hook had the state failed to pay off the deficit. Statewide reductions in unemployment benefits and tax hikes on businesses would have been required had the debt remained unpaid.
Illinois already missed multiple deadlines to repay the loans in 2021 and 2022, costing taxpayers millions in interest.
Lawmakers partially paid down the deficit in March with $2.7 billion in federal funds that included $60 million in interest because of missed payments.
“We have a good agreement,” said state Rep. Dan Ugaste, R-Geneva. “It’s good for labor, it’s good for business, it’s good for the people of the state of Illinois.”
The Illinois Retail Merchants Association and Illinois AFL-CIO both attended the press conference Nov. 29 supporting the plan that helps both employers and workers.
The agreement means a $1.8 billion payment to the trust fund that will leave $450 million on top of paying off the debt. Illinois was one of only four states that still had an outstanding deficit on their unemployment loans.
The state’s emergency reserves will also benefit from the deal, with the extra $450 million being diverted to the rainy-day fund as it is repaid by business taxes over 10 years. Illinois is aiming to put $3.5 billion into the fund, which in August reached $1 billion after previously sitting at only $1.2 million – enough to operate the state for about 15 minutes.
The deal is significant as economists predict a recession is near and as Illinois leads the nation in unemployment. If a recession throws more people out of work, Illinois will be in a better position to help them and avoid added federal mandates for taxes and penalties because its unemployment fund was in the red.