Illinois unemployment deficit threatens to 'cripple' businesses, claimants | Govt-and-politics
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Normally, the incoming funds outpace the amount of outgoing unemployment benefits, but as the state's unemployment rate grew as high as an unprecedented 16% in April 2020 amid forced economic shutdowns, those trends drastically reversed.
When this happens, states can borrow from the federal government in what is called a Title XII advance to pay unemployment claims. As of July 7, Illinois' outstanding balance for federal Title XII borrowing was $4.2 billion, according to the U.S Treasury, but that number is expected to grow this year as the unemployment rate remains high, most recently measuring at 7.1% in May 2021.
While federal lawmakers passed a moratorium on Title XII interest payments in previous COVID-19 relief packages, it is scheduled to expire Sept. 6, at which point interest will begin to accrue at a rate of 2.27%. According to IDES, the state has allocated $10 million for interest payments in the current fiscal year, the first of which will be due Sept. 30.
If any state maintains an outstanding balance of federal borrowing for too long, federal law stipulates that Federal Unemployment Tax Act credits for businesses would decrease incrementally, eventually increasing an employer's tax burden from about 0.6% to 6%. But no states are in danger of a reduction to that credit in 2021.
Illinois law, however, builds "speed bumps" into the repayment process which encourage labor and business interests to come to the negotiating table to address deficits in a timely manner. Those "speed bumps" initiate penalties that, beginning in 2022, would include shortening the benefit period from 26 to 24 weeks, lowering wage repayment for claimants from 47% to 42.4%, and an increase to the formulaic employer tax rates, according to IDES.
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State Sen. Chapin Rose, R-Mahomet, speaks on the Senate floor on June 1, opposing the state's fiscal year budget, in part because it did not include funds to pay down the Unemployment Insurance Trust Fund deficit.
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Gov. J.B. Pritzker's office did not directly respond to questions as to whether ARPA funds might be put toward the deficit. Instead, a spokesperson issued a statement saying the governor is seeking further federal aid as well.
PHOTOS: President Biden's visit to Crystal Lake
President Joe Biden speaks as he tours a children's learning center at McHenry County College, Wednesday, July 7, 2021, in Crystal Lake, Ill. President of McHenry County College Clint Gabbard stands at left.
EVAN VUCCI, ASSOCIATED PRESS
President of McHenry County College Clint Gabbard speaks as President Joe Biden tours a manufacturing lab at McHenry County College during an event highlighting infrastructure spending, Wednesday, July 7, 2021, in Crystal Lake, Ill.
President Joe Biden speaks to a child as he tours a children's learning center at McHenry County College, Wednesday, July 7, 2021, in Crystal Lake, Ill.
President Joe Biden speaks as he tours a children's learning center at McHenry County College, Wednesday, July 7, 2021, in Crystal Lake, Ill. Sen. Tammy Duckworth, R-Ill., left, and President of McHenry County College Clint Gabbard look on.
President Joe Biden delivers remarks on infrastructure spending at McHenry County College, Wednesday, July 7, 2021, in Crystal Lake, Ill.
President Joe Biden speaks to a child as he tours a children's learning center at McHenry County College, Wednesday, July 7, 2021, in Crystal Lake, Ill. Sen. Tammy Duckworth, R-Ill., left, looks on.
President Joe Biden delivers remarks on infrastructure spending at McHenry County College in Crystal Lake on Wednesday.
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