Joined by a bipartisan group of lawmakers, Gov. JB Pritzker announced Tuesday an agreement to rid the state of its unemployment insurance loan debt.
The $1.36 billion in Unemployment Trust Fund debt will be eliminated through a contribution of $1.8 billion in state funds where the extra $450 million will be an interest-free loan to be repaid over the next 10 years.
The investment allowed the state to clear the debt that grew to as much as $4.5 billion during the COVID-19 pandemic, Pritzker said, calling it a fiscal win for Illinois businesses and residents.
“We’ve restored our unemployment system to good, working order after the most serious economic downturn since the Great Depression,” the governor said during his first visit to the state Capitol since his re-election.
That downturn forced the state to borrow $4.5 billion from the federal government, of which $3.1 billion was repaid.
The agreement would increase an employee’s “taxable wage base” – which is the amount of an employee’s wages for which an employer must pay unemployment taxes – by 2.4 percent for each of the next five years. It would also increase the target balance of the fund’s reserves from $1 billion to $1.75 billion.
The final payment eliminates the debt while maintaining no reductions to the number of weeks and amount of unemployment benefits an unemployed person can receive.
Three weeks have since passed the contentious midterm elections, which lawmakers on both sides said made the bipartisan agreement all the more important.
“In my brief tenure as Senate president, what I’m most proud of is the work we’ve done to restore fiscal stability,” said Senate President Don Harmon, D-Oak Park. “This agreement is yet another step forward. I applaud everyone involved for coming to the table with workable ideas and the desire to be part of a solution.”
The unemployment trust fund is generally funded by the state’s businesses through insurance premiums collected via payroll taxes.
“Without this agreement, Illinois employers would have had to pay nearly $1 billion more in taxes over the next five years,” added Deputy Minority Senate Leader Sue Rezin, R-Morris. “Thankfully, we were able to avoid this worse-case scenario.”
In repaying the $450 million loan, the funds will be redirected to the state’s rainy day fund. Pritzker proposed earlier this month the state invest $1.3 billion into that fund.
The governor said the state still needs to at least reach the 5% benchmark of an annual budget and would like to see the legislature take up action to build the rainy day fund.
Related:rainy day fund tops $1 billion for the first time” class=”link “>The State of Illinois’ rainy day fund tops $1 billion for the first time
“That’s not enough,” Pritzker said of the $450 million heading towards the fund over the next 10 years. “We’re still going to have to talk to the legislature and, hopefully with bipartisan support, for the new budget.”
Comptroller Susana Mendoza indicated her support of the governor’s proposal but also wanted the Illinois General Assembly to pass House Bill 4118 — which would require annual funding of the rainy day fund and the pension stabilization fund.
The debit pay-off agreement heads to the General Assembly where it is expected to pass before the veto session adjourns.
Capitol News Illinois contributed.
Contact Patrick Keck: 312-549-9340, [email protected], twitter.com/@pkeckreporter
This article originally appeared on State Journal-Register: Plan announced to clear $1 billion in unemployment fund debt