Lawmakers direct $2.7 billion in federal funds toward $4.5 billion unemployment fund deficit

House Majority Leader Greg Harris, D-Chicago, speaks on House action to pay down the debt Thursday night. He is joined by Rep. Marcus Evans, D-Chicago, and Rep. Jay Hoffman, D-Swansea, in the Capitol press briefing room. (Capitol News Illinois photo by Peter Hancock)

Discussions between companies and unions continue over retirement of another $1.8 billion

Illinois Capitol News

SPRINGFIELD (Reuters) – The House on Wednesday advanced a measure to allocate $2.7 billion of funds from the U.S. Federal Bailout Act to pay off more than half of its outstanding $4.5 billion debt under the Unemployment Insurance Trust Fund.

The measure, an amendment to Senate Bill 2803, also included more than $1 billion in spending from the general revenue fund to pay off other state debts.

The debate lasted nearly an hour and became contentious at times when the bill passed 68 to 43 with only Democrats supporting it. The Senate was to resume it when it returned Thursday.

The trust fund is the pool of money paid by companies that funds unemployment claims. Debt has piled up as the state borrowed from the federal government at the height of the pandemic to maintain trust fund solvency amid an unprecedented crush of claims.

When states run up trust fund debt, the ways to pay it off have always been to increase insurance premium rates paid by employers, cut unemployment benefits, or see a new influx of cash, such as federal, state or private funds.

Representative Jay Hoffman, a Democrat from Swansea who is a top House negotiator on unemployment issues, said talks were continuing with business and labor interests on resolving the $1.8 billion remaining dollars. But at least $2.5 billion was needed to move these negotiations forward.

“It is an agreed billing process. Companies and workers have to come to an agreement or we’re not going to move the bill,” he said of ongoing negotiations to repay the $1.8 billion. “This was a budget measure to facilitate the agreed-upon bill process.”

Hoffman said that in 2011, after the Great Recession, the state turned to the private bond market to pay off a $2.3 billion trust fund shortfall and dedicated a revenue stream from the increased employer premiums to pay it back.

Such a path is again considered this time. The state needed to act by April 1 to keep all options — including increasing premiums, cutting benefits or bonding — on the table moving forward, according to the chief executive. majority in the House, Greg Harris, a Democrat from Chicago who sponsored the bill. Hoffman said he hoped the parties would agree by the April 8 adjournment date.

The governor’s office held closed meetings throughout the day to discuss the debt repayment proposal. A late amendment increased the previously planned allocation to the $2 billion trust fund to $2.7 billion.

Democrats said the money would come from an unallocated ARPA fund balance that stands at about $3.5 billion. Illinois received $8.1 billion directly from the ARPA stimulus package signed by President Joe Biden last year.

But Republicans have called for full repayment of the $4.5 billion, noting that about $6.9 billion of ARPA funds remain unspent, even though more than was promised in previous spending plans passed by the government. General Assembly.

Before the pandemic, the state had $1.2 billion in its trust fund, Rep. Tom Demmer, R-Dixon, said in a floor speech. Republicans urged the state to use ARPA funds to replenish that amount as well.

“So you might ask what happens when our unemployment insurance trust fund is in debt?” said Demer. “Two things: first, a significant tax increase on every job in the state of Illinois; and second, a reduction in benefits for every worker in the state of Illinois. It’s a lose-lose scenario. Taxes are rising; the benefits decrease because the fund is indebted.

Republicans urged reallocating other ARPA funds, particularly $1 billion allocated last year for capital projects, to pay off all debt to avoid negative consequences for employers and workers.

Democrats called their action a fiscally prudent move that goes a long way to solving the trust fund problem while allowing for other necessary spending of ARPA funds.

“You know as well as I do that we have used ARPA funding during this emergency to support institutions and businesses that have been on the front lines and providing health care in our communities,” Harris said in response. to Republican critics.

He pointed to spending on hospitals, nursing homes and purchases of personal protective equipment, as well as trust fund payments to gig workers and increased unemployment benefits to workers who were paid by the federal government.

“And actually, I’m proud that we spent that money making sure those Illinois were protected, and the fact that you wanted to take it away from them, you think we should have shorted them. Shame on you,” he said.

As of Wednesday, the state had already accrued $41 million in interest on the debt at a rate of 1.59%. This interest was to be paid by September 30, according to the US Treasury.

By November, without action, that interest is expected to reach $80 million, Hoffman said. Interest cannot be paid through ARPA, so it would require an allocation from the General Revenue Fund, he added. Acting by November would reduce that amount, he said.

The measure also allocated $898 million to pay old group health insurance bills, an additional $300 million for pension payments beyond statutory levels and $230 million to pay off unfunded program debt. College Illinois Savings Bank – all the cornerstones of Governor JB Pritzker’s debt repayment. initiatives put forward in its draft budget. These allocations will come from the general state revenue fund from a projected surplus for the 2022 financial year.

Retirement spending would create $1 billion in savings for the state retirement system over its lifetime, while group health insurance payments would save more than $100 million in interest and paying College Illinois would create a savings of $75 million, House Democrats estimate.

“Illinois is getting our fiscal house in order and paying down our debt. I commend House Democrats for prioritizing legislation that will use our resources in the most fiscally responsible way…” Pritzker said in a statement, “I am disappointed that Republicans are putting politics ahead of fiscal responsibility as Democrats in the General Assembly take the lead in getting our fiscal house in order.”

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government and distributed to more than 400 newspapers statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.

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