 The Legislature last week approved allowing the Illinois Department
of Employment Security to sell bonds to pay off about $2.4 billion
borrowed from the Federal Unemployment Account to keep unemployed
Illinoisans' benefits flowing during the Great Recession."It's
probably one of the biggest bills that passed (during the fall veto
session)," said state Rep. Frank Mautino, D-Spring Valley, one of
the lead architects of the deal negotiated over the summer and into
the fall.
Gov. Pat Quinn has said he will sign off on the deal.
The usual contributions businesses make to the unemployment trust
fund, administered by the Illinois Department of Employment
Security, will pay for the interest on the bonds instead of using
money from the state's general revenue fund.
Illinois' unemployment trust fund went from black to red starting
in 2009 as more people became unemployed. The state took out a $2.8
billion interest-free loan from the federal government to pay for
unemployment benefits after it exhausted its unemployment trust
fund. The state has paid back $400 million toward the debt so far.
If Illinois doesn't pay back the remaining $2.4 billion by Jan.
1, it faces $82 million in interest alone for 2012. The state says
it can sell bonds with an interest rate of about 1 percent as
opposed to the 4 percent the federal government would charge on the
remaining debt, saving the state $240 million.
Under the state plan, businesses will avoid nearly $1.2 billion
in federal penalties and $400 million in increased federal taxes
that would stem from the state's delinquency in paying back the
money to the federal government, since businesses pay into the trust
fund.
"Had we not done this, every business that has a door would have
received a notice from the federal government on Jan. 1 that says,
'Because of the state's inability to balance this fund, you will see
an increase this year,'" Mautino said.
The deal also rewards the 46 percent of businesses in Illinois
that have avoided layoffs by lowering their unemployment insurance
tax rate by 16 percent on average. What a business pays in
unemployment insurance tax varies depending on the business's
history of layoffs.
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"Businesses need a degree of tax certainty to successfully grow
in this economy. This legislation will provide the tax relief to
make that happen while making the trust fund solvent," said David
Vite, president of the Illinois Retail Merchants Association, which
lobbies on behalf of retail businesses in the state.
The measure also avoids cutting unemployment benefits to cover
the interest on the borrowed money this year. However, as part of
longer-term unemployment insurance reform, the state will offer
benefits for 25 weeks, not 26, starting Jan. 1 to save the state an
estimated $50 million annually.
"These reforms will help create vital private-sector jobs,
significantly reduce the tax burden on the half of all employers in
the state and ensure the protection of benefits for all working men
and women in Illinois who are in need of temporary assistance," said
state Rep. Pam Roth, R-Morris.
Each state operates its own unemployment trust fund. In Illinois,
businesses pay unemployment insurance taxes on the first $12,740 an
employee earns. The more employees a business lays off, the higher
the percentage of that $12,740 they have to contribute to the trust
fund.
The average weekly benefit in Illinois for 2010 was $313.12. The
national average was $295 for 2010.
[Illinois
Statehouse News; By ANDREW THOMASON]
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