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“The improvements to our Unemployment Trust Fund will aid businesses
and workers by providing financial stability and avoiding future
financial predicaments,” said Governor Blagojevich. “I want to thank
labor and business, specifically Margaret Blackshere, Illinois
AFL-CIO President and David Vite, Illinois Retail Merchants
Association President for their hard work, leadership and commitment
in developing an agreement that improves our unemployment insurance
system and is in the best interests of workers, employers and the
state.”
“Governor Blagojevich, assisted by representatives of each
legislative caucus, created an environment in which employer and
labor representatives could discuss thoughtfully the stranglehold
that federal interest penalties and federal taxes would have on
economic development prospects in Illinois. In that environment,
business and labor creatively and agreeably found a solution to a $1
billion problem,” said Vite. “Without the guidance and sometimes
tough encouragement of the Blagojevich administration, business and
labor would not have been able to reach a successful conclusion.”
House Bill 810, which is the first major agreed unemployment
insurance legislation in more than a decade, will return the fund to
solvency by the end of 2009. The legislation recognizes that
business and labor must share the burden of eliminating the current
trust fund deficit. It corrects the problem gradually over several
years to lessen the hardship on workers and businesses.
The solvency package relies on a combination of employer tax
increases, benefit constraints and the issuance of $1.4 billion in
revenue bonds to save on borrowing costs over the next six years.
While the solvency package increases taxes on employers, it provides
them with greater predictability in their unemployment insurance
taxes and will save employers money over the next six years compared
to what they would have paid under existing law. Under current law,
employers are projected to pay an annual average tax of $487 per
employee in 2009. This legislation will reduce the annual average
tax to $362 per employee, a savings of $125 per employee.
In addition, the agreement provides long-sought benefit improvements
for workers, including changes in eligibility calculations that will
allow more unemployed workers, especially those new to the
workforce, to qualify for benefits more quickly.
Another benefit is for those victims of domestic violence. Beginning
in 2004, workers who must leave their job because they are victims
of domestic violence will be eligible for unemployment.
“Studies show 25 percent to 50 percent of domestic violence victims
lose their jobs over the ongoing torment,” said Blackshere. “Now
workers who must leave their jobs and even their communities to
escape violent assaults can apply for unemployment assistance to
help them get reestablished and back on their feet. We can help them
feel safe again. This is an important UI reform.”
Another feature of the legislation is the innovative bonding
proposal, which will be administered by the Illinois Department of
Employment Security (IDES) to cover shortfalls in the benefits fund
as it returns to a sound fiscal footing. The bonding proposal, which
is guaranteed by unemployment insurance trust funds paid by
employers not state funds, protects the state’s general revenue fund
while allowing the state to take advantage of lower interest costs.
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Depending on the individual employer’s history of worker layoffs,
tax rates for 2004 will range from a minimum of 0.9 percent to a
maximum of 8.6 percent. For 2004, the taxes will be levied only on
the first $9,800 in total wages paid each worker, a level below the
national average. That level will increase by a total of $2500 over
the following five years to a maximum of $12,3000 in 2009. The Fund
Building Rate will remain a part of each employer’s tax rate and
will increase from its present 0.4 percent to 0.7 percent next year,
0.9 percent in 2005, then decrease gradually back to 0.4 percent in
2009. This portion of employer tax rates is what will be used to
secure the bond financing. As a result, the bond issuance will not
be a general obligation of the state.
To avert future financial problems with the fund, the legislation
also includes structural changes designed to keep the trust fund
solvent by making the system more responsive to changing economic
conditions, including automatic adjustments in taxes and benefits
based on the financial health of the trust fund. “By implementing
these safeguards, we hope to avoid the present dilemma of having to
consider benefit reductions and tax increases during an economic
downturn when workers and employers can least afford it,” said the
Governor.
On the benefits side, the percentage of prior earnings that workers
will receive will be reduced slightly beginning in 2004. Rates for
single workers will decrease from 49.5 percent to 48 percent through
2007 and 47 percent after 2008. Benefits for those with dependent
children will decrease by .3 percent from 65.5 percent to 65.2
percent. Baseline benefits do have a yearly cost of living increase
built in but that increase will be reduced by these percentages.
“The Chamber is pleased with the process where employers and labor
came together to address this serious problem and developed a
reasonable and timely solution,” said Doug Whitley, Illinois Chamber
of Commerce President.
“The Funding plan just approved by the Governor is proof of the
efficacy of the Agreed Bill process,” said IDES Director Brenda A.
Russell. “With good will and determination, Illinois business and
labor have assured the future ability of the state to help an
increased number of workers in their periods of greatest need.”
“IMA is grateful for the cooperation and effort put forward by the
Governor, legislative leaders, business and labor to bring the
unemployment insurance system to solvency in an appropriate time
frame,” Greg Baise, Illinois Manufacturers’ Association President.
The legislation, which becomes effective upon the Governor’s
signature, is sponsored by State Representative Jay Hoffman and
State Senator Carol Ronen.
[News Release]
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