 But neither side
is talking much."We'll have a solution by the
end of the (calendar) year, but the debt will have to be repaid over
a longer period of time," said Jay Shattuck, executive director of
the Illinois Chamber of Commerce's Employment Law Council, who put
the year-end debt at a potential $3.5 billion, given the lagging
economy.
Shattuck said business and labor groups will pay a large portion
of the principal, which now stands at $2.8 billion. Who will pay the
$80 million interest due Sept. 30 apparently is still under
negotiation.
Tim Drea, secretary-treasurer of the Illinois AFL-CIO, is the top
labor negotiator. Beth Spencer, director of communications for the
Illinois AFL-CIO, said, "We're opting to not comment on it at this
time while negotiations are ongoing."
With both groups helping to pay off the loan, possible options
could include an increase in business contributions, a decrease in
unemployment benefits or borrowing by the state -- or all three.
A spokesman for the Illinois Department of Employment Security
cautioned against jumping to conclusions on a complex issue.
"It really is premature to characterize what the agreement will
look like," said Greg Rivara.
However, he did note that in 2003 the state issued bonds to cover
its unemployment debt and paid them off two years early.
Any borrowing would add to the state's debt, which includes
nearly $4 billion in bonds approved by lawmakers in January to make
the 2011 pension payment, as well as $8.75 billion in borrowing Gov.
Pat Quinn is calling for to pay off vendors and other financial
obligations.
A small part of the business collections can be paid toward the
debt, but not enough to cover the total $2.8 billion.
As part of the federal stimulus program, states could get
interest-free loans from the Federal Unemployment Account -- which
acts as a line of credit -- to bolster unemployment trust funds left
depleted from the 2008 economic crash and the ensuing recession.
Illinois started borrowing in July 2009 and tallies a total debt of
$2.8 billion as of the latest data available on March 15.
Illinois is not alone in the financial conundrum -- 30 other
states and the Virgin Islands have racked up a debt to the Federal
Unemployment Account to the tune of nearly $45.4 billion, with
Illinois ranking fifth behind California, Michigan, New York and
Pennsylvania. First-place California owes $10.3 billion, while New
Hampshire brings up the pack at nearly $11.4 million.
However, the loans from the federal government started accruing
an interest rate of 4 percent annually as of Jan. 1, although there
is talk in Washington of extending the interest-free borrowing.
In January and February the state made a total $60 million
payment on the principal -- the first payment since it started
borrowing in 2009, according to Rivara.
He noted the interest-free borrowing gave the state no incentive
to pay back the principal during those times of high unemployment
until it had to -- which is now.
"At the end of the day, if the balance on the account is
positive, it goes toward the principal," he said.
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The unemployment trust fund is also expecting a replenishment
with a large influx of employer contributions beginning next month
and continuing into May, after first-quarter collections are
received.
Businesses contribute on the first $12,740 that would have been
earned by the unemployed worker, meaning most of the total business
collections will be collected in the first quarter. Many businesses
also make their annual payment after the first quarter, Rivara said.
He said IDES expects to bring in up to $1 billion of business
contributions by May, which is funneled directly into paying
unemployment insurance claims, negating the need to borrow from the
federal account.
"We went from the end of April 2010 to the end of December
without borrowing," he said. "It had enough dollars on hand to pay
the obligation."
He said the agency expects to bring in a total of $2.6 billion
from business collections for 2011, up from $2 billion in 2010. That
money goes toward paying unemployment claims, not the debt.
The amount businesses pay to the state's unemployment trust fund
depends on a three-year formula set in a 2003 law that takes into
account the employer's industry and previous history of layoffs. For
2011, the amount businesses annually pay per worker ranges from $89
to $1,070, according to Rivara -- up slightly from $81 to $908 in
2010.
The jobs landscape for the state is brightening slightly, as the
unemployment rate has fallen for 13 consecutive months and mirrors
the national rate for February at 8.9 percent, which is the most
recent data available.
But few expect a quick rebound for the state.
The University of Illinois' "Flash Index" as compiled by
economist J. Fred Giertz hit 96.1 for February, marking the 10th
consecutive monthly improvement. But the Flash Index, a monthly
weighted average of Illinois growth rates in corporate earnings,
consumer spending and personal income, has yet to break 100, which
indicates economic growth.
"Slow recoveries are typical in recessions accompanied by a
financial panic as occurred in the fall of 2008," Giertz said in a
statement.
[Illinois
Statehouse News; By MARY MASSINGALE]
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