Illinois To Pay $1.3 Billion In Unemployment Debt Using State Funds

ILLINOIS — State, business and labor leaders have reached an agreement to pay off more than $1.3 billion in unemployment debt created as a result of the coronavirus pandemic, the governor announced this week.

The state will give over $1.8 billion in government funds to cover a $1.36 billion federal loan balance and place the remaining $450 million in the unemployment insurance trust fund as an interest-free loan to be repaid over 10 years, according to a news release from Gov. JB Pritzker. As the loan is repaid, the money will go to the state’s rainy day fund.

"The pandemic created unprecedented challenges for unemployment insurance systems across the nation and without action, Illinois employers would have faced crushing tax increases in the midst of other challenges,” said Rob Karr, president and CEO of the Illinois Retail Merchants Association, in the news release.

The unemployment trust was forced to borrow $4.5 billion in federal funds due to the unprecedented number of unemployed workers throughout the pandemic, the news release said.

This week’s agreement marks the third major contribution to the loan balance, according to the news release. Pritzker signed legislation in March to provide $2.7 billion for the unemployment trust fund via one-time federal dollars from the American Rescue Plan Act and, in September, another $450 million payment was made toward the balance from the fund itself as a result of months of low unemployment claims.

The $1.8 billion agreement will prevent employers from paying more than $900 million in taxes over the next five years, according to Karr. It will also save taxpayers an estimated $20 million in interest that would be due in September, the news release said, and ensures there are no reductions in the standard number of weeks of unemployment benefits or the amount a person can claim.

"Paying off the unemployment insurance trust fund debt is a crucial step in our state's continued recovery from the fiscal crisis brought on by the COVID-19 pandemic," state Rep. Marcus Evans, D-Chicago, said in the news release.

The agreement is expected to pass during upcoming legislative sessions.

"It's good to know we're working together to pay off debt and even better to know that the funds previously allocated to paying down that debt will now go to shoring up the state's Rainy Day Fund,” state Sen. Sue Rezin, R-Morris, said in the news release.