Illinois to use $2.7 billion in federal relief funds to pay off COVID-related debt | Chicago News

(WTTW News)

Illinois will use $2.7 billion of the state’s remaining federal relief funding to partially close pandemic-related, interest-earning debt.

Meanwhile, Republicans say the solution is half-baked and paves the way for future business tax hikes and lower unemployment benefits for unemployed Illinois.

When COVID-19 shutdowns left a record number of people suddenly out of work, Illinois saw record claims for unemployment benefits. This increase has drained the state fund that pays these benefits, the Illinois Unemployment Insurance Trust Fund.

The fund was not only depleted, but unemployment claims left it with $4.5 billion in debt, an amount that is earning such interest that the state paid $10 million last year.

Businesses gave lukewarm support to Democrats’ hasty efforts this week to erase 60% of that debt, signaling that infusion is better than no action while leaving a significant problem unaddressed even as businesses grapple with other uncertainties related to the pandemic recovery.

“Illinois employers appreciate the Governor and members of the General Assembly for taking this positive step in addressing the massive $4.5 billion debt,” read a statement from The Joint Employers, a coalition of major business groups, including the state and Chicago Chambers of Commerce. and major manufacturers’ and retailers’ associations.

The statement then went on to say “we hope negotiations will continue to resolve the remaining balance of this unprecedented deficit” – a politically delicate nod to the pressures to come.

Republican lawmakers, who voted against, were blunt in their condemnation.

“This action will lead to the largest corporate tax increase in the state of Illinois in state history. Employers who have been treated with absolute disregard throughout this pandemic will literally be left behind and be responsible for depositing the remaining deficit into the unemployment insurance fund,” said State Senator Don DeWitte (R -St.Charles).

Employers largely fund the Unemployment Insurance Fund, or UI, through a payroll tax. Most of the time, he is on his own, but not under the stress of pandemic-induced attraction.

Illinois could have — Republicans say it should have — immediately spent $4.5 billion of its $8.1 billion in American Rescue Plan Act (ARPA) dollars to clear the debt, as the other states have done.

Instead, the money has flowed into one-time crime reduction projects and programs, largely in areas represented by Democrats — choices Democrats see as sound investments.

“This was a complete train wreck” and a “complete and utter disaster on the part of the governor, and it was completely avoidable,” said Sen. Win Stoller, a Republican who represents the Peoria area.

With the $2.7 billion cut, lawmakers, business and labor representatives will negotiate, through an agreed-upon bill process, how to address the remaining $1.7 billion in debt. The options: raise taxes on employers, cut benefits paid to those who lose their jobs, or a combination of both.

The State could also take out a bond, which should be covered.

“It’s been an incredibly tough two years for business,” Stoller said. “And now we’re preparing to ask them to bear the brunt of solving this problem.”

Democratic Gov. JB Pritzker, who is seeking a second term, called partisan comments from Republicans partisan “talking points” ahead of the election, which he said “drives me crazy”, even as the party’s political wings Democrat issued a series of press releases. flush with talking points that criticize Republicans.

Reducing the unemployment insurance fund deficit is fiscally responsible, Democrats said.

“Every dollar we invest in the (unemployment insurance trust fund) outside of the system saves a tax increase or benefit reduction, and we’ve invested $2.7 billion to protect employers and employees. of these kinds of reductions,” the state Senate said. President Don Harmon.

The governor said he plans to sign the measure as soon as Thursday evening — an unusually quick turnaround after Senate approval on Thursday afternoon.

Illinois must process using ARPA money for debt payment by April 1, or the state would have to talk about one of the options to pay off the remaining debt – reducing benefits. unemployment – off the table until 2025.

It’s unclear whether workers would agree to cut benefits, or whether this is politically viable amid an election and widespread concerns about inflation and a possible looming recession – the latter of which may once lead to a spike in claims. unemployment, even though the data released on Thursday showed it. Illinois’ unemployment rate fell 0.2 percentage points to 4.8% last month.

That’s 1 percentage point higher than the national unemployment rate.

As part of the Democrats’ $4.1 billion package, Illinois will also pay off other outstanding debt, including $898 million for debt accumulated over the years in state employee health insurance. and $200 million for the College Illinois Prepaid Tuition Program, which for years has been on the verge of insolvency.

Illinois is also spending $300 million on the state’s long-term pension debt of nearly $140 billion, which the Pritzker administration says will save $1 billion through 2045. .

“It’s so important that we find every opportunity to ease the future burden on taxpayers,” House Speaker Emanuel “Chris” Welch said.

Federal COVID relief money and higher-than-expected revenues have given Illinois more fiscal room to maneuver than last year.

The General Assembly has given itself an April 8 deadline to do its work, including adopting a full budget for fiscal year 2023.

On Thursday, the nonpartisan Civic Federation announced public support for Pritzker’s spending plan.

“The Governor’s proposal stands in stark contrast to the questionable accounting gimmicks and changes that have historically been implemented to make or reduce already insufficient statutory payments,” Civic Federation President Laurence Msall said in a press release. .

Follow Amanda Vinicky on Twitter: @amandavinicky

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