Illinois businesses on hook for $1.4 billion in state unemployment debt
Illinois will contribute $450 million to the Unemployment Insurance Trust Fund. With $1.4 billion in debt remaining, Illinois businesses are on the hook if lawmakers don’t meet the Nov. 10 deadline.
Gov. J.B. Pritzker announced the Illinois Department of Employment Security will pay down $450 million of the $1.8 billion Unemployment Insurance Trust Fund deficit, but it looks like too little too late.
The problem is the final deadline to pay off the remaining $1.4 billion is Nov. 10. After that, the federal government hits Illinois businesses with an automatic unemployment tax hike until the deficit is paid off.
Pritzker celebrated a $10 million savings in potential interest for taxpayers, who could be on the hook for $100 million in interest past the Nov. 10 deadline. Pritzker also suggested the state will somehow negotiate the remaining deficit.
“As the economy continues, stabilized, we believe that we’ll be able to reduce that even more in the agreed bill process, working with the legislature, we’ll be able to pay it off by year-end,” he said.
The next legislative session is scheduled to start Nov. 15, after the deadline. Lawmakers partially paid down the deficit in March using $2.7 billion in American Rescue Plan Act dollars. House Republicans wanted to pay off the entire loan because Illinois had nearly $8 billion in ARPA funds.
The Federal Unemployment Tax Act requires employers to pay a 6% tax on an employee’s first $7,000 of their wages but offers a 5.4% tax credit. If Illinois still has a deficit come Nov. 10, Illinois businesses with partially lose their tax credit.
Illinois was in a similar hole after the Great Recession in 2010 when unemployment loans lead to unemployment benefit cuts and raised premiums for employers to fill the deficit.
Illinois is one of five states that has yet to pay off unemployment loans from the pandemic. Avoiding an automatic tax hike on businesses statewide is a top priority as Illinois faces the possibility of a recession.
It is also imperative job creators not face the uncertainty and added tax burdens from the Amendment 1 proposal at the top of the Nov. 8 ballot. Amendment 1 would enshrine permanent power for government unions in the state constitution, which could mean higher taxes, higher costs and potentially costly litigation for business owners.