State facing big bill for jobless benefits

2010-09-26T03:00:00Z State facing big bill for jobless benefitsBy Kurt Erickson, The Southern Springfield Bureau The Southern

SPRINGFIELD - Illinois' nightmarish budget situation could get even scarier in the not-too-distant future.

Amid the huge backlog of bills and unpaid pension obligations, the state also has borrowed more than $2.2 billion from the federal government to pay out unemployment benefits to laid-off workers.

And now, the bill for that borrowing - an estimated $250 million in interest - is about to come due, according to information compiled as part of a joint project of Illinois Issues magazine and The Southern Springfield Bureau.

In the next few months, Illinois and other states will have to figure out how to repay the money to the feds, while also attempting to craft a plan to replenish their depleted unemployment insurance trust funds.

Although Congress and President Obama could come up with a solution to lessen the looming financial blow, business and labor groups - who have the most at stake when it comes to the issue of jobless benefits - aren't figuring on any quick fix.

"It really is the ticking time bomb," said Mark Denzler, government relations chief for the Illinois Manufacturers Association, which represents large business interests in the Capitol.

Throughout the country, states manage Unemployment Insurance Trust Funds to pay benefits to workers who lose their jobs. Illinois' fund is financed by employer contributions, with no infusion of state tax dollars. Businesses pay a percentage of a worker's salary into the fund. The system is designed to build up the fund in robust economic times so it can provide benefits to unemployed workers in dire financial times.

At the beginning of 2009, the state had a healthy $1.5 billion saved up, but the surge of bad economic news and layoffs helped bring the balance of the fund down to $100 million by July of that year. By the next month, Illinois was asking for federal help. Over the past year, officials have had to tap the federal line of credit for $2.2 billion. In recent months, things have leveled out a bit. Through the end of August, $414 million was in the account, and the state hadn't had to borrow since April.

The state, however, may not be able to get through the year without tapping the federal money again.

"I would anticipate that will be the case," said Greg Rivara, spokesman for the Illinois Department of Employment Security.

Most agree the lingering economic problems have caused the meltdown. By the end of 2010, the projected deficit in Illinois' fund is expected to be $2.75 billion. By some estimates, that could grow to as high as $7 billion by the end of 2012.

"The bleeding is going to go on longer," says George Wentworth, a senior attorney with the New York-based National Employment Law Project, which studies the issue.

Along with borrowing, Illinois and 34 other states have tried to adjust what they collect from businesses. In some cases, such as Illinois, states raised their taxable wage base, which gives businesses the basis on which to figure how they will pay into the fund for each employee.

For now, the federal government has not required states to repay the loans with interest. But beginning in 2012, Illinois could be on the hook for as much as $250 million in interest payments - at a time when the state is already in dire fiscal shape.

David Vite, executive director of the Illinois Retail Merchants Association, is among those who believe Illinois' depleted fund could have withstood a traditional slowdown. But the built-in protections were not strong enough to keep the fund from collapsing as the recession has dragged on.

"The floor dropped out. It was a once-in-a-century kind of problem," he said.

Wentworth agrees that the extent of the recession was not expected. Nearly half of those who have used the unemployment benefits have exceeded the initial 26-week window for benefits. The last time Illinois depleted its fund - in the recession of the 1980s - just a quarter of out-of-work Americans were considered long-term.

A multi-tiered solution could be in the offing. Along with pushing Washington, D.C., to waive or delay interest payments, the Illinois Legislature could begin talks aimed at boosting how much employers contribute or lowering how much workers receive in benefits - or some combination of both.

"Ultimately, it will be business and labor working together," Denzler said. "The process works pretty well."

Sean Stott, a representative of the Laborers' International union, said he doesn't see negotiations between business and labor getting serious until after the federal government outlines how far it will go in helping out the states.

"A lot depends on what action Congress takes," Stott said.

kurt.erickson@lee.net

217-789-0865

Copyright 2015 The Southern. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

No Comments Posted.

Add Comment
You must Login to comment.

Click here to get an account it's free and quick

Anti-strike measure approved in House

SPRINGFIELD — Democrats in the Illinois House pushed through a plan Friday that could stop a lockout or a strike by the state's largest employ…

4 hours ago Related (0)
Rauner wants compromise by Sunday

Rauner wants compromise by Sunday

SPRINGFIELD — Hoping to salvage some of his business-friendly agenda, Gov. Bruce Rauner said he wants to strike a deal with Democrats on issue… Updated: 11:26 pm

12 hours ago Photos

Photos

Related (0)

Rauner: No special session if deadline for budget missed

SPRINGFIELD, Ill. (AP) — Gov. Bruce Rauner says he will not call lawmakers back into session if there's no agreement on a budget by Sunday.

15 hours ago(0)
'Clean energy' bills take back seat to Illinois budget

'Clean energy' bills take back seat to Illinois budget

SPRINGFIELD — Measures advertised as promoting "clean energy" in Illinois — including a plan pushed by power-producing giant Exelon Corp. — ha…

15 hours ago Photos

Photos

Related (0)

Rauner, leaders negotiating, but no budget deal this session

SPRINGFIELD — Illinois legislative leaders say they're still open to negotiating with Gov. Bruce Rauner over the 2016 budget and Rauner's pro-…

15 hours ago Related (0)
Legislature could give final OK to parts of 2016 budget

Legislature could give final OK to parts of 2016 budget

SPRINGFIELD — The Illinois Legislature could give final approval to parts of a $36.3 billion budget as lawmakers head toward the end of their …

19 hours ago Related (0)

Land surveyors give notice for high voltage transmission construction

The Illinois House unanimously advanced legislation on Thursday to require land surveyors to give notice to land owners before beginning const…

May 28, 2015 8:00 pm Related (0)
Lawmakers OK legislation helping private water firm

Lawmakers OK legislation helping private water firm

SPRINGFIELD — A private water company could get permission to spread the cost of upgrades to its customers under legislation heading to Gov. B…

May 28, 2015 7:00 pm Related (0)

Illinois Lawmakers vote on Rauner lawsuit reform proposal

SPRINGFIELD — Illinois senators have rejected a measure sought by Gov. Bruce Rauner that would have made changes to the state's legal system.

May 28, 2015 4:33 pm Related (0)

Effort to expand Illinois gambling likely pushed into summer

SPRINGFIELD — An effort to approve a Chicago casino and other new casinos throughout Illinois to generate much-needed revenue could be pushed …

May 28, 2015 4:16 pm Related (0)
Follow the Southern Illinoisan

Pinboard