Without some help from the federal government, the General Assembly could face another hefty interest payment in about 15 months.
Last year, the state received a $2 billion credit line from Washington to pay out unemployment benefits to laid-off workers. The heightened demand for jobless benefits thoroughly drained Illinois' unemployment insurance trust fund, which employers cover by contributing a percentage of a worker’s salary via a payroll tax. While Congress has so far waived the interest requirement on that loan (as part of the economic stimulus bill), Kurt Erickson reports today that Illinois will need to fork over roughly $300 million in interest beginning in 2012.
Those payments could increase over time, too. The Illinois Department of Employment Security anticipates it will need to borrow from the feds once again before the year closes out. Congress will definitely consider another emergency unemployment benefit extension this winter, which most economists still support. ProPublica estimates that we will ultimately borrow $8 billion before the recession ends.
Back in May, we highlighted a few potential solutions to the unemployment trust fund debacle. In D.C., Congress could extend indefinitely its moratorium on state interest payments. Here in Illinois, business and labor must reach some long-term agreement that either increases how much employers contribute or reduces how much workers receive in benefits. The state already raised (PDF) slightly the maximum wage figure that is subject to the payroll tax, but they could be more aggressive in increasing what employers chip in, as Washington State has done to wide praise. And while they are at it, lawmakers could simplify the lengthy appeals process for workers trying to access benefits, a reform the Legal Assistance Foundation has been fighting for over the past several years.
We recently posted a video highlighting the effects of the unemployment crisis on Illinoisans. Watch it here.