Illinois has borrowed more than $2.2 billion from the federal government since July 2009 to pay unemployment benefits.
The good news is the state has not had to borrow since April, and the loan is interest-free for now.
“We really do access it as needed. It’s a day-to-day decision, five days a week,” Illinois Department of Employment Security spokesman Greg Rivara said Thursday.
Illinois has plenty of borrowing company. According to the National Conference of State Legislatures, 31 states and the Virgin Islands had borrowed $38.7 billion to pay jobless claims as of this week.
Several states exceeded Illinois borrowing, topped by California at nearly $7.5 billion.
Unemployment trust funds are paid for through withholding taxes on employers, but Rivara said there have been minimal rate changes up to now in Illinois because rates are based on a three-year payment history.
The system is designed to ease rates during a down economy, when claims are high, and for rates to rise in good times to rebuild the fund, he said. Rates for 2010 are lower than those in 2007, while the taxable wage-base is higher.
Interest free, for now
The federal government suspended interest on loans to states for jobless benefits as part of the national stimulus legislation, but that exemption is scheduled to expire in January barring a congressional extension.
Several states, including most recently Pennsylvania, already are struggling with ways to build unemployment trust funds. But the basic options — raise rates on employers or cut benefits in an already-struggling economy — are a tough political sell, said Marc Katz, congressional and public affairs director for the National Association of Workforce Agencies in Washington, D.C.
“In terms of escalating taxes, this is going to be an issue that’s getting a lot of attention. … It’s going to be a major issue with state legislatures,” said Katz.
Katz said a variety of proposals are pending in Congress, including simply forgiving the state debts because of the severity of the recession. But he said the federal government has its own financial issues.
“It’s unclear what will happen because there’s also intense focus on the (federal) deficit,” said Katz.
Not unprecedented
Illinois resorted to borrowing during a recession in the early 1980s, when at one point the unemployment trust fund was $2.3 billion in the red. The borrowing also resulted in a series of reforms in 2003 that set up the current system.
