Starting next year, Illinois businesses will see a tax increase and the recently unemployed will lose a week of jobless benefits, according to a compromise bill passed earlier this month in the Illinois Legislature.
The deal is part of a longer-term plan to help contribute to Illinois’ depleted unemployment trust fund, which owes $3 billion to the U.S. Treasury, according to a story published Monday in the Rockford Register Star.
Illinois Department of Employment Security spokesman Greg Rivara said the tax increase and benefit cut are expected to generate about $100 million for the unemployment fund next year, or about 3 percent of its debt.
Illinois is among more than 30 states that have borrowed money from the federal government to keep jobless benefits going and the state isn’t alone in reducing unemployment benefits to help funding. Michigan recently did something similar and other states are considering it.
“You’re going to see different states employ different money management tools that best suit their specific condition,” Rivara said.
Illinois has borrowed more than $40 billion so far to pay for the state portion of jobless benefits. The money doesn’t affect the jobless benefit extensions, which the federal government pays for.
Most state debts get charged interest starting Jan. 1. Since that time, Illinois has accumulated about $30 million in charges. If the state has a balance as of Jan. 1 next year, businesses might lose a federal tax credit on unemployment insurance.
Rivara said the new law will divert $90 million in unemployment tax receipts to pay interest on the loan. If federal officials extend the interest payment deadline, the money goes back to the trust fund.