Tough Challenges Remain to Reach Unemployment Fund Agreement
A temporary closed sign shows at the Neiman Marcus department store in Northbrook., Friday, May 8, 2020. (Photo credit: Associated Press)
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With a week left in the legislative session, it appears there is still a long way for business and labor to go before they reach an agreement on a fix to the hole in the state’s unemployment fund.
Democrats in the legislature will admit that when they passed a plan spending $2.7 billion in federal bailout dollars toward the around $4.5 billion hole in the Unemployment Insurance Trust Fund, it would be up to business and labor to figure out the rest.
The Unemployment Trust Fund is the pot of money used to pay unemployment claims and is paid for by business and payroll taxes. The fund went heavily into the red during the pandemic, especially with an unknown amount of money being paid out in fraudulent claims.
The legislature has tasked business and labor to reach an “agreed” bill to settle the remaining balance. When the legislature knows it has a controversial topic that could make a lot of people on either side angry, often they will defer to both sides of an issue to hammer out an agreement that is acceptable to all sides, though nobody is ever truly happy with the final solution. That typically allows a more bipartisan vote and keeps the heat off of incumbents when it comes re-election time.
Business interests and labor are all at the table. Business wants as few new taxes on employers as possible, though they admit it was unavoidable in the current situation. Labor interests want as few benefit cuts for unemployed workers as possible. A combination of the two (among with a plethora of complicated, less significant options) are likely part of the solution.
It also seems as if Republicans we’ve spoken to will be unwilling to put votes on any bill that increases taxes on employers. Some Democrats may be reticent to support any sort of benefit cuts because they feel the $2.7 billion of federal dollars was a de facto tax credit for business. So even an agreement has a hard time getting legislative approval.
Both sides appear to be talking, but none of the sources we spoke to Thursday were particularly positive about the status of the negotiations. Though, to be fair, nobody said it’s a lost cause, either. But it doesn’t sound like they are not close to an agreement.
Illinois Retail Merchants Association President and CEO Rob Karr, one of the point people on the business side of discussions, told me last night that he didn’t want to discuss negotiations while they are ongoing. An AFL-CIO representative did not comment on negotiations.
If the two sides don’t reach an agreement in the next week, that’s when things could get really tricky. A loan payment to the federal government is due in September, and $80 million in interest would be required to come from general state spending. Without action by November, higher business taxes, like those paid through the Federal Unemployment Tax Act (FUTA), could kick in around the first of the year.