Unemployment Insurance Fund as Much as $8 billion in Hole
The state’s unemployment insurance program is supposed to be there if you need it. It’s not something many of us think about until we have to file a claim for the first time or anytime thereafter. But some business leaders fear the fund used to pay out unemployment claims is billions of dollars underwater.
Illinois Retail Merchants Association President & CEO Rob Karr says employers pay into the Unemployment Insurance Trust Fund and unemployment payments to those out of work are made from that fund. But, when the state’s unemployment rate went from 3.7% to 16.5% seemingly overnight at the beginning of the pandemic, Karr says the fund couldn’t keep up with the demand.
“Normally, you have some relatively gradual decline into a recession. This was a cliff,” Karr said. “The fund could not adjust that quickly.”
Karr says prior to the pandemic, the Unemployment Insurance Trust Fund was more than $1 billion in the black, but now faces a deficit as high as $8 billion.
Karr says there are cases of fraud that play a role in the shortfall, but, more than anything, the fund just couldn’t handle the demand.
“The system was overwhelmed,” he said. “Part of that includes fraud. And, to this day, I don’t know that anyone has a good handle on the true extent of the fraud.”
He says some estimates show fraud nationwide as high as $200 billion
The new budget includes $100 million for the UI Trust Fund, but Karr says that won’t help tackle the problem. The House is expected to pass a bill Wednesday to provide unemployment funding for non-education employees in schools like janitors and cooks. The bill would also forgive payments made to people who didn’t qualify as long as it was no fault of their own. Those two additional costs are expected to eat up the funding from the legislature.
Karr says employers are asking the General Assembly to use more of the American Rescue Plan dollars to strengthen the UI Trust Fund, but much of the ARP funding was not disbursed in the new budget. He says the Pritzker administration is attempting to get additional funding to shore up the fund, but hasn’t made significant progress yet.
Karr says without an influx of money, the state faces the choice of raising taxes on employers, cutting benefits to the unemployed, or some combination of the two.
“{Additional taxes] would not be welcome,” said Karr. “If both parties were committed to sharing in the solution, it could be done.”
Neither IDES Director Kristin Richards or Deputy Governor Dan Hynes, who oversees IDES, responded to our requests for comment.