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* Capitol News Illinois in October…
The deficit in the state’s Unemployment Insurance Trust Fund remains over $4.3 billion and interest payments on the debt began accruing on Sept. 6.
Thus far, more than $6 million in interest has accrued on the money Illinois owes the federal government, according to the U.S. Treasury, and interest will continue to accrue at a rate of 2.27 percent. The state earmarked $10 million for interest payments this fiscal year.
* Comptroller Mendoza press release…
State financial officers are asking the federal government to reinstate the waiver on interest being charged for fund advances given to the states to cover COVID-19 unemployment insurance.
These advances were provided to the states interest free so that unemployment benefits could be made without disruption during the worst phase of the COVID-19 pandemic. The interest waiver on these advances expired Sept. 6, 2021.
“Taxpayers should not be on the hook for interest just because the pandemic is lasting longer than projected,” Illinois Comptroller Susana Mendoza said. “States are wrestling with how best to replenish their COVID-depleted unemployment funds and they should not have to do that with the meter running.”
Illinois’ interest tab is nearly $20 million as of today. That could reach more than $100 million if left unpaid for a year.
State officers, representing more than 75 million residents from New York, Colorado, Pennsylvania, Connecticut, New Jersey, Massachusetts and Minnesota joined Comptroller Mendoza in cosigning the attached letter to U.S. Treasury Secretary, Janet Yellen, seeking the administration’s support for reinstating the interest waiver.
“We believe the waiver deadline was originally determined under the assumption that the pandemic would likely be over and that the economy and state governments would be in recovery mode,” the signatories wrote. “However, it is quite plain to see that this public health crisis is not over, and the benefit provided by this interest waiver is still necessary.”
They emphasized that the pandemic is clearly not over and that states that are having to pay interest on more than $39 billion on federal advancements need more time to figure out how to address repayment of these advances.
“The cost of covering this federal initiative to extend unemployment benefits during the pandemic should not fall completely on the shoulders of businesses and labor,” said Illinois Comptroller Susana A. Mendoza, who convened her fellow financial officers from the most-affected states to seek the extension.
“Colorado has over $1 billion in outstanding advancements,” said Colorado Comptroller Robert Jaros. “Accrued interest is almost $4 million as of today and will grow to over $20 million if not paid within a year. The State supports reinstating the interest waiver for advancement loans for UI benefits. Colorado needs more time to address the repayment of the outstanding advancements.”
Illinois owes $4.5 billion in outstanding advancements. The advances are generating federal interest at a rate of 2.27%, amounting to more than $187.5 million as of Dec. 6, 2021. Illinois has accrued $19.6 million in interest since the waiver expired and after paying $6.3 million in September.
The letter is here.
posted by Rich Miller
Tuesday, Dec 14, 21 @ 9:55 am
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Smart move if they can pull it off.
Comment by RNUG Tuesday, Dec 14, 21 @ 10:09 am
Another budget pressure that’s coming this year. Even if they get the waiver they should look to reduce that loan amount as quick as possible.
Comment by Frank talks Tuesday, Dec 14, 21 @ 10:09 am
On May 17, the Treasury Department released guidance specifying that states could use ARPA money to restore their unemployment funds to pre-pandemic levels, and many states did just that. Illinois received over $8 billion in ARPA funds, and now we don’t have enough of that left to pay the $4.4 billion we owe. Furthermore, he hasn’t told us where the money is supposed to come from to do that.
Comment by Steve Reick Tuesday, Dec 14, 21 @ 10:20 am
Wonder how Colorado can sign the letter when their governor just declared the pandemic medical emergency
over.
Comment by Huh? Tuesday, Dec 14, 21 @ 10:21 am
===governor just declared===
He’s gonna eat those words.
Comment by Rich Miller Tuesday, Dec 14, 21 @ 10:28 am
“Taxpayers should not be on the hook for interest just because the pandemic is lasting longer than projected,
Who if not taxpayers is on the hook for funding the government?
Comment by Lucky Pierre Tuesday, Dec 14, 21 @ 10:32 am
LP arguing for higher state spending. Such a surprise.
Comment by Rich Miller Tuesday, Dec 14, 21 @ 10:35 am
Democrats believe there is never ending supply of free money that never has to be paid back.
All that Federal money has caused inflation to spike
Comment by Lucky Pierre Tuesday, Dec 14, 21 @ 10:42 am
It likely won’t happen because most states have already addressed their Trust Funds using ARPA dollars. Not Illinois despite requests from business and labor.
The only states still running deficits include CA, CO, CT, IL, MA, MN, NJ, NY, PA, and TX. The same states seeking a no interest waiver.
Some of the States that used ARPA dollars to eliminate debts include AZ, CT, HA, IN, IA, KA, KY, LA, ME, NV, NM, OH, UT, VA, and WA.
Pritzker either mistakenly (or intentionally) noted earlier that ARPA dollars could not be used and was corrected. The Administration clearly wants to use the dollars prospectively on feel good programs with press pops instead of paying old debt like many other states have done.
Comment by 4 percent Tuesday, Dec 14, 21 @ 10:52 am
“States are wrestling with how best to replenish their COVID-depleted unemployment funds”
Apparently, most states have already pinned their opponent. Illinois is sleeping in the locker room.
Comment by City Zen Tuesday, Dec 14, 21 @ 10:54 am
===All that Federal money has caused inflation to spike ===
You’re so hilarious. What does that have to do with forgiving interest on a loan?
Comment by Rich Miller Tuesday, Dec 14, 21 @ 11:59 am
@4percent: those “only states” that haven’t replenished their UI funds represent the lions share of American workers. That many smaller states did one thing doesn’t mean that most of the country can put this behind us.
Comment by Socially DIstant watcher Tuesday, Dec 14, 21 @ 1:36 pm
=== ===governor just declared===
He’s gonna eat those words.===
Got ahead of himself, even the walk back seems so parsed that as a political tool the statement is alienating both sides as the pandemic continues.
The accounting and interest forgiveness would be such savvy politics to the wonky, it could be one maneuver that makes sense to whichever side of the house you find your governing residing
Comment by Oswego Willy Tuesday, Dec 14, 21 @ 2:05 pm
== The Administration clearly wants to use the dollars prospectively on feel good programs with press pops instead of paying old debt like many other states have done. ==
Unfortunately, that describes a lot of politicians both in Illinois and elsewhere
Comment by RNUG Tuesday, Dec 14, 21 @ 2:27 pm
Most other states had budgets in better shape overall and much less UI debt, so it was easier to use ARPA to make UI systems whole. What we forget is that there’s an answer to UI trust fund holes - raise UI taxes. When unemployment is low business demands they be cut; when it’s high they refuse to raise them. Funny how that works.
Comment by Most other states... Tuesday, Dec 14, 21 @ 3:15 pm
@Most
There are two ways to balance: raise taxes or cut benefits, or a combination. This debt is more than double the record high after 2008-09. Even IDES has noted that you cannot raise taxes high enough to fill the hole.
When the balance is high, labor wants higher benefits. Traditionally, when there is a health balance, the split is 50/50 between enhanced benefits and tax reduction.
So, when the balance is low (or in debt), the split would take effect as well. Cuts to workers and higher taxes.
Using ARPA dollars, as most states have done, will mitigate some of these actions.
Comment by 4 percent Tuesday, Dec 14, 21 @ 4:21 pm