Illinois has reached an agreement to close a hole in the unemployment fund

SPRINGFIELD — Gov. J. B. Pritzker unveiled a bipartisan deal on Tuesday to plug a nearly $1.4 billion hole in the state’s pandemic-depleted unemployment insurance trust fund, wiping out what was once $4.5 billion owed to the federal government.

Pritzker’s announcement came as state lawmakers gathered at the Capitol for their final session of the year, with negotiations still underway on what is expected to be a top agenda item — changes to controversial criminal justice measures that take effect Jan. 1 .

The unemployment fund debt deal, in addition to support from lawmakers on both sides of the aisle, has support from business interests and organized labor, but still needs legislative approval. Pritzker described the agreement as part of his administration’s ongoing effort to stabilize the state’s chronically shaky finances, a central theme of the campaign that led to his re-election earlier this month.

“Today we complete the mission to pay down that debt,” Pritzker said, flanked by Democratic and Republican lawmakers, as well as business and labor representatives in his state office. “Government is at its best when we work together to solve problems.”

The deal would use $1.8 billion in state funds to repay about $1.36 billion to the federal government and contribute $450 million to the unemployment trust fund as an interest-free loan from the state that will be repaid with business taxes over the next decade. As the loan is repaid, the money will be transferred to the state fund for a rainy day.

The proposal would complete an effort that began in the spring, when Pritzker signed legislation that used $2.7 billion in federal coronavirus relief funds to repay part of Washington’s unemployment insurance loan. Like other states, Illinois borrowed money in 2020 to continue receiving unemployment benefits during the height of the first wave of the pandemic.

A plan to eliminate the remaining deficit was deadlocked between labor and business at the end of the spring session. In September, the Pritzker administration said the Illinois Department of Employment Security would pay off another $450 million in federal loans with available funds because of low unemployment insurance claims.

Talks with business and labor groups to fill the remaining hole in the insurance fund have touched on the possibility of issuing bonds that would likely be repaid by raising corporate payroll taxes and reducing or cutting benefits.

Instead, the state is counting on higher-than-expected revenues in the current budget year to pay off the debt and bring confidence back into the red. Earlier this month, the governor’s office projected a nearly $3.7 billion increase in revenue for the budget year that ends June 30.

The governor’s office estimates the plan will save taxpayers $20 million in interest. Without a deal, businesses expect to pay more than $900 million in additional taxes over the next five years.

The measure also includes provisions that supporters say will stabilize the fund by increasing the portion of each worker’s wages from which employers pay unemployment taxes and increasing the trust fund’s target balance to prepare for future downturns.

“This is good news for business owners, workers and taxpayers,” said Pat Devaney, secretary-treasurer of the Illinois AFL-CIO, which represented unions in the negotiations.

Rob Carr, president and CEO of the Illinois Retail Merchants Association, said the deal would spare employers from a “crushing tax increase in the midst of other challenges” caused by the pandemic and an inflationary economy.

Unemployment insurance trust fund shortfalls are usually addressed through some combination of raising taxes for employers or cutting benefits for people receiving unemployment checks, but the historic nature of the pandemic calls for a different solution, said state Sen. Sue Rezin of Morris, who participated in the talks. in the Senate GOP.

“We understand that some may not like it, but given where we’ve been, in the unprecedented times since the pandemic, it’s a good bill,” Rezin said, noting that many other states have taken similar measures to strengthen their unemployment funds. .

At least part of the deal is expected to pass before lawmakers adjourn for a year on Thursday.

When Pritzker announced the unemployment insurance trust fund, lawmakers were debating possible changes to the SAFE-T Act today, also known as the SAFE-T Act, before key provisions of the law take effect on Jan. 1.

Written and passed last year by the Democratic-controlled Legislature, the SAFE-T Act aims to address inequities in the criminal justice system. But the law drew intense heat during the just-concluded election, when Republicans called Democrats soft on crime for supporting a measure that would have repealed cash bail since New Year’s Day, prompting assurances from Pritzker and others in his party that an explanation would be made.

This fall, about 60 state attorneys across Illinois, including some Democrats, joined a lawsuit against Pritzker and other top Democrats, arguing that passage of the SAFE-T Act violates the Illinois Constitution. A Kankakee County judge could rule on the lawsuit as early as next month.

On Tuesday, Pritzker said it was important that any changes to the law make it clear that it does not mean that criminal defendants on bail will automatically be released on Jan. 1. From that date on, judges must weigh several factors when deciding whether to detain a defendant for being a flight risk or a danger to the community.

“It is critical that we clear up the misunderstandings and misinformation that exists about the SAFE-T Act. Changes to the SAFE-T Act should certainly include clarifying the purpose of cashless bail, making sure that people in Illinois counties are not led to believe that they have to open the jail doors. January 1,” Pritzker told reporters. “The legislation is not like that.”

Pritzker shied away from offering a preview of what’s to come in the next few days.

“I’m going to let the negotiators do the work here and make their presentation,” he said. “We also have our people. I don’t want to mess with it. But I think it will be a good bill that will be introduced.”

dpetrella@chicagotribune.com

jgorner@chicagotribune.com