Members of Illinois’ congressional delegation are pressing for legislation that would waive interest on federal unemployment trust fund loans for an additional year.
States took out the loans in the early days of the COVID-19 pandemic and lockdowns as a wave of job losses overwhelmed unemployment insurance programs in 2020.
Sens. Dick Durbin and Tammy Duckworth joined Reps. Danny K. Davis and Brad Schneider, all Illinois Democrats, to introduce the
Interest began accruing after Sept. 6, 2021, on tens of billions of dollars in UI loans. The legislation would extend the interest waiver through Sept. 30 and would retroactively forgive accrued interest in an effort give states more time to come up with a repayment plan.
“To ease the financial burden on Illinois and other states, we must extend the waiver of interest payments on federal unemployment loans,” Durbin said in a statement. “By extending the waiver, we can give our communities time to recover from the economic pain of the pandemic.”
A total of $40 billion spread among nine states and the Virgin Islands remained outstanding as of Monday, according to the U.S. Department of Labor. California owes the most at $19.7 billion followed by New York with $9.4 billion and Illinois with $4.5 billion. Colorado, Connecticut, Massachusetts, Minnesota, New Jersey, and Pennsylvania are the other states.
“Prematurely ending that waiver is piling more costs on taxpayers' backs and diverting precious state resources from the critical mission of job creation and economic growth,” Illinois Comptroller Susana Mendoza said.
Mendoza, who will travel to the Capitol next week to press for passage of the legislation,
Fiscal leaders from seven other states joined Mendoza in penning a December letter to Yellen making the request. States are charged a 2.27% interest rate. The interest tab totaled $197.3 million as of Dec. 10.
The federal government provided advances to the states to avert shortfalls in Title XII Unemployment Insurance Trust Fund accounts to ensure that unemployment benefits continued without interruption as jobless claims surged to record levels during the early days of the COVID-19 pandemic.
It's a standard operating procedure that was frequently used during the 2008 recession. Several states
States paid out $175 billion of benefits from the start of the pandemic through Sept. 11. That’s in addition to the $661 billion of federal government extended and expanded benefits between January 2020 and September 2021, according to a
Illinois had accrued $19.6 million of interest at the time of the letter and the tab could reach $100 million if the loan goes unpaid for a full year, according to Mendoza’s office who manages state bill payments.
States are permitted to use a portion of the $195 billion of relief distributed under the American Rescue Plan Act relief to pay down their unemployment trust debts and some had tapped into that pool of funds. Minnesota has proposed joining that group and
The lack of a fix in Illinois could trigger benefit cuts for the unemployed and tax rate increases or surcharges for employers. Fixes used to manage the last big unemployment trust hole in Illinois included a
The legislation was also cosponsored by Sens. Michael Bennet, D-Colo., Richard Blumenthal, D-Conn., Kirsten Gillibrand, D-N.Y., and Tina Smith, D-Minn.
