SPRINGFIELD – As the spring legislative session ends, negotiators representing organized labor today announced agreement on delaying temporary employer tax increases and worker benefit reductions, but an impasse in discussions to address a historic deficit in the state fund that provides unemployment insurance benefits to workers.
Representatives of five key labor organizations announced that negotiations among labor, business, legislators and Gov. Pritzker’s administration over solutions to eliminate what remains of the state’s Unemployment Insurance Trust Fund deficit of $4.5 billion had reached an impasse.
Negotiators announced support for stop-gap action delaying temporary triggers in state law that will increase costs for businesses and decrease benefits for workers. However, if no action had been taken by the end of the year, the so-called “speed bumps” in the unemployment insurance law would drive up costs in the system by $409 million in tax increases on employers, and $318 million in benefits for jobless workers.
“We just saw the Legislature and Governor provide $2.7 billion in federal pandemic relief funding to the unemployment insurance program,” said Pat Devaney, Secretary-Treasurer with the Illinois AFL-CIO. “But without an agreement on structural reform to protect workers, employers and taxpayers, Illinois’ unemployment fund will be bankrupt again in a couple of years.
All parties need to get back to the bargaining table and find a real solution that protects workers and taxpayers, gives businesses stability and certainty and finally gets honest about the revenue needed to support our unemployment system.”
This is the third time Illinois has faced a multi-billion-dollar hole in its unemployment trust fund in the past 18 years, but the $4.5 billion debt is the state’s largest ever – initiated by widespread unemployment from the pandemic economic shutdown, but cemented by a revenue structure that has seen little change since 1980.
Labor negotiators have urged all involved to focus on more than just providing relief to businesses through federal ARPA funding. Because the system is chronically underfunded, economic crisis events create large deficits – and too often, workers and taxpayers are expected to bear the burden of bailing out the system. The labor groups will urge negotiations focus on ending the historic underfunding of the UI system that results in huge debt challenges during economic slowdowns.
This is the letter:
April 8, 2022
Gov. Pritzker and Members of the 102nd Illinois General Assembly:
Although an agreement will temporarily delay the implementation of unemployment benefit reductions and employer tax increases, we regret to inform you the parties have reached an impasse in negotiations over resolving what remains of the $4.5 billion deficit in the state’s Unemployment Insurance Trust Fund.
Our labor negotiation team has been at the bargaining table in good faith for many months. We understand clearly the state’s track record in amassing large deficits in the UI trust fund during moments of economic crisis – this is the 3rd since 2004. Our goal going into these talks was the same as it was during negotiations in 2004, 2011 and 2015: Labor wants to end the cycle of instability once and for all.
From the very first discussions on resolving this record debt driven by the pandemic shutdowns, we have recognized the need for shared sacrifice and meaningful reform. Simply injecting federal recovery dollars and billions in borrowing to prop up a broken system is not a solution, yet every proposal we have presented is summarily dismissed by the business community.
Please remember, our state unemployment insurance system was created decades ago to prevent the economic insecurity of high unemployment from becoming a “menace.” In fact, the Legislature’s declaration of public policy to lead the UI statute is crystal clear:
It is the considered judgment of the General Assembly that in order to lessen the menace to the health, safety and morals of the people of Illinois, and to encourage stabilization of employment, compulsory unemployment insurance upon a statewide scale providing for the setting aside of reserves during periods of employment to be used to pay benefits during periods of unemployment, is necessary. (820 ILCA 405/100, Public Act 79-98).
Unfortunately, since 2004, Illinois has dealt with the painful effects of the unemployment insurance system’s outdated revenue structure. Instead of building cushions during stronger economic times, it ekes out thinner reserves than needed. When crisis hits, the fund runs out of resources too soon, and it has to borrow money and workers are asked to sacrifice more. It’s a never-ending cycle, and one that proves costly to all of us.
The devastating toll on both employers and workers from the pandemic was widespread and deep, and it’s why we all came to the table and used federal aid to help get through the most trying times. Today, the bill is due, but the employers refuse to recognize the steps needed for reform to ensure we never have to go through this painful process again.
If there is no legislative action before the end of this calendar year, “speed bumps” in the law will drive up costs in the system: $409 million in tax increases on employers, $318 million in benefit reductions for workers. Higher costs plus remaining debt, without reform? We cannot think of a worse outcome from these negotiations, and that is why we agreed to delay these impacts while we work through the larger issues.
Please send all parties back to the bargaining table in good faith with structural reform as the goal, not more temporary fixes. Illinois must fix its unemployment insurance system’s outdated revenue structure, once and for all.