A press release from the Illinois State Chamber of Commerce:
Statement from Illinois Chamber President & CEO Doug Whitley
CHICAGO – “Illinois businesses will save more than $400 million in unemployment insurance taxes thanks to the actions of state officials, who today refinanced a federal loan used to pay unemployment insurance claims,” said Doug Whitley, President & CEO of the Illinois Chamber.
“Negotiating last year’s legislation was a laborious task, but it achieved long-term tax stability and savings for employers in our state unemployment insurance system.”
The $1.5 billion bond sale at a 1.46 percent interest rate to pay off the unemployment insurance debt owed to the federal government will erase a looming $200 million federal tax obligation on businesses and save $30 million in interest costs for this year.
An additional $200 million in savings over the next seven years will occur through business rate and benefit payment reforms that passed in 2011 with overwhelming bi-partisan support and endorsement from leading business and labor organizations.“The members of our business community, especially our small-business owners, are leading this economic recovery. Today’s bond sale brings closure to many months of negotiations and long-range planning to help Illinois employers rebound from the Great Recession,” said Whitley.
“Satisfying the state’s debt obligation to the federal government while demonstrating the ability of Illinois’ elected leaders to constructively address another major business issue indicates our state is taking positive actions to restore confidence in government decision making.
“Continuing to find thoughtful solutions to public policy issues is essential to demonstrate Illinois is on the path toward economic growth and prosperity.”
Illinois was among more than 30 states to borrow from the federal government to pay unemployment insurance.
Unemployment insurance benefits are funded through business taxes and are paid to workers who are out of work through no fault of their own.
The unemployment insurance program is designed to borrow during times of economic crisis and grow fund balances during economic prosperity. Because businesses provide a dedicated revenue stream for this temporary assistance, there was no impact on the state’s budget.
The Illinois Department of Employment Security (IDES) issued the bonds, which earned an AA+ rating from Fitch Ratings and AA from Standard and Poor’s Financial Services LLC. The ratings meet or exceed those earned in 2003 and 2004, the last time the IDES issued bonds to repay federal loans that funded unemployment insurance benefits.
The 1.46 percentage rate is significantly lower than the 2.94 percent the IDES had been paying to the federal government.
Refinancing the loan will save an employer $42 for each worker next year.
The 2011 agreement provides significant tax reductions to the nearly 46 percent of Illinois employers – more than 143,000 – that did not lay off workers during the recession.
The 2011 law championed by the Illinois Chamber also contained reforms to fight waste by introducing new tools to prevent and recover fraudulent payments, which will help restore Trust Fund solvency.
For example, the state collected $40 million through garnishing federal tax returns of individuals who knowingly defrauded the program and refused to consider a repayment plan.