There are many resounding negative effects of economic shutdown due to the COVID-19 pandemic. One very troubling after shock to the business community is the imminent risk of major increases in an employer’s unemployment insurance tax rate post-pandemic.
The Illinois Unemployment Trust Fund is funded primarily by employers through the unemployment payroll taxes they pay for each employee. An individual employer’s unemployment insurance rate is based on that business’ layoff history, years in operation and the state’s unemployment insurance trust fund balance. If an employer was forced to lay off employees due to the shutdown coupled with a low or even negative trust fund balance will wield a painful blow to employers in skyrocketing unemployment insurance rates, not to mention further tax burdens to all Illinois taxpayers.
The most recent Illinois Department of Employment Security Report (IDES) report indicates that unemployment rates have dropped significantly in the City of Naperville, from 6.3% in November 2020, to 2.8% in November 2021 with similar improvements in DuPage and Will Counties as a whole. However, months of skyrocketing unemployment filings statewide has resulted in a drain to the state’s unemployment trust fund. Also contributing to the depletion is unemployment dollars expended due to fraudulent unemployment claims, which some sources estimate may be at least $430 million. Think what a devastating impact a natural disaster would have on property insurance rates, then expand that devastation statewide. Illinois borrowed money from the federal government as a stop gap to the Illinois Unemployment Trust Fund drain and $4.5 billion is still owed along with mounting interest charges. If the debt isn’t addressed, it could lead to increased taxes on employers and decreased benefits for the unemployed worker and increase tax burden on Illinois taxpayers.
The NACC has joined more than 50 local chambers around the state in “Chambers All In for Economic Recovery” coalition to call on state legislators to utilize American Rescue Plan Act (ARPA) funding to help replenish the unemployment trust fund. Governor Pritzker’s 2022 budget allocates $2.8 billion of Illinois $8.1 billion in ARPA funds Allocating ARPA funds to bolster the unemployment insurance trust fund would go a long way to mitigate the impending financial impact on our area businesses due to escalating unemployment insurance rate and tax hikes.
As always, please reach out if you have questions or want to discuss policy issues impacting your business or industry.
Sources:
IL Department of Employment Security Report, December 23, 2021
The Center Square – January 19, 2022
