Illinois Governor J.B. Pritzker signed an amendment to Senate Bill 2803 on March 25 allocating $2.7 billion in federal American Rescue Plan Act (ARPA) funding to help pay down the state’s $4.5 billion Unemployment Insurance Trust Fund debt. The state will still have $1.8 billion of outstanding debt in the fund.
As of March 23, Illinois owed the U.S. Treasury about $41 million of interest on the trust fund’s debt, due September 30. ARPA funds cannot be used to pay interest to the federal government, so the state would have to pay the interest out of its General Revenue Fund.
States usually have to raise state unemployment insurance taxes on employers, reduce benefits paid to claimants, or tap into another source of cash (such as federal funds or funds from another state account) to pay down unemployment trust fund balances.
Unemployment insurance is a term that refers to a joint federal and state program that provides temporary monetary benefits to eligible laid-off workers who are actively seeking new employment. Qualifying individuals receive unemployment compensation as a percentage of their lost wages in the form of weekly cash benefits while they search for new employment.
The federal government oversees the general administration of state unemployment insurance programs. The states control the specific features of their unemployment insurance programs, such as eligibility requirements and length of benefits.