CAPITOL RECAP: State announces further unemployment debt repayment

CAPITOL RECAP: State announces further unemployment debt repayment

SPRINGFIELD – Gov. JB Pritzker announced a plan Tuesday, Sept. 27, to reduce a $1.8 billion Unemployment Insurance Trust Fund deficit by $450 million through an infusion of unemployment-related revenues.

The trust fund is the pool of money paid into by employers to provide a social safety net for unemployed individuals. The employer’s insurance premiums are essentially collected via payroll tax.

The “deficit” figure represents money Illinois must repay to the federal government. It was borrowed under Title XII of the Social Security Act so the state could continue to pay unemployment claims amid the COVID-19 pandemic and is accruing interest at a rate of 1.59 percent annually.

While that balance exceeded $4.5 billion as the unemployment rate reached 16 percent at the height of the pandemic, lawmakers in March dedicated $2.7 billion in federal American Rescue Plan Act funding to pay down the deficit to the balance of roughly $1.8 billion.

The $450 million announced Tuesday will bring the deficit below $1.4 billion.

Pritzker said Tuesday at a news conference in Chicago that the move was made possible by low unemployment rates that drove up UI trust fund balance. Last week, the state announced unemployment rates were down from one year ago in all 14 metro areas, ranging from 3.8 percent in the Moline and Rock Island area to 6.8 percent around Decatur.

Pritzker said he expects the move to save the state about $10 million in interest costs.

Pritzker said business and labor interests continue to negotiate a solution for reducing the deficit further. But they’re approaching a Nov. 10 deadline after which federal tax hikes would take effect if the balance isn’t erased by that date. Lawmakers are not scheduled to return to the Capitol until Nov. 15.

The process is spelled out in the Federal Unemployment Tax Act, or FUTA.

Federal law requires an employer to pay a FUTA tax on an employee’s first $7,000 of wages at a rate of 6 percent. But it also offers businesses a 5.4 percent tax credit, putting the effective rate at 0.6 percent.

If a state has a negative balance in the trust fund on Jan. 1 for two consecutive years – as Illinois has had – it has until Nov. 10 of the second year to retire that deficit, or the federal government will start clawing back 0.3 percent of the FUTA tax credit from employers each year until the deficit is gone.

A spokesperson for the Illinois Department of Employment Security said in March that the 0.3 percent tax credit reduction would apply to businesses for the 2022 tax year if a balance remains in place on Nov. 10.

As of Tuesday, Illinois was one of five states and the U.S. Virgin Islands that had an outstanding trust fund balance, according to the U.S. Treasury. Other states included California at $17.8 billion, New York at $7.9 billion, Connecticut at $97 million, Colorado at $33 million and the Virgin Islands at $96 million.

* * *

JONES ARRAIGNED: State Sen. Emil Jones III has been charged in federal court with three criminal counts tied to his dealings with a red light camera company.

On Friday, Sept. 23, he pleaded not guilty to the charge in an arraignment, and he waived his right to be indicted by a grand jury.

Jones, a Chicago Democrat, is the son of former Senate President Emil Jones Jr. The younger Jones has served in the Senate since 2009 following his father’s retirement. He is deputy majority leader and chairs the Committee on Licensed Activities.

He also is on the ballot for reelection in November and does not have an opponent.

The charges relate to legislation Jones introduced in 2019 calling for a statewide study to evaluate red light cameras, formally known as “automated traffic law enforcement systems.”

According to the charging document, Jones later agreed to limit the scope of any such study to cameras operated only inside the city in exchange for payments to himself and an unnamed associate from someone identified only as “Individual A,” who had an ownership interest in a red light camera company that did business with municipalities outside Chicago.

Prosecutors allege that from April through September 2019, Jones solicited and agreed to accept a $5,000 payment from Individual A, as well as an unspecified payment and a job to the associate identified as “Individual B.”

Senate records indicate the bill passed out of the Transportation Committee on Nov. 12, 2019, but was never voted on by the full Senate.

Jones is also charged with arranging the deal through interstate commerce by using a Google email account. And he is charged with lying to federal agents during their investigation of the matter.

Jones is the second Illinois state senator to face charges related to a red light camera company. In 2020, then-Sen. Martin Sandoval, also a Chicago Democrat, was indicted on similar corruption charges related to a red light camera company identified as SafeSpeed LLC following a raid on his Statehouse office. He later resigned from office and pleaded guilty to bribery and tax evasion.

Sandoval agreed to cooperate with a continuing investigation in exchange for delayed sentencing. He died in December 2020 of complications from COVID-19 and never served time in prison.

Senate President Don Harmon, D-Oak Park, issued a statement Tuesday calling for Jones to step down from his leadership position and committee chairmanship, but stopping short of asking for his resignation from office. Jones stepped down from leadership later in the week.

PRESSURE FROM GOV: Gov. JB Pritzker called on two Democratic state senators Thursday, Sept. 22, to resign their seats amid allegations of misconduct.

That included Jones and Sen. Michael Hastings, D-Frankfort, who faces accusations of domestic violence against his estranged wife, according a report by public radio station WBEZ in Chicago.

Both have given up their roles in the Senate Democrats’ leadership team but remain in the Senate.

“Senator Jones is accused of accepting bribes. And Senator Hastings is accused of abusing women. They should answer the charges and have their day in court,” Pritzker said in a statement Thursday. “But in the best interests of their constituents, these men must resign from their offices. Resigning only their leadership roles falls short of what the public should expect. I want to send a clear message to the people of Illinois: Corruption and abuse have no place here.”

So far, however, Senate President Don Harmon, D-Oak Park, has not gone that far.

“The gravity of the accusations required immediate action and consequences, which is why the Senate president demanded and received resignations from their leadership posts,” his spokesman, John Patterson, said in an email statement. “Now it is up to these individuals and their constituents to determine their futures.”

The governor’s statement came just a little more than six weeks before the Nov. 8 general election in which both senators are on the ballot.

Hastings faces a challenge from Republican police officer Patrick Sheehan in the 19th District in the city’s south suburbs. Once considered a rising star in the Democratic Party, he is an attorney and Army veteran and was awarded the Bronze Star for his service in Iraq.

Hastings’ legal troubles began more than two years ago when he was sued for racial and gender discrimination by his former chief of staff. The state hired a private attorney to defend him and eventually agreed to pay $100,000 to settle the case.

But according to WBEZ, he now faces accusations of domestic abuse from his estranged wife.

“The allegations made therein are baseless and without merit,” Hastings said in a statement Thursday through his spokesman. “I look forward to continuing to serve the best interests of the hard-working men and women of the south suburbs.”

His Republican rival, however, joined Pritzker in calling for Hastings’ resignation.

* * *

BACK PAY LAWSUIT: The Illinois Supreme Court on Thursday, Sept. 22, rejected a lawsuit filed by two former state legislators who sued for back pay they believed they were due for raises that they voted against while in office.

Former Sen. Michael Noland, D-Elgin, and former Sen. James Clayborne, D-Belleville, argued that the pay reduction measures they voted for violated the legislative salary clause of the Illinois Constitution, which says, “changes in the salary of a member shall not take effect during the term for which he has been elected.”

But in a 6-0 decision, the court declined to rule on the constitutionality aspect, saying the former lawmakers undercut their own case by voting in favor of the measures, touting them to the public and waiting too long to file their claims.

Illinois is currently governed by the Compensation Review Act. In 1990, a Compensation Review Board that has since been abolished recommended that legislative salaries be subject to annual cost of living adjustments, or COLAs. The General Assembly approved that recommendation and it remained in effect when the board was abolished.

In 2009, in the wake of a severe recession, lawmakers passed a bill canceling those COLAs for the upcoming fiscal year, and they repeated that policy each year until 2019.

The lawsuit sought to order Illinois Comptroller Susana Mendoza to pay Clayborne $104,412.93 and Noland $71,507.43.

In July 2019, Cook County Judge Franklin Valderrama ruled in their favor, saying the salary freezes were unconstitutional, and a subsequent judge, Allen P. Walker, issued an order in April 2021 for Mendoza to make the payments. But Mendoza appealed directly to the Supreme Court.

During oral arguments, Attorney General Kwame Raoul’s office, representing Mendoza, did not challenge the finding that the legislative acts were unconstitutional, but argued that the former senators had effectively waived their right to any relief by voting in favor of the pay reduction bills.

It also argued that the former lawmakers waited an unreasonable length of time before filing their claims and that their claims should be barred by the statute of limitations, which is generally five years.

In its ruling Thursday, the Supreme Court agreed with those arguments and did not rule on the constitutionality argument.

* * *

TREASURER’S RACE: In Illinois, the role of state treasurer is that of chief investment officer.

Treasurer Michael Frerichs has held that position for two full terms, winning by less than 10,000 votes in 2014 before cruising to an 18 percentage-point victory in 2018.

He boasts that Illinois has topped $1.2 billion in interest gains on its investments since he took office, making him just the second treasurer since Republican Judy Baar Topinka, who held that post from 1995 through 2007, to reach that threshold.

“We’ve raised more than a billion dollars for the state of Illinois,” he said in a podcast interview with Capitol News Illinois. “A billion dollars that didn’t have to be raised in taxes or a billion dollars in cuts that didn’t have to be made to things like our schools, our roads and bridges.”

He said the treasurer’s office invests about $26 billion in state funds, about $15 billion in pooled municipal assets and administers a college savings program through which Illinoisans have saved almost $17 billion, among other tasks.

His opponent is state Rep. Tom Demmer, a Republican from Dixon who has served in the General Assembly since 2013 and is currently House Deputy Minority Leader. He’s the House Republicans’ point person on budget issues.

Demmer said his focus is on adding a Republican check on Democratic power among the state’s constitutional officers – those include governor, comptroller, attorney general, secretary of state and treasurer – all of which are currently held by Democrats, although all will be up for vote in November.

“When you have one party in control of really every aspect of government, sometimes folks in the office, they don’t have an incentive to speak up,” Demmer said in an interview with Capitol News Illinois. “They don’t want to rock the boat. They don’t want to try to hold somebody else accountable, because they’re in the same party, and they don’t want to ruffle any feathers. That’s not how our government is set up to work.”

Each candidate was interviewed for the Capitol News Illinois’ Capitol Cast podcast to share their plans for the office. The full article and podcast interviews can be found here.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government that is distributed to more than 400 newspapers statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.

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