Borrowing money always comes with associated costs, specifically interest payments.
When we’re late paying our credit cards, we pay interest. When we borrow to buy a car or a house, pay for school or consolidate debt, we pay interest. When it’s a state that borrows money it is the taxpayers who pay the interest.
To protect hardworking taxpayers, Illinois' government should pay its debts as expeditiously as possible. It is the responsible thing to do. Last week the Democrat supermajority in the House of Representatives took a different approach. Instead of using existing eligible funds to pay off a federal loan, Democrats chose to saddle Illinois taxpayers with interest payments that will increase every day until the debt is paid. By passing SB 2803, Democrats have also risked benefit cuts to the unemployed, and ensured a tax increase is coming for every job in Illinois. All so they can fund new “pork projects” in their own districts.
The COVID-19 pandemic wreaked havoc on everyone’s budgets – families, employers, and the state. Governor Pritzker's orders forced many small businesses to shut down, unemployment rates soared and our unemployment fund was strained. The federal government provided some relief; checks to families and loans or grants to businesses and states. One of the loans provided to states was through the federal Unemployment Insurance (UI) Trust Fund, which is paid for through payroll taxes imposed on all businesses.
Illinois at the time was already a state deeply in debt. With low credit after years of passing unbalanced budgets, borrowing money to get through the pandemic seemed impossible.
But then, a Unicorn...a once in a lifetime federal bailout was made available with very few strings attached. How often does a lender provide a free means to repay a loan? This year, the federal government did just that. It authorized states to use federal CARES and ARPA funds to repay the interest-bearing unemployment insurance loans.
There was only one caveat; a federal deadline of March 31, 2022, was imposed to take advantage of the payback opportunity. Paying off the state’s debt would save taxpayers the cost of interest and ensures the stability of the unemployment insurance fund going forward. Taking this action would be the right thing for struggling small businesses and workers who might once again find themselves unexpectedly unemployed. More importantly, it is the right thing to do for taxpayers.
But the Democrat supermajority in the Illinois House of Representatives went in a different direction.
They decided to only pay off a portion of the state’s debt and use the federal dollars to fund pet projects. Even with a projected $4.6 billion of unexpected revenue coming into the state budget, Democrats wanted more for their pork projects. Instead of reducing state debt, they chose to pass on millions in interest penalties to Illinois taxpayers.
We believe Governor Pritzker and Democrats should change course. There is still time to prioritize the payment of the unemployment insurance debt we owe to the federal government, avoid a tax on jobs, and eliminate pending interest penalties from the already heavy burden borne by Illinois taxpayers.