Illinois State Jobless Fund Borrows to Pay Benefits

With unemployment still rising, Illinois has had to borrow federal money to meet its obligations for jobless benefits.

The state has drawn about $9 million from a federal credit line to help replenish its unemployment insurance fund and pay out close to $100 million in unemployment claims. The fund had dwindled to about $81.8 million as of July 5 from $1.45 billion at the start of 2009.

“There was no interruption of benefits. The borrowing is a result of the national economic challenge,” says a spokesman for the State of Illinois Department of Employment Security.

Rising unemployment and employer contributions that haven’t kept pace with demand have zapped the fund. The shortfall, according to the spokesman, has nothing to do with the state’s struggles to plug an $11.6 billion gap.

It’s not the first time the state has had to borrow to cover jobless benefits.

In 2003, it borrowed more than $700 million to shore up the fund. Six years ago the state unemployment rate peaked at 6.9 percent. Illinois’ rate hit 10.3 percent in June.

The state has borrowed just $9 million this time because it expects to receive $200 million in federal funds, allowing it to extend unemployment benefits by seven weeks to a total of 79 weeks, a move mandated by a bill Illinois Gov. Pat Quinn signed into law June 30, the Department of Employment Security spokesman said.

Illinois has access to about $900 million in an interest-free loan from the federal government through the stimulus plan.

Unemployment is expected to rise further, putting more pressure on the state fund. Moody’s Economy.com predicts the state jobless rate will peak at or just above 11.5 percent during the first half of 2010.

In the week ended July 5, the Department of Employment Security paid $130.4 million in unemployment benefits. Of that, the state’s portion totaled $74.6 million while the rest was covered under federally funded new and existing programs, the spokesman said.

The number of state residents filing new claims for unemployment benefits rose last week to 27,428, up 4,939. During the same week last year, new claims totaled about 13,708.

Those collecting unemployment benefits rose to 305,543, up 4,424, in the week ended July 11. The same period last year, 137,733 people were collecting benefits.

Filed by Monée Fields-White of Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.