Governor Pat Quinn recently signed into law reforms to the Illinois unemployment insurance (UI) system that will replenish the state’s depleted UI trust fund while reducing taxes for employers that have avoided layoffs. Under Senate Bill (SB) 72, the nearly 46 percent of Illinois employers who have not laid off workers during the recession—nearly 143,000 businesses—will receive UI tax cuts averaging 16 percent. The legislation will “reward Illinois companies for sound business practices, protect those laid off through no fault of their own, and give our companies the confidence to grow,” Governor Quinn said.

SB 72 also allows Illinois to issue bonds to replenish the state’s unemployment trust fund rather than borrowing from the federal government, a measure expected to save nearly $82 million in interest in 2012 alone. The bonds will be funded by normal employer UI contributions.

In addition, the legislation introduces new tools to prevent and recover fraudulent unemployment benefit payments, which will help replenish the UI trust fund. For the first time, the state will be able to garnish federal tax returns of individuals who purposefully collect unearned UI benefits and establish personal liability for individuals who defraud the UI program of taxes owed.

Illinois ended 2011 with roughly $2.4 billion in outstanding loans from the federal government to cover state unemployment benefits. Without the legislation, in 2012 federal penalties would have resulted in increased UI taxes for companies throughout Illinois, regardless of whether they had laid off workers.

“This bill is a testament to what we can accomplish when we work together,” said State Senator Dave Koehler, who serves on the Senate Labor Committee. “Instead of approaching each other as adversaries, business owners and labor leaders worked together with legislators to find a solution that saved unemployment insurance and actually created a net benefit for employers.”

“Businesses need a degree of tax certainty to successfully grow in this economy,” said David Vite, president of the Illinois Retail Merchants Association. “This legislation will provide the tax relief to make that happen while making the trust fund solvent.”