Illinois Government Consultants Incorporated

Starting next year, Illinois businesses will see a tax increase and the recently unemployed will lose a week of unemployment benefits.

That’s because of a compromise bill passed this month in the Illinois Legislature.

The Rockford Register Star reports the deal is part of a longer-term plan to help contribute to Illinois’ depleted unemployment trust fund, which is $3 billion in debt to the U.S. Treasury.

Illinois Department of Employment Security spokesman Greg Rivara says the tax increase and benefit cut are expected to generate about $100 million for the unemployment fund next year, or about 3 percent of its current debt.

Illinois is among more than 30 states that have borrowed money from federal officials to keep jobless benefits going.

Illinois has borrowed more than $40 billion so far.
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Source: The State Journal Register - The Oldest Newspaper in Illinois

The number of people requesting unemployment benefits last week plunged to a nearly three-year low, bolstering hopes that companies will expand hiring this year.

The government said Thursday that applications for unemployment benefits fell by 20,000 to a seasonally adjusted 368,000. It was the third decline in the four weeks. Applications are now at their lowest level since late May 2008.

The four-week average for applications, a less volatile figure, fell last week to 388,500. That was the lowest level since July 2008, the last time the four-week average was below 400,000.

Economists say applications that remain consistently below 375,000 tend to signal declines in the unemployment rate. Applications for benefits peaked during the recession at 651,000.

The downward trend suggests that companies are easing the pace of layoffs now that the economy is gaining momentum. During the recession, companies slashed work forces, cut or froze workers’ pay and took other aggressive steps to reduce costs.

Companies are expected to increase hiring in the month ahead.

Stronger job creation is needed to steadily reduce unemployment. The economy needs to produce at least 200,000 a month on a consistent basis for that to happen.

Thursday’s report also showed the number of people receiving unemployment benefits dropped to 3.77 million, the lowest level since mid-October 2008.

That does not include millions of people enrolled in emergency unemployment benefit programs financed by the federal government. Another 4.5 million unemployed workers received benefits under the extended programs during the week ending Feb. 12, the latest data available. Altogether, 9.2 million people were on the benefit rolls that week.

In a second economic report on Thursday, the Labor Department said that productivity grew in the final quarter of 2010 at the fastest pace in nine months, even as economists expect a significant slowdown in growth in 2011.

Productivity grew at an annual rate of 2.6 percent in the fourth quarter while labor costs fell at an annual rate of 0.6 percent. Both figures were unchanged from a preliminary report a month ago.

For the year, productivity grew 3.9 percent, the biggest increase in eight years. However, economists believe productivity may grow at just half that rate in 2011 as companies reach the limit on the amount of output they can squeeze out of their workers and start hiring more employees.

A survey of top forecasters from the National Association for Business Economics this week predicted that productivity would advance 2.1 percent this year and 1.9 percent in 2012. While those gains would be in line with the growth trend over the last three decades, it would represent a significant slowdown after a surge over the last two years.

The 3.9 percent jump in productivity in 2010 followed a 3.7 percent rise in 2009. Both figures were the highest since productivity rose 4.6 percent in 2002, the largest increase in a half century.

Normally, a slowdown in productivity would be considered bad for the economy. But the two-year surge came at the expense of many workers. Companies shed 8 million jobs during the recession and the economy now needs job growth now, even at the expense of worker productivity, economists say.

The 2.6 percent rise in productivity in the fourth quarter was the best quarterly showing since an increase of 4.6 percent in the first three months of 2010.

The 0.6 percent drop in unit labor costs was the first quarterly decline since labor costs fell at a 4.6 percent rate in the first quarter of 2010. For the year, unit labor costs declined 1.5 percent after having fallen 1.6 percent in 2009.
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Source: The New York Times

The two-day delay until Friday that Erskine Bowles and Alan Simpson obtained before their debt-management commission decides on their tough-medicine recommendations may not be enough to produce the votes needed to send those proposals on to Congress.

Illinois has borrowed more than $2.2 billion from the federal government since July 2009 to pay unemployment benefits.

The good news is the state has not had to borrow since April, and the loan is interest-free for now.

“We really do access it as needed. It’s a day-to-day decision, five days a week,” Illinois Department of Employment Security spokesman Greg Rivara said Thursday.

Illinois has plenty of borrowing company. According to the National Conference of State Legislatures, 31 states and the Virgin Islands had borrowed $38.7 billion to pay jobless claims as of this week.

Several states exceeded Illinois borrowing, topped by California at nearly $7.5 billion.

Unemployment trust funds are paid for through withholding taxes on employers, but Rivara said there have been minimal rate changes up to now in Illinois because rates are based on a three-year payment history.

The system is designed to ease rates during a down economy, when claims are high, and for rates to rise in good times to rebuild the fund, he said. Rates for 2010 are lower than those in 2007, while the taxable wage-base is higher.

Interest free, for now

The federal government suspended interest on loans to states for jobless benefits as part of the national stimulus legislation, but that exemption is scheduled to expire in January barring a congressional extension.

Several states, including most recently Pennsylvania, already are struggling with ways to build unemployment trust funds. But the basic options — raise rates on employers or cut benefits in an already-struggling economy — are a tough political sell, said Marc Katz, congressional and public affairs director for the National Association of Workforce Agencies in Washington, D.C.

“In terms of escalating taxes, this is going to be an issue that’s getting a lot of attention. … It’s going to be a major issue with state legislatures,” said Katz.

Katz said a variety of proposals are pending in Congress, including simply forgiving the state debts because of the severity of the recession. But he said the federal government has its own financial issues.

“It’s unclear what will happen because there’s also intense focus on the (federal) deficit,” said Katz.

Not unprecedented

Illinois resorted to borrowing during a recession in the early 1980s, when at one point the unemployment trust fund was $2.3 billion in the red. The borrowing also resulted in a series of reforms in 2003 that set up the current system.

The same trend occurred in 2009, said Rivara.

“We were in positive territory when 2009 started, and we were in negative territory when 2009 ended,” he said.

The balance has since rebounded to about $481 million, though Rivara said that is primarily because employers pay the bulk of withholding taxes in spring and summer. The state could be forced to borrow again, he said.

Illinois has not yet begun to repay the federal loan, and Rivara said the state could pay as much as 4 percent interest on the balance if the interest exemption expires in January. He said states also could be penalized in other ways, including federal incentives for business, if the money is owed for more than two years.
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Source: The State Journal Register - The Oldest Newspaper in Illinois

Senate Democrats are poised to break a partisan stalemate on Tuesday over extending unemployment benefits for millions of Americans who have been jobless for six months or more, but the fight seems certain to continue playing out as a defining issue in the midterm elections.

One day before a crucial procedural vote to provide added unemployment assistance through November, President Obama appeared in the Rose Garden on Monday with three out-of-work Americans to hammer Republicans for blocking the extension until now by insisting, over Democratic objections, that the $34 billion costs of the benefits not be added to the deficit.

“The same people who didn’t have any problem spending hundreds of billions of dollars on tax breaks for the wealthiest Americans are now saying we shouldn’t offer relief to middle-class Americans,” Mr. Obama said.

Democrats have been one vote short of pushing the measure through the Senate. But on Tuesday, a new Democratic senator from West Virginia will be sworn in to succeed Robert C. Byrd, who died last month, putting Democrats in position to overcome the Republican blocking tactic and bring the bill to a final vote.

As a political matter, the issue has appeal to both parties, especially in an election year in which each party needs first to motivate its own base.

For Republicans, it provides a concrete vehicle for pushing the argument that the government’s response to the recession has been wasteful and ineffective, that the growing national debt requires deep spending cuts and that Mr. Obama is guilty of ideological overreach.

For Democrats, it is an opportunity to accuse Republicans of being obstructionist and out of touch with the pain caused by an economic downturn that began on the Republicans’ watch.

Mr. Obama’s tough attack on Monday signaled the White House’s confidence that it has the upper hand, legislatively and politically. Recent public opinion polls show that a majority of Americans favor giving the long-term unemployed more financial help even if it adds to the deficit.

“To govern is to choose, and this is a clear choice: You either support extending benefits for people who are out of work or you don’t,” said Rahm Emanuel, the White House chief of staff. “There are obvious political ramifications to that difference.”

With many voters expressing growing alarm at the mounting national debt, Republicans say that standing against an unemployment extension that would add to the deficit could energize their voters and help them regain some of the reputation for fiscal responsibility they have lost in recent years. They also accused the White House of misleading the public about the Republican position on added jobless pay.

“The president knows that Republicans support extending unemployment insurance, and doing it in a fiscally responsible way by cutting spending elsewhere in the $3 trillion federal budget,” Representative John A. Boehner of Ohio, the House Republican leader, said in a statement Monday. “At a time of record debt and deficits made worse by Washington Democrats’ massive spending spree, that’s the right thing to do and the right way to do it.”

The additional money for those who have exhausted their standard 26 weeks of jobless pay has been tied up since the beginning of June but had become a growing point of contention since February when Senator Jim Bunning, Republican of Kentucky, initiated a one-man filibuster against a temporary extension of the safety-net spending.

While Republicans eventually relented and allowed an additional month of unemployment compensation, the party began to coalesce around the position that further extensions should be paid for with offsetting cuts in other spending, leading to the current stalemate.

Most Democrats contend that deficit spending is acceptable — even, in economic terms, necessary — to help not only the jobless but also the economy as a whole. Their argument is that unemployed workers will spend all or nearly all of their benefits on goods and services that help support other jobs.

“At what point do we pivot and start being concerned about our children and our grandchildren?” Senator Mitch McConnell of Kentucky, the Republican leader, said Sunday on CNN. “There is no way in the world on a trillion-dollar budget this year we can’t find the money to pay for an extension of unemployment insurance, something we’re in favor of.”

Besides the support of Carte Goodwin, the West Virginian to be sworn in Tuesday to succeed Mr. Byrd, Democrats are counting on the votes of Senators Susan Collins and Olympia J. Snowe, the two Maine Republicans, to reach the minimum 60 votes needed to overcome the threat of a Republican filibuster.

To ease objections, Democrats have scaled back the unemployment proposal, which originally was to extend through December and included billions of dollars in health insurance subsidies for the unemployed.

In a floor speech Monday, Senator Harry Reid, the Nevada Democrat and majority leader, chastised Republicans for blocking the added unemployment benefits, noting that Republicans had voted before to treat the assistance as emergency spending that could be added to the deficit.

He also accused Republicans of being callous to the unemployed, noting that some Senate Republicans — as well as Senate candidates — have suggested that the added unemployment pay amounts to welfare and is discouraging people from taking jobs when they can rely on the government.

“Many of my constituents take offense at these absurd allegations, and they’ve let me know about it,” Mr. Reid said. “They’ve written or called me or pulled me aside when I see them in Nevada.”

If the Senate is successful in approving the extension, the House will have to vote on the measure before it is sent to the president, but Democrats have sufficient votes there.

The potential impact on Congressional races was evident Monday.

In one case, the Democratic Senatorial Campaign Committee issued a statement noting that Dan Coats, the Republican Senate candidate in Indiana, had backed Republican efforts to block the jobless pay unless it was offset with cuts elsewhere.

“Due to Republican obstructionism, over 48,000 unemployed Hoosiers have already lost their unemployment benefits,” the Democratic statement said.

Republicans fired back, criticizing Representative Brad Ellsworth, the Democratic Senate candidate, for his support of deficit spending on unemployment pay.

“Instead of making the tough economic decisions that every Indiana family and small business face each day, Brad Ellsworth has been sitting in Washington maxing out the government credit card and doing nothing to get more Hoosiers back to work,” said Brian Walsh, a spokesman for the National Republican Senatorial Committee.
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Source: The New York Times

The fiscal food fight that has been consuming the Senate and House continues this week, with unemployment benefits, Medicare fees to doctors and health aid to states among the potential casualties.

Senate Democrats will try to get more serious about their $140 billion package of tax breaks and spending programs after holding only a few votes on the plan last week. Democrats remain short of the 60 votes needed to break the logjam on the measure, and President Obama upped the pressure over the weekend by pushing Congress to provide money to states to prevent an economic crisis.

Some Congressional Democrats have grown queasy about the amount of deficit spending required, and Republicans say they are not ready to help dole out the requested aid unless spending cuts are made elsewhere.

“Fact is that the spending spree in Washington is continuing to run unabated,” Representative John A. Boehner of Ohio, the Republican leader, said Sunday on ABC’s “This Week.” “The American people are screaming at the top of their lungs, ′Stop′! And to move this without finding other offsets in spending, I think, is irresponsible.”

On the same program, Representative Steny H. Hoyer of Maryland, the House majority leader, acknowledged that “spending fatigue” on Capitol Hill was complicating efforts to pass money measures.

He suggested that the administration look at stimulus dollars Congress has allocated but not spent to cover aid to states, since that would not add to the deficit. The administration should “see whether or not there are some available for this more immediate priority than some that may not be quite as immediate,” Mr. Hoyer said.

Because of the impasse over spending, added unemployment benefits have expired for thousands of jobless Americans, and a 21 percent cut in Medicare fees paid to doctors has gone into effect, threatening health care access for retirees. States are also awaiting $24 billion in expected health care aid that is caught up in the fight.

While the House and Senate try to sort out the money tangle, the House is set to vote on a measure intended to encourage more lending to small businesses. House members may also vote on a Democratic measure to require more disclosure of who is behind political advertisements after the Supreme Court cleared the way for spending by corporations.

House and Senate negotiators will continue to hold talks on reconciling differences in their financial industry overhauls, with the leadership hoping to send a final measure to the president by the Fourth of July recess.

On Tuesday, Gen. David H. Petraeus, the top commander in Afghanistan, is scheduled to testify before the Senate Armed Services Committee on the state of the conflict there as Congress still weighs a mid-year spending measure providing money for combat in Afghanistan and in Iraq.
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Source: The New York Times

Senate Democrats have introduced an altered version of a major tax and spending measure that would restore unemployment benefits for those whose aid is running out and provide states with $24 billion to help with health care costs.

The measure proposed on Tuesday by Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee, would also soften the impact of a new House-passed tax on hedge fund managers and venture capitalists.

The bill has run into resistance because of its costs, but it is one of Democrats’ last chances to pass policy this year that could spur employment. Senate leaders and the White House are anxious to see it enacted.

“We have to get more Americans back to work,” Mr. Baucus said.

Debate is likely to take a few days since the leadership has decided to allow members of both parties to try to revise the bill on the floor. It now appears the measure could not be passed before next week and another House vote would be required.

The legislation is a hodge-podge of tax breaks for businesses and individuals, spending programs for the jobless, and efforts to close tax loopholes that have provided incentives to move jobs overseas and allowed wealthy investors to escape ordinary income tax rates by paying lower capital gains rates on many profitable investments.

The Senate approach to this kind of investment income would raise an estimated $14 billion, about $3 billion less than the House measure. It would tax 65 percent of the so-called carried interest paid as compensation to those in private equity investments after 2012 rather than the 75 percent that would be caught in the new tax by the House.

The bill would also prevent a 21 percent cut in Medicare fees paid to physicians and spend $1 billion on a summer jobs programs expected to provide 350,000 jobs to young Americans. In the aftermath of the Gulf oil crisis, the measure would also increase the tax that oil companies pay into a liability fund to 41 cents per barrel, from 8 cents, still above the 32 cent increase approved by the House last month.

Senate Republicans contended the measure was both too costly and too partisan since it had been written almost entirely by Democrats.
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Source: New York Times

A first group of 20,000 unemployed Illinoisans has exhausted 99 weeks of state and federal benefits, and another 7,000 are expected to do so in the next five weeks, a spokesman for the Illinois Department of Employment Security said Monday.

Greg Rivara said benefits have begun to run out for the long-term unemployed in the state, an issue separate from a congressional deadlock over funding. About 530,000 Illinoisans are receiving benefits with joblessness at its highest in nearly 30 years.

“It’s a big number for us. There was not another tier of benefits for them to graduate to,” said Rivara.

Congress recessed last week without approving money for extended benefits that add 73 weeks to the standard 26 weeks of state benefits. Democrats and Republicans in the U.S. Senate are at odds over paying for the program.

Even if Congress approves additional funding when it returns April 12, the number of recipients using up their extended benefits is expected to grow.

“It will continue unless they approve additional tiers (beyond 99 weeks), said Rivara.

The National Employment Law Council has estimated another 15,000 Illinoisans a week could begin to lose benefits within a couple of weeks if Congress does not act quickly to approve additional funding for the emergency benefits.

A spokeswoman for U.S. Sen. Dick Durbin, D-Ill., said the Senate is expected to take up the funding issue when Congress returns.

Illinois’ unemployment rate of 11.4 percent in February was the state’s highest since July 1983. It compared to 9.7 percent nationally.

Unemployment benefits in Illinois

* Weekly average, $315

* Maximum weekly, $534

Unemployment definition: Includes anyone who is out of work and looking for a job, whether or not they are receiving unemployment benefits.

Source: Illinois Department of Employment Security
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Source: The State Journal Register - The Oldest Newspaper in Illinois