States can use ARPA money to replenish unemployment funds, contrary to Pritzker’s claim

To meet a tidal wave of unemployment claims during last year’s COVID-19 shutdown, Illinois borrowed billions from the federal government.

In fact, Illinois is among 17 states currently indebted to the federal government for more than $53 billion in unemployment benefit loans collectively.

During an interview with Capitol News Illinois reporter Jerry Nowicki, Democratic Gov. J.B. Pritzker was asked if he was considering paying the debt with money from President Joseph Biden’s pandemic relief package, known as the American Rescue Plan Act, or ARPA.

"You can't actually use ARPA funds according to the rules of ARPA," Pritzker said. "You can’t repay any debt that's already owed to the federal government with ARPA funds."

As Nowicki pointed out in the article and podcast following that interview, however, federal guidance issued in May by the U.S. Department of the Treasury carves out an exception to get unemployment funds back to pre-pandemic levels.

So we reached out to Pritzker’s office to ask what the governor meant when he said federal relief can’t be used that way.

Pritzker spokeswoman Jordan Abudayyeh told us the governor mistakenly referred to an earlier version of Treasury rules and "misspoke when discussing the current version."

Indeed, during his conversation with Nowicki about ARPA rules, Pritzker described Illinois’ unsuccessful push earlier this year to use the pandemic aid to repay another kind of federal loan the state took out during the pandemic.

At the time Pritzker misspoke during the July 21 interview, however, many other states had used or were planning to use ARPA money to replenish unemployment funds, according to a May report from the Associated Press.

And in June and early July, state business leaders and lawmakers from both parties were calling for Illinois to restore its unemployment fund with some of its approximately $8 billion in ARPA aid. Illinois currently owes the federal government $4.2 billion in unemployment advances.

Unemployment benefits are funded by payroll taxes levied on employers. Federal law allows states to borrow money if they exhaust those funds. And while federal lawmakers paused payments on those advances during the pandemic, the loans will start accruing interest again on Sept. 6.

"Such states may need to raise taxes on their employers or reduce UC benefit levels, actions that dampen economic growth, job creation, and consumer demand," a December 2020 report from the Congressional Research Service warned.

Whether Pritzker supports using ARPA dollars to help replenish the state’s unemployment fund, Abudayyeh did not say.

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"The administration looks forward to working on a solution that considers the needs of both businesses and the Illinoisans who rely on these vital programs," she wrote in her emailed response to our inquiry after acknowledging Pritzker’s misstatement.

We followed up asking if using ARPA dollars is among the solutions the governor is now considering, but did not hear back.

Pritzker said ARPA funds cannot be used to pay down state unemployment insurance fund deficits.

His office acknowledged federal guidelines released in May permit states to use that aid to replenish those funds and said Pritzker misspoke.

We rate Pritzker’s claim False.

FALSE — The statement is not accurate.

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