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Why does Illinois’ Unemployment Insurance Trust Fund have a large deficit?

Why does Illinois’ Unemployment Insurance Trust Fund have a large deficit?

The economic disruption brought about by Covid and stay-at-home orders led to an unprecedented rise in unemployment and extreme fiscal stress on states’ unemployment insurance (UI) trust funds. Although this happened in nearly all U.S. states, Illinois is one of only a few states that emerged with a very large—more than $4 billion—net deficit in the fund. Through this analysis, we seek to understand Illinois’ experience and draw lessons about policy going forward. We begin by providing some background about the UI system and its financing.

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While dramatic increases in the unemployment rate brought about by a pandemic may be beyond state policymakers’ control, some actions could be taken to diminish the chances of large future UI trust fund deficits.

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