Gov. J.B. Pritzker responds to questions regarding a police shootout and looting during news conference at Morgan Park in Chicago on Aug. 10.
Gov. J.B. Pritzker held off filling top vacancies at Illinois’ unemployment office because he was planning to merge it with another state department.
Then COVID-19 upended the nation.
Starting in March, as authorities shut down businesses and schools and 2 million Illinois workers flooded the state for jobless benefits, the state Department of Employment Security was already at one of its weakest moments in recent history, records and interviews show.
At that moment, agency staffing was at an “all-time low,” according to its then-acting director. Veteran employees were retiring in droves to be replaced by rookies. And when key jobs were filled it was sometimes with political aides who had little or no agency experience.
Before the national health crisis, Illinois had been ranked among national leaders for speedy delivery of unemployment benefits. Suddenly, IDES plunged to being among the worst in the nation on several key performance measures.
In the months since, as problems have persisted, the administration has offered a range of explanations for its inability to handle the surge of claims.
Pritzker has blamed his Republican predecessor for hollowing out IDES and leaving the agency with inadequate staff and outdated technology. He has also criticized President Trump for “unfair” and chaotic rollouts of federal unemployment benefits.
But government records and interviews offer a more complex portrait, and reveal the frenzy inside an agency diminished by staff vacancies at every level in the 18 months Pritzker was in charge — even before the crisis.
State-by-state data from the U.S. Labor Department, hundreds of agency emails and internal agency documents obtained by the Better Government Association show:
- In recent months, IDES has issued around 1 percent of its unemployment checks within seven days of the initial applications, making it the slowest state in the nation by that measure. Before the pandemic, it was among the fastest.
- On some key federal measurements for processing unemployment claims, IDES performed better during the pandemic than other big states or than the nation as a whole. Still, Illinois failed to meet standards in five of 10 performance measures collected by federal authorities, ranging from timely benefits distribution to the soundness of internal audits that detect fraud and underpayments. The Pritzker administration denied a request for these scorecards, but the BGA obtained them anyway.
- In June, the overwhelmed and understaffed agency told a senate oversight panel, in writing, that it moved jobless claims that came through elected officials to “the front of the line” over applications that came directly from taxpayers, the BGA found.
- In emails and internal presentations, the acting head of the agency sounded the alarm repeatedly and urgently. “Please know that I’m doing everything in my power to get you what is needed,” he wrote in a March 14 email to his boss, Deputy Governor Dan Hynes. “But I need some help.”
Pritzker administration officials acknowledged to the BGA the agency had problems, but Hynes said unfilled leadership positions at IDES had little impact.
“There was not instability at the top,” he said. “I think what was lacking was everything underneath there.
“There was great attrition in the rank-and-file employees who were at the front lines of services. There was outdated technology, a lack of investment in technology that had occurred over the last 10 years. That’s really what was lacking.”
Hynes said IDES worked hard “under incredible stress” to pay out a staggering $14.2 billion in benefits to an unprecedented 2.1 million Illinois claimants from March through August.
“The volume and surge of claims that overtook the agency was really unprecedented and unsolvable until we figured out how to allocate the resources in the right way,” Hynes said. “It was heart-wrenching among all of us to urge patience among people who were desperate to get help, but knowing that we were unable to deal with everybody all at once.”
Pritzker this summer named Kristin Richards, a former chief of staff to state Senate Presidents John Cullerton and Don Harmon, the new acting director at IDES.
“More so than anything, I feel a responsibility to try and bring some stability for claimants, find some stability for people that are attempting to reach us,” Richards said. “It’s a really big problem-solving exercise but it’s the right time to throw every bit of muscle we can to try to do it, and that’s what we’re going to do.”
“These problems at IDES came at a cost to people. Some applicants had desperate financial problems,” said Jeremy Rosen, director of economic justice at Chicago’s Shriver Center on Poverty Law. “The governor was right that no state was properly prepared. But given the crisis every state faced, why did Illinois not respond as effectively as other states?”
From best to worst
Before the pandemic, Illinois had been paying about 80 percent of initial unemployment claims within seven days.
That quick payout rate plummeted to around 1 percent and held there through September, putting Illinois last among states on this timeliness measure, according to newly released data from the federal labor department.
IDES told the BGA these quick payments slowed because Illinois — like many states — waited one week before starting the clock prior to the pandemic. After the crisis, Illinois and 36 other states cut out the “waiting week” in an effort to get more money out quickly.
Agency officials offered no explanation why it performed so much worse than all other states, including those that waived the waiting week. Only nine other states fell to less than 10 percent on this seven-day measure, the federal records show.
Federal rules do not require a seven-day turn around. Instead, the guidelines require states to pay out nearly 90 percent of all initial unemployment checks within 21 days.
On that 21-day measure, Illinois also fell short by distributing only 61 percent. However, Illinois still performed better than most states. By comparison, the national average for meeting the three-week window is nearly 55 percent.
Still, every day matters to laid-off Illinois workers borrowing from relatives to pay their rent or mortgage bills, selling personal belongings and using food banks to get groceries to their families, according to emails pleading for help that reached the governor’s cabinet.
“There is no standard for seven days,” said Richards, the IDES acting director. “I agree with you it is important to claimants. Every day is important to claimants.”
A Christmas tree on fire
The difficulties Illinois was facing amid the pandemic were reflected in federal labor department score cards required by the federal government, which rank states for the promptness of payments, the effectiveness of audits and eight other agency functions.
States submit reports every three months to indicate adequate performance or something less by labeling each of the 10 categories with either a green or red mark. IDES veterans call this chart “the Christmas tree.”
While IDES had been slowly improving since 2015 on the core labor department metrics, by March of this year Illinois was the only state failing all three categories labeled “integrity” measures, which includes detection of overpayments, improper payments, and the recovery of those mistaken payouts.
Asked for the state’s scorecard data through June, Pritzker administration officials declined to provide the records.
“The Christmas tree is a document put together for internal purposes only and is not available for public consumption,” IDES spokeswoman Rebecca Cisco told the BGA in an email.
The BGA, however, obtained a copy of that report, which shows erosion as Illinois failed five of 10 performance measures.
Front of the line
Amid the chaos, IDES was so far behind in processing claims that it triaged cases by prioritizing people referred by local politicians, the BGA found.
In a June 5 report to the bipartisan Senate oversight panel, IDES responded to questions about the lack of uniformity in how unemployment claims are submitted.
“Claimants continue to call IDES in addition to their elected officials,” the report said. “Therefore, often, even though we move an elected official’s constituent to the front of the line, the constituent has often already been able to get through to the call center.
“We will continue to pull our staff out of the call center to call claimants sent to us by an elected official,” that report added, “but with hundreds of elected officials submitting issues to IDES, we cannot ensure the claimant will receive a response prior to their being able to get through to the call center.”
Later that month, more than 50 House Democrats wrote to the agency that each of them was fielding 60 to 90 complaints from constituents on any given day. The lawmakers asked for additional IDES staff to handle their claims. In a column in the Chicago Sun-Times, Rich Miller reported on the lawmakers’ letter.
In a recent email to the BGA, Pritzker spokeswoman Jordan Abudayyeh called the IDES practice of responding to claims referred by elected officials “an attempt for the Department and its employees to help as many people as possible at a time when there was no structure in place.”
The BGA has filed a pending public records request for details on the number of claims referred by each elected official since March.
‘This is not good’
Illinois began the pandemic era in a proud position, first among states to begin paying out the initial $600-per-week Federal Pandemic Unemployment Compensation payments on April 6, records show.
That early success quickly became a footnote as IDES was overwhelmed with 519,269 new claims for regular unemployment benefits that month — more than 10 previous Aprils combined — and federal authorities poured $500 billion in crisis relief into an alphabet soup of new and existing programs for laid-off workers.
Records show how Illinois struggled to implement those federal programs.
It was the 44th state to apply for the $300-per-week “Lost Wage Assistance” benefit: While most states deployed that program in August, Illinois did not start making payments until September 4, records show.
It was among 23 states that did not offer workers partial benefits when their employers reduced hours instead of laying them off. IDES told the Senate oversight panel in August it decided against offering the benefit because its staff was “stretched thin.”
Illinois also trailed all but seven states in processing the federal Pandemic Unemployment Assistance, or PUA benefit, to independent contractors and “gig workers.” Illinois did not begin processing PUA payments until May 11, and didn’t starting paying until a week later.
Emails between Hynes and then-IDES Acting Director Thomas Chan — obtained by the BGA through a public records request — detail the pressure inside IDES as Illinois’ PUA program was rolled out.
“Folks — I am counting on you to launch the independent contractor unemployment system ASAP and no later than May 11,” Pritzker wrote to Chan and Hynes at 7:43 a.m. on May 4. “Can you confirm that will happen? JB.”
IDES hustled to update its policies and computer code, and minutes before midnight on May 10 Chan emailed Hynes that he and aides did a test run by filing a small sample of claims.
“Minor hiccups but no show stoppers,” Chan wrote.
Within 10 minutes of Illinois’ PUA system going live the next morning, on May 11, more than 1,500 people applied for benefits through the state portal, records show. Hynes conducted his own test minutes later.
“I called the 800 number. Hit the correct prompts for PUA,” Hynes wrote in an email to Chan at 8:01 a.m.
An automated voice told Hynes there was a high volume of calls. Then it hung up on him, Hynes emailed.
“It’s not even 830,” Hynes wrote. “This is not good.”
Staffing levels hit ‘all-time low'
Illinois’ struggle to roll out the new federal benefits came amid staffing shortfalls at every level of IDES.
Acting Director Chan was a placeholder pending the governor’s merger plans. Pritzker had named a replacement for Chan in 2019 then withdrew that appointment days later without explanation. And there were months-long vacancies in the deputy director and audit positions.
On March 14, 2020 — as Pritzker was closing Illinois schools and dine-in restaurants and limiting gatherings to no more than 50 people — Chan sent Hynes an urgent email that revealed the staffing shortfalls within IDES.
“I need permission to fill IDES’ Chief Operating Officer position as soon as possible,” Chan wrote. “Please know that I’m doing everything in my power to get you what is needed. But I need some help.”
The Pritzker administration granted that request, and Chan rode out the harrowing next months at the helm of IDES. Chan declined to comment for this report.
Beyond leadership vacancies, rank-and-file numbers also were dropping.
In 2010, the year after Democratic Gov. Pat Quinn took office, the agency headcount stood at almost 2,000. That number declined to around 1,300 when Republican Gov. Bruce Rauner took over in 2015. When Pritzker assumed office in 2019, there were 1,100, records show.
By April, the IDES staff level had slipped to 1,041, according to state records.
“Illinois had been struggling to onboard new employees faster than the rate of attrition,” Chan told the state’s Employment Security Advisory Board.
“In other words, heading into this downturn, our baseline staffing numbers, the employees hired to operate our programs and meet minimum federal performance standards, were, despite our best efforts, at an all-time low.”
What’s more, experience had been drained from the agency.
In 2014, Chan told the panel, about 86 percent of IDES’ workforce had more than five years’ experience with the agency. By June it had dropped to 67 percent. Managers “are serving in multiple roles and performing the work of multiple employees,” Chan said, according to the board’s meeting minutes.
Amid the pandemic, on April 29, IDES contracted with a private accounting firm to bolster the force of 100-plus IDES staffers answering phones. But those new agents often did not have adequate training to answer even the simplest questions, instead transferring claimants to the better-trained IDES employees, records show.
‘Best practices’ to borrow
Pritzker wants to add 226 IDES employees next year. Illinois also is planning to issue bonds to borrow more than $5 billion to bail out the IDES Trust Fund, which uses taxes levied from employers to pay out worker benefits claims, records and interviews show.
“What we’re going to do ourselves over the coming months and years is to figure out what we’ve learned from this experience,” Hynes said. “And that applies to what technology systems we have and need, what sort of human resources we need to devote to this agency, what type of best practices we should be borrowing from other states.”
On hold for now: the governor’s plan to merge IDES with the state labor department.
“It would not be a prudent thing to try to move pieces around and make changes in an agency that is really struggling just to meet its basic operations,” Hynes said.
The Illinois graduated tax amendment explained
The amendment
Specifically, Article 9, Section 3 of the Illinois Constitution would be amended if the ballot question passes. The new language would read:
“The General Assembly shall provide by law for the rate or rates of any tax on or measured by income imposed by the State. In any such tax imposed upon corporations the highest rate shall not exceed the highest rate imposed on individuals by more than a ratio of 8 to 5.”
That would replace the current language, which states:
“A tax on or measured by income shall be at a non-graduated rate. At any one time there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations. In any such tax imposed upon corporations the rate shall not exceed the rate imposed on individuals by more than a ratio of 8 to 5.”
On the ballot, voters will see the question worded as follows:
“The proposed amendment grants the State authority to impose higher income tax rates on higher income levels, which is how the federal government and a majority of other states do it. The amendment would remove the portion of the Revenue Article of the Illinois Constitution that is sometimes referred to as the "flat tax," that requires all taxes on income to be at the same rate. The amendment does not itself change tax rates. It gives the State the ability to impose higher tax rates on those with higher income levels and lower income tax rates on those with middle or lower income levels. You are asked to decide whether the proposed amendment should become a part of the Illinois Constitution.”
They’ll be able to vote “yes” or “no,” and the amendment has two paths to passage. If it receives 60 percent of the vote from those voting on the question, it passes. But if it fails to reach the 60 percent threshold for those voting on the question but still musters “yes” votes from more than half of those voting in the election, it would still pass.
The rate structure
The proposal to put the amendment question on the ballot was approved with support from only Democrats, as was Senate Bill 687, the accompanying legislation to set graduated rates beginning in January 2021, should the amendment pass. Again, the current rate is 4.95 percent on any taxable income.
The new rate structure would create six tax brackets, with rates applying to margins of taxable income instead of every penny of an earner’s income, except for those in the top bracket. The rates would be:
- 4.75 percent on single or joint filers’ first $10,000 of taxable income
- 4.9 percent on single or joint filers’ income from over $10,000 to $100,000
- 4.95 percent on single or joint filers’ income from over $100,000 to $250,000
- 7.75 percent on a single filer’s income from over $250,000 to $350,000 and joint filers’ from over $250,000 to $500,000
- 7.85 percent on a single filer’s income from over $350,000 to $750,000 and joint filers’ from over $350,000 to $1 million
- Once a single filer exceeds $750,000 or joint filers exceed $1 million, the top rate of 7.99 percent will apply at a flat rate to every penny of income. For all other earners, the previous brackets apply.
Those rates effectively mean anyone earning $250,000 or less will pay the same or lower income tax rates under the graduated structure, while those earning above that amount would pay higher rates.
The measure also raises the corporate tax rate to 7.99 percent from 7 percent and does not change the Corporate Property Replacement tax of 1.5 to 2.5 percent which already exists in current law.
It also raises the property tax credit from 5 percent to 6 percent, and creates a $100 per-child tax credit for joint filers earning less than $60,000 annually and single filers earning less than $40,000 annually. The tax credit would decrease by $5 per child for every $2,000 of income a filer has above those amounts.
In estimates released before the COVID-19 pandemic, the governor’s office said the graduated tax is expected to bring in about $1.2 billion for the current fiscal year as it would be in place for only part of it, and $3.4 billion once it is in place for a full year.
Neither the amendment nor the accompanying legislation would change the level of authority lawmakers have to raise tax rates. A simple majority vote from both chambers in the General Assembly and a signature from the governor is all that is needed to raise rates currently, and that would remain the case with the passage of the amendment.
The fiscal picture
For proponents of the measure, the amendment and the rates approved are all about raising more revenue without increasing rates on middle-income earners or making drastic budget cuts to state services, education and public safety.
Pritzker frequently notes he inherited a state government “hollowed out” by budget cuts from previous administrations and a two-year state budget impasse during which the state spent roughly $5 billion more than it took in each year, driving a backlog of unpaid bills up to $16 billion.
Pritzker has estimated the budget shortfall for the current fiscal year at $6.2 billion, as the COVID-19 pandemic has blown a hole in state finances. Without the graduated tax, which would be in effect for only half of the fiscal year, the shortfall could reach $7.4 billion, he said in April.
To fill that gap, the governor has left open the option of borrowing billions from the federal government and has lobbied for greater aid to states in another federal stimulus package.
But even before the pandemic, Pritzker pegged Illinois’ structural, year-after-year budget deficit at $3.2 billion, and he has framed the graduated tax debate as a choice between 15 percent across-the-board cuts to state government, a 20 percent flat tax hike or passage of the graduated rates.
On Sept. 24, Lt. Gov. Juliana Stratton said lawmakers “will be forced to consider raising income taxes on all Illinois residents by at least 20 percent, regardless of their level of income” if the graduated income tax fails. That would push the current tax rate to about 6 percent, and would require a simple majority vote in a Legislature dominated by Democrats with or without the passage of the amendment.
But opponents argue that without spending reforms, particularly to unfunded state pension obligations which exceed $137 billion, voters should not consider sending the state more revenue. They also note both graduated tax measures are devoid of any meaningful immediate property tax reforms. Property taxes are levied and collected locally, not by the state, and they fund such things as schools, local governments, fire departments and libraries.
Those in favor of the amendment argue the added revenue could make it easier to fully fund the evidence-based funding formula for K-12 schools, which – years down the line, they say – could alleviate property tax pressures by shifting funding responsibility from local taxes to the state.
But opponents are skeptical of what the added revenues would be used for, as the amendment and accompanying legislation contain no guarantees and the state’s pension burden continues to increase.
Opponents also point out that Illinois’ combined total tax burden – including state and local sales taxes, income taxes, property taxes and others – is the highest in the country, according to the personal finance website Wallethub. The graduated tax would only add to that, they say, claiming that it might drive high-earning residents from the state. Pritzker has said it is middle-income earners who have thus far been more likely to leave the state because, he says, the tax burden is “unfairly” distributed.
Proponents of the amendment, including Pritzker, cite a breakdown which shows the bottom 20 percent of Illinois earners pay 14.4 percent of their total income to state and local taxes, while the top 1 percent of earners pay 7.4 percent of their income in taxes. That’s according to a report by the left-leaning Washington D.C.-based Institute on Taxation and Economic Policy.
Other arguments
Opposition, led in large part by the Illinois Chamber of Commerce, has centered on what the tax would do to businesses and what lawmakers might do in the future if voters give them the opportunity to levy taxes on portions of the electorate at any one time, rather than on every taxpayer at once.
They also point out the added revenues would not cover state budget deficits amid the pandemic and would require further tax hikes in the future, which could mean adjusting the brackets to raise rates on middle-income earners.
The idea, according to much of the advertising against the amendment, is that giving Springfield politicians the authority to raise taxes on just a small group of taxpayers at any one time makes it easier politically to raise taxes, even though the simple majority vote threshold remains unchanged.
Opposition groups also point to June comments from Treasurer Michael Frerichs, a Democrat who has no role in setting tax rates, who said it was “worth a discussion” to consider taxing retirement income on certain brackets.
While the graduated tax would make it possible to implement taxes on high-earning retirees without taxing all retirees, Pritzker has said he and Democrats in the General Assembly oppose taxing any retirement income, and the idea remains widely unpopular in Illinois – one of 12 states that do not tax retirement income. Of those 12, nine do not levy income taxes at all.
The senior advocacy group AARP held a news conference earlier this month noting added revenue from the graduated tax could make lawmakers less likely to tax retirement income in order to fill budget gaps. But opponents continue to point to Frerichs’ comments, although the treasurer has since said he does not support a retirement tax.
While those against the measure say the increase to the corporate tax rate will hit job creators hard at a time when the pandemic is already making it difficult to remain afloat, proponents note that businesses structured as pass-through entities – such as S corporations, sole proprietors and others who claim business income on personal taxes – will see taxes decrease if they earn less than $250,000 annually in taxable income.
Opponents also take issue with the amendment’s removal of language which states “there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations,” claiming the removal of the language allows for tax bills such as “education surcharges” or other such fees on top of the regular income tax.
Those in favor of the bill, however, say the prohibition on levying multiple income taxes was simply a companion to the requirement for a single flat tax rate. The framers’ inclusion of the language, proponents say, was aimed at stopping lawmakers from creating a multi-tiered tax structure through a series of limited flat taxes on different levels of income. Allowing for a graduated tax renders the language moot, they argue.
The funding
The omnipresent TV and social media advertising regarding the amendment has largely been funded thus far by two billionaires whose combined donations top $100 million.
The first is Gov. JB Pritzker, who has donated $56.5 million of his personal fortune to the Vote Yes for Fairness ballot initiative committee.
The other is Kenneth Griffin – Illinois’ wealthiest person, founder of the hedge fund Citadel and former major donor to former Republican Gov. Bruce Rauner – who has donated $46.75 million to the Coalition to Stop the Proposed Tax Hike Amendment, a business-tied group led by the Illinois Chamber of Commerce.
