The performance of Illinois' unemployment insurance system over business cycles

The back-to-back recessions of the early 1980's drove Illinois and most other states deep into debt to the Federal government for their unemployment insurance systems. As part of the process of debt repayment, Illinois created a model of the state's unemployment insurance (UI) system to analyze legislation geared to debt repayment. This paper describes Illinois' UI forecasting model, and examines two uses of the model for UI system evaluation. Illinois' system is found to be solvent, as it accumulates little or no debt over severe business cycles and repays debt automatically. It is also found to be counter-cyclical, as benefits increase during recessions, and tax rates tend to increase at times of low unemployment.