‘It hurts’: Spike in unemployment insurance rates hits Rockford restaurants

By Kevin Haas
Rock River Current
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ROCKFORD — Several small businesses here are grappling with the sticker shock of increased unemployment insurance rates that have, in some cases, spiked by a multiple of seven.

It’s difficult to pinpoint the cause of the increase for each business, but several are pointing to layoffs made in early 2021 in order to comply with business restrictions meant to curb the spread of the coronavirus.

State lawmakers canceled any increase in unemployment rates from March 15, 2020, to Jan. 2, 2021, to protect businesses from paying more for layoffs caused by coronavirus restrictions. But it wasn’t until late January that year that indoor dining was permitted in northern Illinois, and even then capacity was limited to 25% per room.

Now, businesses are getting the bill for cutbacks they made more than a year ago. Emily Hurd, the owner of The Norwegian on Rockford’s North End, said her unemployment insurance rate went from less than 1% to the maximum rate of 7.625%. The minimum rate for 2022 is 0.725%.

“I’m going to owe the state of Illinois, or (Illinois Department of Employment Security), about $85,000 for having that layoff in that first quarter of 2021,” Hurd said. “They gave us no heads up, nothing. We’re all finding out in 2022.”

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Unemployment insurance rates are determined by a multi-factor formula that accounts for total wages and unemployment claims, among a variety of other components. But in it’s simplest terms, businesses with more layoffs pay a higher rate.

Restaurant owners such as Hurd feel like they’re being punished with higher rates for following health guidelines meant to keep their employees and customers safe. She said she never had an unemployment claim before the pandemic.

“To be punished for being the kind of business that takes care of your employees by a rule that was made to punish employers who don’t take care of their employees is really maddening,” she said. “And frankly, we don’t have the money. Our margins are too small.”

Crystal Douglas, who has run Wired Cafe in downtown for a dozen years, also said she never had an unemployment claim filed against her business before the coronavirus pandemic. She had three people file while restrictions were ongoing, now her rate has increased from roughly 4% to 6.75%, she said.

“It hurts,” Douglas said. “During COVID, when they were encouraging people to apply for unemployment, they said that it would not affect our rate at all, and they lied.”

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Douglas employs four people at her small coffee shop and breakfast and lunch cafe. That’s down from eight workers pre-pandemic. But a combination of factors is pushing her costs up.

“My payroll is more than it was when I had eight people on between the minimum wage, the unemployment tax and the disability insurance,” she said. “Everything went up.”

‘It’s scary to see what’s going to happen’

The unemployment rates are adding financial pressure to small restaurants already dealing with higher food and fuel costs. Some won’t be able to afford to pay it, said Zak Rotello, general manager of The Olympic Tavern in Rockford’s North End.

“That money is just not in the pot,” he said. “Everybody out there in the world right now sees what’s happening with gas, food, labor prices, everything is going up.”

The Norwegian, which employs about 40 people, is selling T-shirts as part of a fundraiser to be able to pay its unemployment insurance bill.

“It’s scary to see what’s going to happen to maybe some other businesses in town,” Rotello said. “We are fortunate to be in good financial standing. That being said, how much longer if the state keeps trying to pull more and more money out of my bank account.”

Rotello sounded the alarm to every state and federal lawmaker who represents Rockford in mid-August. He said he’s gotten responses from almost none of them.

“Clearly the state knew this would be an issue because they froze the rate for the entirety of 2020, but the mandates continued through 2021,” Rotello said. “They knew it was going to be a problem for businesses, and they did nothing to get ahead of the curve on this.”

Rotello did get a response Tuesday from a representative of IDES, who said the issue has been brought to the attention of its director and lawmakers.

“The director of IDES did receive your letter and is aware of the pressure facing your business and others in your situation, especially those who followed the public health guidelines and seem to be paying a price for doing so,” the email, which was reviewed by the Rock River Current, reads. “While I can offer no assurances as to a remedy, I can say that we will present these facts to those parties who must balance competing interests in addressing the (Unemployment Insurance) Trust Fund deficit.”

Looking for a legislative fix

In March, Democratic Gov. JB Pritzker signed a bill allocating $2.7 billion in federal coronavirus relief funds to pay down a $4.5 billion unemployment insurance trust fund debt. The state still has a roughly $1.8 billion debt in that fund.

That debt, Republican state Sen. Dave Syverson of Rockford said, is going to force further unemployment insurance rate increases at the start of 2023.

“Unfortunately, these restaurants have no idea what they’re in for come Jan. 1 when the real rate goes up even more,” Syverson said. “Why should they be stuck with this huge tax increase for the decision that the state government made? It is frustrating.”

Syverson said the rising unemployment insurance costs will only further exacerbate inflationary issues by forcing restaurants to raise their prices to makeup for the increase.

Lawmakers aren’t slated return to Springfield for consideration of new bills until next year, when they would have their first chance to address the issue with legislation.

“I’m in the process of trying to talk with a bunch of other legislators to see what I can do to find a way to give them some kind of relief,” said Dave Vella, a Democrat from Loves Park. “They shouldn’t be penalized for doing the right thing.”

State Sen. Steve Stadelman, also a Loves Park Democrat, also said the General Assembly needs to take up the issue.

“It’s been a difficult two years for businesses, especially in the restaurant industry trying to make ends meet and trying to cover their costs,” he said.

Lawmakers have a fall veto session to consider any bills vetoed by the governor, but unless a special session is called new laws won’t be considered until after the next General Assembly is convened.

Hurd said she and her staff at The Norwegian can’t afford to wait that long for a fix.

“I have until the end of October, then they’re coming for me again,” Hurd said of scheduled unemployment insurance payments. “That’s not very much time for me to make a lot of money on a little bitty egg plate profit margin.”

This article is by Kevin Haas. Email him at khaas@rockrivercurrent.com or follow him on Twitter at @KevinMHaas or Instagram @thekevinhaas.