Keep fiscal responsibility in Illinois’ next budget

When a governor gets $3.4 billion more revenue than anticipated during an election year, the usual political playbook calls for flinging largesse to the crowds. Popular new spending goes to the head of the agenda. Unsustainable new programs are the order of the day.

So it was OK to scratch your head and wonder what was up when Gov. J.B. Pritzker included elements of fiscal responsibility in his proposed Fiscal Year 2023 budget when he gave his annual State of the State and Budget address Feb. 2 at the Old State Capitol in Springfield.

For example, Pritzker wants to set aside $500 million to pre-pay pensions. To do that, he would take $300 million out of the unexpected extra revenue this year, and $200 millino will come out of the 2023 General Fund budget.

In Illinois politics, pension underfunding is like the weather. Everyone complains, but no one does anything about it. Why? It’s hard to do, and laboring to fix pensions doesn’t resonate with voters. There is little political bang for the buck. That’s why state pensions have been underfunded year after year for a century.

There is value in prepaying pension debt beyond what is required by the so-called ramp, as Pritzker proposes. Because of double compounding — less money must be borrowed to be repaid with interest and investments on the added money yield more returns — $500 million spent now will save the state $1.8 billion later.

And then there is his proposal for College Illinois. The state’s only prepaid tuition plan is getting $230 million. The money will cover the part of the program the state already has agreed to cover but just didn’t have the money to do it. The payment will save $75 million by eliminating future interest and related costs on unfunded liabilities.

That’s the kind of sensible behind-the-scenes work that we wish budget planners engaged in more often.

Of $1.6 billion in supplemental appropriations spending Pritzker proposes for Fiscal Year 2022 — the fiscal year the state now is in — $1.28 billion isn’t going for new spending. Rather, it will cover obligations that have already occurred, including $898 million for the state’s health insurance program. Boring, yes, but important.

Remember just a few years ago when health care providers started requiring state employees to pay up front because their insurance wasn’t paying? Getting this program in order may be mundane, but it also is responsible.

And then there is $800 million — $600 million from this year’s extra revenue and $200 million out of Fiscal Year 2023 — to replenish the state’s rainy day fund. COVID-19 demonstrated why states need a rainy day fund. Emergencies upend budget plans.

The extra money won’t bring Illinois’ rainy day fund up to the level of many other states, but it is an improvement on the bare cupboard Illinois has now. It will give Illinois by far the largest rainy day fund anyone can remember.

Yes, the $1.8 billion for pensions is just a drop in the bucket when unfunded pension liabilities are at an estimated $129 billion. But when have you seen Illinois governors add even a drop to that bucket? It’s the first time any governor has taken such a step.

And, yes, Pritzker is benefiting from billions of dollars in federal pandemic aid from the American Rescue Plan Act — money the state can’t keep writing into budgets indefinitely. But that’s a problem Illinois will face no matter how Pritzker chooses to allocate money this year. At least this budget, by paying down costs, is designed to soften some of the blow when the effect of federal money goes away.

Pritzker’s call for one-time property tax rebates of up to $300 million for about 2 million homeowners does little to fix the state’s excessive reliance on property taxes to fund schools. It’s within bounds for Republicans to call this an election-year gimmick. The state needs to do what its own Constitution says: shoulder the majority of public school costs, not shove those costs off onto high and ever-rising property taxes.

Pritzker does include some shiny objects in his budget plan. His suspension of grocery sales taxes as well as the 2.2-cent gasoline tax hike — which will be welcomed by many Illinoisans — is just for one year. So is his suspension of licensing fees for health care professionals, bars and restaurants. Pritzker argues the one-time elements in his budget are temporary because they address the problems caused by the pandemic.

Pritzker’s $45.8 billion budget now goes to the Legislature, which historically also has its own playbook, one that too often dictates election-year spending should go to shiny objects and giveaways to favored constituencies.

But paying down bills and directly reducing accumulated debt is meaningful. When it comes time for a final vote on the budget, the Legislature really ought to make sure Pritzker’s elements of fiscal responsibility are still in it.

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