For weeks, Gov. J.B. Pritzker has been asked just how bad the state budget shortfall would be in light of a coronavirus outbreak that has devastated the nation’s economy and killed nearly a thousand people in Illinois alone.
On Wednesday — at Pritzker’s 38th consecutive daily coronavirus briefing — the Democratic governor unveiled the grim projections from his budget office: $2.7 billion less revenue than expected for the budget the state is currently operating under, and $4.6 billion less revenue for a budget plan for the fiscal year that begins on July 1.
With short-term borrowing to get through the pandemic, the total shortfall for that Fiscal Year 2021 budget would be $6.2 billion, when compared to a spending plan Pritzker released in February.
And the governor made a soft pitch for his pet graduated income tax proposal. His office says next year’s shortfall rises to $7.4 billion without it. Asked whether it’s time to abandon his No. 1 policy goal, Pritzker would only say he would argue we need it “now more than ever.”
Earlier on Wednesday, Pritzker unveiled the numbers — which he called “preliminary and estimated figures” — with the four legislative leaders on a conference call. Legislators also had a separate call with Deputy Gov. Dan Hynes and other members of Pritzker’s budget staff.
“You don’t have to be an epidemiologist to see that the virus is going to hit our budget hard, a reality that is being visited upon every state in the United States,” Pritzker said at his later public briefing.
“Based on our new preliminary projections on the economic impact of COVID-19 that path has fundamentally diminished, to the narrowest of paths,” the governor also said.
Pritzker said the $2.7 billion revenue shortfall is based on a 7% drop in our state revenue, with $1 billion of that due to the three-month state and federal tax deadline extension. Because of that extension, that income tax revenue will be counted towards the 2021 budget.
To make up for that loss, Pritzker said he has asked his agency directors to enact spending reductions and efficiencies. That included holding all non-essential purchases and expenditures, freezing travel and limiting hiring. That’s expected to save $25 million.
Within the $2.7 billion gap, about $600 million of that lost revenue is due to unemployment, while between $700 million and $750 million is a downward revision of sales tax, since so many businesses are closed. There’s also a big hit from no video gaming, casinos or sports betting, in both the operating and capital budgets.
Pritzker said he is appreciative of the $2.7 billion secured through the federal Coronavirus Aid, Relief, and. Economic Security Act to help with the coronavirus response, but he said the CARES Act doesn’t help with state government revenue shortfalls incurred by the pandemic.
“That leaves states to face this unprecedented financial hole on their own. If the Congress doesn’t pass a CARES Act II to support state governments, lawmakers on both sides of the aisle from across the nation have pointed out that it is absolutely critical that Congress pass another stimulus bill to assist states and territories through this crisis,” Pritzker said.
State House Republicans who were briefed on the budget projections said there’s a need for more guidance from the federal government regarding assistance Illinois has received to help with the coronavirus response.
“Looking at the enhanced Medicaid match rate the federal government has put forward, also money that they earmarked for the state in the CARES Act, both of those are still subject to how long it will last. … We would love to see more guidance from the feds, like, ‘It will last ‘til this date to bill in your budget,’” said Deputy House Republican Leader Tom Demmer.
Regarding the CARES Act, the Dixon Republican said while the state and large municipalities are still slated to receive about $5 billion, they don’t have guidance about what bills they can pay. The strict interpretation, he said, is that the state can pay for coronavirus costs, which were outlined publicly on Tuesday on Illinois Comptroller Susana Mendoza’s website.
“That’s roughly $180 million. And so there’s all this money left over,” Demmer said, adding there have been talks about getting more of a definition about a broader range of costs, including whether it can be used to pay for the extra employees working to help process unemployment claims at the Illinois Department of Employment Security.
“All those kinds of things are sort of a gray area. That stuff is not being accounted for, and it’s obviously a cost to the state,” Demmer said. “Also, with the scale of billions that are already tagged for Illinois that could really help quite a bit.”
Still, Demmer said the projections are a “big help” to the state’s Republicans, who are just as worried about the state’s finances.
“It’s been hard to have budget discussions prior to today because we didn’t have revised budget projections,” Demmer said.
Demmer said this pandemic will serve as a lesson for future budgets, and legislators should have contingency plans should the virus make a resurgence.
“The biggest takeaways from this will be when we put together the FY21 budget. We’ve got to be thinking of some contingency plans in the beginning,” Demmer said. “I know that there’s a huge amount of uncertainty in this budget, but there has to be something in our back pocket if another round of this happens and we have to stay at home longer. If we have to make those changes, how are we going to deal with it?”
