Gov. J.B. Pritzker on Wednesday signed a $42.9 billion “maintenance” budget that’s largely reliant on borrowing and the hope that the federal government will provide Illinois with more COVID-19 assistance.
It’s a budget no one could have predicted, but one that Democrats said would toss the state a lifeline amid a world of uncertainty.
When Pritzker signed his first budget in June 2019, he called it a “new era of fiscal stability.” His plan even generated a $150 million surplus to help down the state’s bill backlog.
Then came 2020 — with 6,095 killed by the coronavirus, 1,361,036 unemployment claims processed by the state and businesses decimated by the deadly virus.
“Since taking office, my administration has prioritized effective and efficient government as we’ve worked to undo years of financial mismanagement while rebuilding our hollowed out state government,” the governor said in a statement Wednesday.
“The COVID-19 pandemic highlighted the enormous role government plays in keeping communities safe and providing the tools people need to build better lives. While the pandemic has had a devastating impact on our state revenues, investing in our people will allow the state to rebound and recover from this pandemic as we safely re-open.”
On the makeshift House floor at a Springfield convention center during a legislative special session last month, House Majority Leader Greg Harris, D-Chicago, acknowledged the plan “may not be the world’s best budget.”
“But at least we have a budget,” he said.
Republicans, in turn, called it a power grab by Pritzker, whom they said would have the control of billions of dollars in federal funds. Part of the budget includes the authorization of $5 billion in borrowing from the Federal Reserve’s newly created Municipal Liquidity Facility authorized under the CARES Act, which is being used to balance the budget.
Pritzker signed the operating budget legislation on Wednesday. The measure that allows for up to $5 billion of borrowing was signed on May 29, the governor’s office said.
The budget maintains funding for most of state operations, and it helps health care agencies that have been deeply affected by COVID-19.
The budget also includes $20 million grants from the Illinois Department of Public Health to nine hospitals in the state, chosen by the highest percentage of Medicaid patients and aimed to help hospitals disproportionately impacted by the COVID pandemic.
School districts will receive the same amount of funding as they received in 2020. The plan also keeps higher education spending flat to last year’s budget. It also fully funds the certified contributions for pensions.
In mid-April, Pritzker unveiled grim revenue loss projections due to COVID-19: $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.
Pritzker said the $2.7 billion revenue shortfall was 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.
The state’s tax deadline was pushed to July 15 — matching the federal tax deadline — to help aid residents who were worried about paying their taxes amid job losses and instability caused by the coronavirus outbreak. That also means the state is receiving its revenue in a delayed fashion. Pritzker’s delay also included tax payments.
Within the $2.7 billion gap, about $600 million of that lost revenue was due to unemployment, while between $700 million and $750 million was a downward revision of sales tax, since so many businesses are closed. There was also a big hit from no video gaming, casinos or sports betting, in both the operating and capital budgets.
According to an analysis by the Pew Charitable Trusts, neither short-term or long-term borrowing will make up for the revenue declines the state has experienced, as well as the economic downturn.
“Ultimately, balancing state budgets will require longer-term solutions such as spending cuts, tax increases, drawing on rainy day funds, or federal aid,” Pew researchers said in an analysis released Wednesday. “Borrowing can provide immediate cash and buy time to make those decisions but will have to be repaid with interest.”
In essence, the state’s budget problems are compounded by the pandemic. And during the special session, Republicans loudly voiced their opposition to a plan that doesn’t help the state with pension reform and property tax changes. The state’s bill backlog remained at $6.028 billion as of Wednesday.