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 At his daily press conference Tuesday, Gov. J.B. Pritzker
traded shots with President Donald Trump over the fiscal health of Illinois,
which led to Pritzker incorrectly claiming the state budget would have been
balanced were it not for the coronavirus.
Trump tweeted early Tuesday, “Why should the people and taxpayers of America be
bailing out poorly run states (like Illinois, as example) and cities, in all
cases Democrat run and managed, when most of the other states are not looking
for bailout help? I am open to discussing anything, but just asking?”
When asked about it at his press conference, Pritzker shot back: “Unlike Donald
Trump, we proposed and passed and have effectuated a balanced budget for the
year that we’re in,” Pritzker argued. “Had it not been for coronavirus, we would
have had a (budget) surplus.”
That is wrong. Illinois would not have had a balanced budget for fiscal year
2020, let alone a budget surplus, before COVID-19 became a financial issue. In
fact, Illinois hasn’t balanced a budget since 2001.
Last June, the General Assembly passed a 1,581-page budget that lawmakers shoved
through in a matter of hours. An Illinois Policy Institute analysis found the
budget was as much as $1.3 billion out of balance. Even granting optimistic
revenue assumptions, the state would have ended the year $574 million in the
red.
Making matters worse, the budget was unbalanced even with 20 new or higher taxes
and fees on Illinoisans. Those taxes and fees, including doubling the state gas
tax, designated more than $1 billion for the operating budget and financed a $45
billion infrastructure plan.
Lawmakers and the governor claimed the budget was balanced on paper, using their
projections for spending and tax collections. That is where Illinois runs into
trouble.
The Illinois Constitution requires a balanced budget, but the requirement is
toothless. The constitution reads: “Appropriations for a fiscal year shall not
exceed funds estimated by the General Assembly to be available during that
year.”
The word “estimated” is the issue. The requirement is that lawmakers plan to
spend only what they receive but does not require the budget to actually balance
at the end of the year. This allows for numerous budget gimmicks, including
overestimating revenue and underestimating expenditures.
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Worse, Illinois actually carries what is
essentially a perpetual operating deficit through its backlog of
unpaid bills. As of April 30, Illinois owes more than $6.9 billion
to various vendors for services already rendered. Under state law,
the unpaid bills carry high interest penalties ranging from 9% to
12%. The state’s weak and ineffective balanced budget requirement
allows the backlog deficit to be carried from year to year.
Illinois also has virtually nothing set aside for a recession or
other emergency, what is commonly known as a “rainy day” fund. The
state had only about 15 minutes worth of cash in the rainy day fund
when the pandemic hit in mid-March.
And there was budget trouble projected even before COVID-19 wrecked
state finances. The state in October projected it was facing a $1.77
billion structural deficit for fiscal year 2021, which starts in
July.
Pritzker now wants help from the federal government to resurrect
Illinois’ state finances.
In mid-April, Illinois Senate President Don Harmon wrote a letter to
Congress asking for $44.2 billion from the federal government. Among
these funds would be $10 billion to pay the state’s pensions next
year. Pritzker has publicly rejected the idea, but still called on
Congress to approve more aid for states. In Illinois, this means the
money would inevitably go to the state’s broken pension system.
U.S. Rep. Adam Kinzinger, R-Channahon, rejected the idea of using
federal funds to bail out Illinois from problems it created through
mismanagement well before the pandemic. He said the state will get
help based on the damage done by the virus.
Illinois could lose up to $6.6 billion in personal income tax
revenue resulting from people laid off or having income reduced by
the pandemic. Lawmakers will now be tasked with difficult decisions
about how to cut spending and try to balance the fiscal year 2021
budget – a task at which they have failed since 2001, on a budget
that was already projected to be in the red and that now faces
billions less in revenue.
That is going to be quite a task. Pretending Illinois had no
pre-existing conditions will do nothing to help the state budget
recover from COVID-19.
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