|
The Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
were handed out to states, cities and counties that saw tax
revenues plummet during the pandemic due to government-imposed
lockdowns that shut down businesses deemed to be "nonessential."
As detailed in a report by the Volcker Alliance and authored by
Beverly Bunch, states must confront the fiscal cliffs they could
face if they allocated the recovery aid to recurring programs
rather than one-time costs stemming from the pandemic.
“If
states had used those one-time funds for recurring costs, they
will have to do major cuts to programs and services, and that
would be a cliff,” said Bunch.
The report notes that 38 states primarily used the federal money
for one-time or short-term purposes, such as capital projects,
repaying federal loans to their depleted unemployment trust
funds and providing short-term assistance to businesses and
households.
But 12 states, including Illinois, were flagged for using the
federal funds to cover recurring costs that were equivalent to a
significant 2.5% or more of their fiscal 2022 general fund
expenditures. As a result, the report said Illinois faces a
moderate to elevated risk of encountering that fiscal cliff if
it doesn't find money to replace those federal dollars.
“If they are using funds for operational purposes, that will
recur, then the risk is what will happen when those funds go
away,” said Bunch.
In 2023, Illinois decreased its SLFRF allocation for government
operations and increased its allocation to the repayment of
federal unemployment insurance trust fund loans.
Among the report’s recommendations are clearly identifying
one-time funds for short-term purposes and maintaining
sufficient rainy day funds to preserve critical services in the
event of sudden revenue losses.
States should also develop long-term revenue and expenditure
forecasts, which could address the loss of federal funds.
|
|
