$14B in federal COVID-19 stimulus propped up Illinois’ budget
Despite claims Illinois’ budget was “balanced,” a closer look shows federal stimulus money propped it up. Only long-term reform on pensions, taxes, health care and school district consolidation can balance state finances and end 21 years of deficits.
Before the COVID-19 pandemic, Illinois’ financial health was the worst in the nation, but federal relief added some breathing room. Without structural reform, state finances will be in an even worse position when the federal money expires.
Illinois Forward 2023 offers permanent reform that balances the state budget without raising taxes. It does so using commonsense pension reform, diverting unnecessary administrative costs to classrooms and adjusting taxpayer costs for state worker health insurance. Business as usual means the backlog of bills will climb to $6.5 billion, about where Illinois was before federal aid.
The Illinois Forward plan would save taxpayers $3.6 billion in its first year, leading to a surplus of at least $2.5 billion. Surpluses could be used to provide income tax relief of about one-half of a percentage point. More savings over time are an opportunity for even more tax relief. Surpluses could alternatively grow funding for higher education or programs for the vulnerable. Those portions of the budget have shrunk during the past 20 years.
Federal dollars allowed Illinois to pay its bills and upgrade the state credit rating, but it’s still the worst grade of any state. Without federal assistance, the state budget would’ve been short $14 billion and grown state debt.
In addition to federal aid, Gov. J.B. Pritzker has signed 24 tax and fee increases since taking office, adding $5.24 billion in revenue. Tax hikes and a huge influx of federal money led revenue to outgrow spending. The federal rescue means Illinois managed short-term cash flow but is headed back to massive deficits once federal money runs out.
Federal aid has been a temporary lifeline for the state’s financial health. Illinois Forward 2023 offers permanent solutions to problems such as tax burdens and pension debt that’ve plagued Illinois taxpayers for decades. Lawmakers are on the clock to find a solution before 2024, when federal aid expires.