Federal stimulus passes with $1,400 for most Illinoisans, $13 B for government
President Joe Biden on Friday is expected to sign the COVID-19 stimulus bill, with direct payments to most Illinoisans and a significant boost to local and state governments. Illinois can use this opportunity to fix state finances.
The bill is expected to be signed into law Friday afternoon by President Joe Biden. It ensures $1,400 in direct payments to most Illinoisians, plus a $7.55 billion bailout for state government and $5.68 billion for local governments.
After facing a $4.8 billion state budget deficit earlier this year, the stimulus represents a chance for Illinois to prevent further tax increases on overtaxed residents while protecting government programs for the most vulnerable. The stimulus is a chance for Gov. J.B. Pritzker to drop his plan for nine new taxes that will take nearly $1 billion from the Illinois economy
But state leaders could also choose to squander this chance by failing to use the time offered by this federal lifeline to address the structural spending that crippled the state’s economy well before COVID-19 impacted it.
The top need is to address Illinois’ $317 billion pension crisis.
Pension spending has grown 533% in the past two decades to consume more than a quarter of the state budget in 2021. It is expected to increase to nearly 30% of the state budget in the 2022 fiscal year.
By comparison, education spending during the past two decades has only grown by 21% while spending on other government services, including those that protect vulnerable residents, decreased by 14%.
Essential services Illinoisans rely on, such as education, infrastructure and even direct government transfers to low-income families, have all gone begging as state leaders fed unsustainable growth in public pensions. Pension debt and other debt has earned Illinois the worst credit rating in the nation.
Illinois’ high pension costs and debt add a hidden tax, costing each Illinois resident $1,417 a year. That hidden pension tax results from diminished economic activity because of state pension spending, according to research by the Illinois Policy Institute.
That $1,417 cost per person is more than the $1,400 per person expected in federal stimulus checks. The stimulus is a single boost, but Illinoisans can count on pensions costing them $1,417 every year.
Illinois leaders can choose a better future for the state, but it starts with pension reform that allows them to curb the future growth of the five statewide public pension systems. Coupled with other reforms, Illinois’ economy can recover from COVID-19 and give the federal stimulus a better chance of working.