Here's what to know about Illinois’ long-term financial health ahead of the governor’s address.
PRESS RELEASE from the
ILLINOIS POLICY INSTITUTE
CONTACT: Micky Horstman (312) 607-4977
Illinois Policy Institute: Gov. Pritzker’s budget address needs to lay out a plan for long-term financial stability once federal aid runs out in July
SPRINGFIELD (Feb. 15, 2023) — Here’s what to know about Illinois’ long-term financial health ahead of the governor’s address.
The state should use projected budget surplus dollars to pay down its $1.2 billion bill backlog and other debts. Pritzker Administration tax increases and a massive federal rescue meant revenue grew faster than spending since 2020. Illinois has a projected $3.55 billion surplus for this year. Projections for the upcoming 2024 fiscal year also show the state is anticipating a budget surplus of $357 million, despite the drop in federal funding.
State lawmakers should use the surplus to: restore Illinois’ Unemployment Insurance Trust Fund – the $1.36 billion deficit was officially repaid several weeks ago but the additional $450 million deposit had not been made; pay off 2010 Railsplitter Tobacco Settlement Authority Bonds, on which the state still owes more than $561 million; eliminate the anticipated $1.2 billion bill backlog; and deposit the remaining $347 million into the state’s rainy-day fund.
Federal aid runs out on July 1, meaning $1.2 billion less for Illinois. We need to prepare for that loss of revenue now. Beginning in fiscal year 2024, American Rescue Plan Act funds will run out. The total federal funds received by the state will decline by $1.2 billion. Despite this drop in federal funds, state lawmakers can take advantage of Illinois’ bolstered state finances to pay off debts and put the state on the path to long-term financial stability.
Budget deficits will return in fiscal year 2025 if state lawmakers don’t act now. The Governor’s Office of Management and Budget estimates reveal that without significant structural changes, annual budget deficits will return beginning in 2025. The most recent projections show although the state is expecting a $357 million surplus in 2024, the state budget will be out of balance by $384 million by 2025. The annual deficit is expected to grow to $708 million by 2028. In total, current projections show Illinois will rack up a cumulative budget deficit of $2.3 billion during those four years, absent reform.
Legislative fixes could end budget deficits, create billion-dollar surpluses by 2028. If Illinois can right-size government employee healthcare costs, reduce administrative costs at Illinois’ more than 850 school districts and enact a spending cap linking growth in expenditures to the growth rate of the economy, the state will eliminate its persistent structural deficits and end future fiscal years with budget surpluses in excess of $600 million and eventually closing in on $1 billion annually by 2028.
Illinois Policy Institute Director of Fiscal and Economic Research Bryce Hill released the following statement ahead of Gov. J.B. Pritzker’s State of the State and Budget address today:
“First and foremost, the governor must commit to using the last of the federal aid and higher-than-expected revenues to pay off the anticipated $1.2 billion bill backlog for the end of this fiscal year and follow through on his commitment to rebuilding the Unemployment Insurance Trust Fund, paying down bond debt and increasing the state’s rainy-day fund. State lawmakers must also pursue reforms that can get us back on the right track as a state.
“Illinois is in a unique and fortunate position to get its finances fixed for the first time in decades. Lawmakers can choose to use surpluses from bolstered federal funds and a strong rebound in revenues to eliminate longstanding issues within the state budget. Or they can stick to the status quo of ongoing budget deficits, billions in unpaid bills and the worst pension crisis in the nation.”
To see the institute’s full Illinois Forward 2024 plan with recommendations for the next state budget, visit illini.is/ilforward2024
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