Pritzker signs budget out of balance by $6B

Pritzker signs budget out of balance by $6B

Lawmakers made no serious attempt to balance the new budget, instead counting on a federal bailout.

Gov. J.B. Pritzker signed Illinois’ 20th consecutive unbalanced budget on June 10. The spending plan is out of balance by roughly $6 billion, despite a constitutional requirement to balance the budget.

On May 24, the General Assembly passed the budget along a party-line vote after leaving virtually no time for public comment or debate. It calls for $42.8 billion in spending, which exceeds available resources by nearly $6 billion.

Meanwhile, Illinoisans across the private sector are struggling to responsibly manage their own finances amid economic fallout from COVID-19 and related government shutdown orders. As of June 6, over 1.24 million residents had filed for unemployment benefits. Many businesses remain shuttered and those that are operating under restrictions face drastically reduced income. Illinois’ latest irresponsible spending plan is an insult to taxpayers who are facing unprecedented challenges of their own, largely due to government-ordered business shutdowns intended to fight COVID-19. 

Economic fallout from COVID-19 blew a large hole in expected revenue collections for the coming fiscal year. In April, Pritzker’s own Office of Management and Budget predicted revenues would drop by more than $4.6 billion for fiscal year 2021. A stress test conducted by Moody’s Analytics projected an even steeper drop in total revenue of between $5.2 billion and $6.9 billion depending on the severity of the economic contraction.

Despite these lower revenue expectations, Illinois will spend $2.4 billion or nearly 6% more than last year’s $40.4 billion budget. Moreover, the fiscal year 2021 budget spends $773 million more than the $42.023 billion Pritzker proposed prior to the pandemic in February. Pritzker told reporters on April 23 that he was not even discussing canceling $261 million in automatic raises he agreed to grant state workers in 2019. Additionally, Pritzker did not push for 6.5% cuts in agency budgets despite having asked agencies to come up with plans for those reductions last year.

To partially fill the deficit in the budget, lawmakers granted Pritzker authority to borrow $5 billion from the Federal Reserve’s new state and local lending program. The Fed’s program is designed to provide a “liquidity backstop” for government borrowing amid concerns that the private market for state and local debt would face interruptions resulting from COVID-19 fallout.

Pritzker and many Democratic lawmakers have publicly stated they hope to be able to repay the borrowing with a bailout from the federal government, which Congress has not passed.  Pritzker has repeatedly called for potential federal aid to be “unencumbered,” meaning he wants a blank-check bailout with no strings attached.

The Illinois Policy Institute has proposed a plan under which any financial assistance provided to state governments by Congress would be made contingent on certain taxpayer protections. Those conditions would ensure federal aid supports essential government services rather than being squandered through waste and mismanagement. States would have to demonstrate they have sound pensions, truly balanced budgets and sufficient rules for emergency savings or else enact significant reforms to meet those conditions.

The details of the budget Pritzker just signed demonstrate exactly why Congress should avoid propping up Springfield’s continued financial mismanagement.

Illinois’ broken pension system will consume nearly $9.7 billion, or about 31% of tax dollars state residents send to Springfield this year. When federal sources are included, such as Medicaid reimbursements, pensions will consume 26.5% of all general fund revenues. Spending such large shares of the budget on pensions crowds out services that provide value to state residents.

And despite record job losses and lost business income across the private sector, lawmakers failed to take all actions available to them to stop automatic salary increases that will increase their pay by an estimated $1,800 per year.

While some Democratic lawmakers and state Comptroller Susana Mendoza have denied the budget provides funding for the raises, a law passed in 2014 made lawmaker pay a “continuing appropriation,” which means the money has to be paid regardless of funds made available in the budget. The act specifies the money shall be paid even if “aggregate appropriations made available are insufficient to meet the levels required” and “for any reason.” Lawmakers neglected to include a specific prohibition on lawmaker pay raises as they have in recent years.

In fact, the only significant spending cuts that made it into the budget were for education. Despite increasing overall spending by $2.4 billion compared to fiscal year 2020, the budget essentially keeps education funding flat for both K-12 schools and state universities. After accounting for inflation, this equates to an education cut in real terms and marks a break from the new 2017 education funding formula that calls for $350 million annual increases in state spending.

An analysis from Republican state senate staff obtained by the Illinois Policy Institute explains that the budget provides “the bare minimum” of $7.2 billion under the state’s funding formula, through which money is provided to local schools. All school districts will receive the same amount from the state as last year. Total state K-12 spending, including grants outside of the funding formula and the budget for the Illinois State Board of Education, will increase by just $12.79 million or 0.14%. Funding for state universities will be held constant with the prior budget at $1.16 billion.

Government budgets reveal the priorities of elected officials. By cutting education while increasing their own pay and preserving unaffordable pension benefits, Pritzker and lawmakers are sending a clear and disturbing signal to taxpayers about what they value most.

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