* WBEZ…

Democratic Gov. JB Pritzker hailed the expected final passage today of President Joe Biden’s $1.9 trillion COVID-19 stimulus package as a major fiscal win for the state’s cash-strapped coffers and for Illinoisans awaiting $1,400 stimulus checks.

The governor and Democratic U.S. Rep. Raja Krishnamoorthi, whose House subcommittee helped shape how much state and local governments would receive, dissected one of the largest spending packages ever assembled in Congress during a joint appearance on WBEZ’s morning newscast. […]

Pritzker has made clear one of his first spending priorities once that money reaches Illinois will be the repayment of $2.875 billion in loans the state took out last year from the Federal Reserve’s Municipal Liquidity Facility to help offset the fiscal impact of COVID-19.

That commitment caught the eye of some of the bond-rating agencies, which for years have consistently rated Illinois’ state government as a notch above junk-bond status because of its long-running budgetary ills.

“If the state focuses use of the significant one-time infusion to reduce liabilities and on other one-time needs, it could support stabilization of the state’s fiscal resilience and rating outlook,” according to a statement released Tuesday by Fitch Ratings.

* Toplines from Fitch…

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

– Enactment of the ARP, followed by a clear dedication of the state to using new federal aid to unwind one-time budgetary measures taken over the past year and restore fiscal resilience, would support stabilization of the Outlook and potentially upward rating movement toward its pre-pandemic level.

– A quick and sustained recovery in Illinois’ economic activity and revenue collections could support stabilization of the Outlook by allowing the state to preserve financial resilience and minimize exacerbating its structural budget challenges. Such a recovery is more likely now than even a few months ago given the rollout of multiple vaccines nationally and globally as well the high likelihood of substantial new federal economic stimulus. Similarly, structural changes that lead to materially higher revenues or reduced spending could also support stabilization of the Outlook.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

– A downgrade could be triggered by the lack of a credible path to reversing the state’s current pandemic-driven use of non-structural budget measures or by a reliance on short-term measures that materially compound the state’s long-term challenges such as its pension liability burden. Specifically, Fitch will assess any additional federal aid that could mitigate the state’s fiscal challenges and the long-term structural implications of the state’s fiscal 2022 budget currently under legislative consideration. Actions that materially exacerbate structural budget challenges, such as substantial use of one-time federal aid for recurring expenditures, could trigger negative rating action.

–More severe economic weakness than envisioned in Fitch’s coronavirus baseline scenario that triggers greater than anticipated, sustained and deep revenue declines and materially erodes the state’s gap-closing capacity could lead to negative rating action. Fitch’s assessment of the state’s long-term economic growth prospects could also be fundamentally weakened from an already modest level. This would pressure all aspects of the state’s credit profile.

Go read the rest. The legislature absolutely, without a doubt has to avoid putting that federal aid into the spending base. Period.

* Bond Buyer…

On Tuesday, the legislature’s Commission on Government Forecasting and Accountability revised its revenue estimates for the current fiscal year upward from last fall.

Warnings of a $4 billion gap last November due to the failure of the graduated income tax amendment on the November ballot and decision against tapping the full legislative authority to borrow $5 billion from the MLF overshadowed the positive news that $2.3 billion more in tax revenue was expected.

Base revenues were revised upward Tuesday again by another $596 million for the current fiscal year. That estimate tracks closely with the Governor’s Office of Management and Budget’s $485 million revision, said Jim Muschinske, COGFA revenue manager.

The state now expects $40.4 billion of general fund revenue for fiscal 2022, down from $41.6 billion this year, which was inflated by the windfall of income tax that flowed to coffers at the start of fiscal 2021 due to the extension of the tax filing deadline. Otherwise collections will continue to grow with personal income taxes rising by 3% and sales by 2.8%, slightly better than the administration’s forecast. Those figures don’t account for the impact of Pritzker’s proposals.

* Press release…

Illinois State Comptroller Susana Mendoza issued this statement Wednesday after the U.S. House of Representatives passed the $1.9 trillion American Rescue Plan:

“Thank you, members of the U.S. Congress and the U.S. Senate, for responding to the needs of America to survive COVID-19. This financial relief is needed in Illinois to pay back billions of dollars we borrowed from the federal reserve that allowed us to cover the state’s health care bills as we fight our way through this pandemic.

“As I said in my guest column in Crain’s Chicago Business today:

• Yes, Illinois and all states need the stimulus package.
• No, it’s not a ‘bailout’ of blue states by red states. People in blue, red, and purple states are hurting and need help. From 2015 to 2019, Illinois taxpayers sent $16.4 billion more to the federal government than they got back in federal spending. Illinois has dutifully served as a top donor state, helping some of those same dependent states whose senators now mislabel this stimulus as a “bailout.”
• Before we spend money on anything else, any stimulus money that comes to Illinois is earmarked to pay back money we borrowed from the Federal Reserve for the state’s COVID-19 and other medical expenses during this pandemic.
• Restaurants and hotels were closed and not paying sales taxes. Employees were laid off. Not only were they not earning a paycheck and not paying personal income taxes to the state, people who’d never sought unemployment benefits had to file for the first time and avail themselves of other state services. The state had less money coming in and more demand for services. It was a double whammy to the people and to the state budget, and it will take years to recover.
• No, we are not going to spend a penny of the stimulus on old pension debt that predated the COVID-19 pandemic.
• Yes, 76% of Americans support the stimulus, including 60% of Republicans.”

…Adding… Speaker Welch on the passage of the American Rescue Plan…

The COVID-19 pandemic has had a devastating effect on our state. Although we will never forget the lives we have lost and the hardships we have faced, we now know that help is on the way. Today, President Biden and the United States Congress officially approved a $1.9 trillion COVID-19 relief bill. The state of Illinois will receive $7.5 billion in assistance and local governments will receive another $6 billion. This is funding that will go towards schools, vaccine distribution, improved administration and operations for critical agencies like the Illinois Department of Employment Security, small business support and financial aid. This act will give direct payments of $1,400 to millions of Illinoisans. It will also extend and enhance unemployment benefits and expand the child tax credit, which will put more money directly in the pockets of our most low-income families. I am grateful to Senators Durbin, Duckworth, and our congressional delegation for making sure Congress took bold, swift action. Once guidelines are issued by federal authorities, I look forward to working with the Pritzker administration and our budget leaders on how to best appropriate these funds so they meet the needs of our most vulnerable communities. While I know the road to recovery will not be easy, this bill gives us the funds necessary to simultaneously address this health and economic crisis.

* Related…

* Taxes on unemployment benefits helped improve Illinois’ revenue estimate