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* My weekly syndicated newspaper column…
If I had told you during the brief legislative session last May, while the state was still under a stay at home order and everything appeared to be collapsing, that Illinois would have an extra $2 billion laying around to pay off the remainder of a $3.2 billion federal loan, you might have thought I was insane.
But here we are.
A couple of weeks ago, the federal government declared that states could not use any of the billions of dollars they’re receiving from the American Rescue Plan to pay off loans. That caused severe consternation in Illinois, which had planned to use part of its $8 billion federal aid package to eliminate what was left of the loans it received from the Federal Reserve’s Municipal Liquidity Facility.
However, the General Assembly’s Commission on Government Forecasting and Accountability revised its revenue estimate for the current fiscal year the same week. The new forecast moved COGFA’s March projections upward by about $2 billion. The Governor’s Office of Management and Budget revised its own forecast upward by about $1.5 billion the same day.
And then last week, the governor, the Democratic legislative leaders and the comptroller announced the state will use its own revenues to pay back the federal government instead of relying on American Rescue Plan money.
The loan repayment will save the state about $100 million in interest, but it also frees up $1 billion in Fiscal Year 2023 that otherwise would’ve had to go to the federal government if the state had remained on the original repayment timeline. “This sets us up for the future,” a legislative budgeteer explained.
The repayment move was also deemed prudent by some because the newly “found” money was prompting a horde of spending requests from members, even though COGFA and the Governor’s Office of Management and Budget both stressed that most of this revenue spike was one-time and would not recur in Fiscal Year 2022, which begins July 1.
Using the increased revenue to repay the federal loan, therefore, has the effect of short-circuiting that flood of new spending demands. It’s a fiscally smart move, which is not something that one can usually say about Illinois.
But it’s not a done deal yet because quite a few Democratic legislators will be upset that they can’t tap into the new revenues to fund what they consider to be crucial programs.
Some are worried that immediate spending pressures will win out in the end and cause Democratic leadership to cave. House Higher Education Appropriations Committee Chair La Shawn Ford, D-Chicago, was pretty firm last week, however, when asked his opinion about using state revenues to pay off federal debt.
Ford warned about both the state’s projected $1.3 billion deficit in the coming fiscal year and the absolute requirement to pay off the federal debt. He said both of those need to be addressed while also finding a way to “protect human services, public safety, education, and general services,” adding, “There is a path to fulfill all our obligations before the end of session.”
As far as next fiscal year goes, the House’s top budget negotiator, Majority Leader Greg Harris, declared last week that new revenues were needed to prevent “severe” cuts to pretty much everything. Nothing, he said, will be left unscathed unless that projected $1.3 billion deficit is closed.
The governor has proposed closing almost a billion dollars in “corporate loopholes” to prevent severe cost reductions, and there is supreme reluctance to using one-time federal aid to patch holes in recurring state spending. Doing that would simply kick the can down the road and not allow the state to finally get its fiscal house on a path to a semblance of stability.
The chair of the Senate’s lone appropriations committee, Elgie Sims, D-Chicago, has been telling me for several days that he hopes the budget produced this spring will result in an actual credit upgrade for the state.
Illinois has hovered just a tiny click or two above junk bond status for a very long time, so an upgrade would be a highly unusual and much-welcomed occurrence.
Comptroller Susana Mendoza has already argued for such an upgrade, but you gotta figure the New York raters will wait to see how the final week of session plays out before venturing into that territory.
…Adding… Tribune editorial board does its thing…
The motto on the Illinois state flag is “State Sovereignty, National Union.” But these days, a more relevant one might be in order: “Fiscal Wreckage, State and Local.”
posted by Rich Miller
Monday, May 24, 21 @ 8:18 am
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“the newly “found” money was prompting a horde of spending requests from members”
*rubs temples*
I’m a pretty liberal guy, I love big government programs that actually help people, I think government can be and is a huge force for good in people’s lives, but my GOD sometimes it’s hard for me to support these so-and-sos. The state is broke, please, please, PLEASE THINK FOR ONCE. Keeping what we have, not having massive cuts, is a huge win here[exclamation point]. Take the win[another exclamation point]
Comment by Perrid Monday, May 24, 21 @ 8:32 am
==Fiscal Wreckage, State and Local.==
Coming from a newspaper once valued at 8.2 billion, now selling for 602 million.
Comment by Jocko Monday, May 24, 21 @ 8:40 am
Newspapers acting like they’re relevant is adorable.
Comment by Flyin' Elvis'-Utah Chapter Monday, May 24, 21 @ 8:55 am
Funny how a broke State finds a little money, and the pork-barrel gets rolled out despite said State being broke. We can only how JB and Mendoza can armtwist these foolish electeds into adult behavior.
As for the State of Illinois motto, the late Mike Royko nailed it decades ago: “Where’s mine?” (Nevermind the Latin translation, we’ve ain’t all fancy like that).
Comment by thisjustinagain Monday, May 24, 21 @ 9:16 am
Spend the money on paying back the feds. It’s good policy and politics.
California is doing very well, with a reported $75 billion budget surplus, thanks in part to progressive taxation and one of the few actual fiscal conservatives, the former governor Jerry Brown.
Comment by Grandson of Man Monday, May 24, 21 @ 9:23 am
Not that I’m cynical, but I’m wondering if that found money was just shoving the Federal money into the expected revenue stream and then using the ‘found’ money to pay back the Feds.
I do realize that, as the economy opens up, revenues this year almost have to be better than last year. But it still feels like budgeting sleight of hand.
Comment by RNUG Monday, May 24, 21 @ 9:37 am
=Not that I’m cynical, but I’m wondering if that found money was just shoving the Federal money into the expected revenue stream and then using the ‘found’ money to pay back the Feds.=
I know you know the answer to that question.
And, I am fine with that as it is paying off real debt. Rather than creating new spending.
We should get an upgrade, but the whole ratings industry is, as has been stated here many times, a complete racket.
Comment by JS Mill Monday, May 24, 21 @ 9:41 am
Even liberal as I am, I don’t believe in funding continuous projects and programming with one-time revenue. Sometimes you get socks and underwear for Christmas, and not the pony. Adult budget management requires adult choices to be made.
Comment by Give Us Barabbas Monday, May 24, 21 @ 9:49 am
Pay the debt, erase the deficit, fund existing programs. Without a graduated income tax, new programs must be funded by cutting existing programs. I’m getting multiple notices from great groups that want me to lobby my legislators and the Gov for increased funds for the great programs I support. No dice until the debt is paid off.
Comment by Froganon Monday, May 24, 21 @ 9:52 am
Refreshing that the Alden Capital Editorial Board is reconsidering the usual rubbish they peddle!
/s
I’m sure the rank and file Democrats are pushing for more spending, but encouraging to hear the Approps committee chairs saying the right things.
Comment by The Doc Monday, May 24, 21 @ 10:05 am
“Fiscal Wreckage, State and Local.”
From the fine folks that endorsed Bruce Rauner… twice…. Now that is some fiscal wreckage.
Comment by Ducky LaMoore Monday, May 24, 21 @ 10:38 am
==California is doing very well, with a reported $75 billion budget surplus==
$38 billion, although I’m not sure if I’m more impressed that both their budget surplus and Gov Newsom’s rounding error nearly exceeds our entire state budget.
Comment by City Zen Monday, May 24, 21 @ 10:49 am
=== California===
Thanks, Jerry Brown… and your taxes, and your fiscal belt tightening…
Also… the “California Exodus”… and taxes, and fiscal tightening.
It’s like the mental gymnastics of the Tribune Editorial Board, lol
To the post,
Rich puts into the spotlight what places like they Trib Edit Board doesn’t want to keep their bumper sticker phony.
This column reminds of the fiscal challenges that are all to real to social services, state agencies, and functioning government… while reminding, again, the upgrades are, in my own opinion, arbitrary to the ideals, but wholly blind to constitutional mandates and the budgetary requirements to the constitution.
Illinois deserves at least an upgrade on bind history and the constitution alone…but right now, playing within the racket that is the bond ratings might mean helping the budget too?
Comment by Oswego Willy Monday, May 24, 21 @ 10:57 am
“From the fine folks that endorsed Bruce Rauner… twice…. Now that is some fiscal wreckage.”
Their doom and gloom editorials after Foxconn chose Wisconsin was even more embarrasing.
Comment by MrX Monday, May 24, 21 @ 11:45 am
We would have almost certainly had a brighter fiscal outlook with a progressive state income tax, but the voters made clear that they want to keep giving more of their money to Springfield politicians while protecting the richest. That kind of gape-mouthed, drooling naïveté, being bamboozled out of tax cuts by the state’s richest resident, should get no sympathy.
Comment by Grandson of Man Monday, May 24, 21 @ 11:52 am
The one section I do not read in the ChiTrib is the editorials. Not worth it. I keep thinking I should drop that subscription but I like to read Pearson et al and keep my sub.
Comment by Nearly Normal Monday, May 24, 21 @ 11:54 am
It is sort of funny how much criticism there was for using the Fed loan to bridge the budget gap last year.
Honestly seems to have worked out pretty well in the end. We avoided more unnecessary cuts, can pay it back without federal help, and its a great example of fiscal prudence.
Comment by Nick Monday, May 24, 21 @ 2:48 pm