(The Center Square) – There’s still no certainty regarding how Illinois will cover $6.3 billion of its upcoming pandemic-era spending plan that starts Wednesday.
A public finance watchdog said it shows the state’s policymakers haven’t learned their lesson after years of structurally unbalanced state budgets that have shaken investor confidence in the state’s ability to pay its bills.
Despite projected revenues being down by billions of dollars because of the response to the COVID-19 pandemic, the $42.9 billion spending plan that begins July 1 is the largest in state history.
Truth In Accounting Research Director Bill Bergman said it’s just a plan.
“What do we have? We’ve got a surplus in this budget of $87 million,” Bergman said. “That sounds good, doesn’t it?”
Bergman noted that $6.3 billion of the planned spending in the fiscal year 2021 budget has not yet materialized.
The budget does little to address legacy debt and other liabilities, like the $140 billion in unfunded pension liabilities and tens of billions of retiree health care liabilities. The state is also teetering on the verge of junk status with bond-rating agencies with negative outlooks.
One line item is $5 billion in borrowing from the federal government to pay off a $5 billion loan from a federal reserve program.
U.S. Sen. Dick Durbin is urging the Senate to pass the House Democrats’ $3 trillion bill that includes hundreds of billions of tax dollars for state and local governments across the nation.
“Many people may have laughed at our original effort at $3 trillion, but it was desperately needed, as is a second effort as soon as possible,” Durbin said on the Senate floor Tuesday.
Gov. J.B. Pritzker has said if the federal government doesn’t approve a bailout for states amid the COVID-19 pandemic, lawmakers may have to rework the budget.
Around $1.3 billion of the state’s planned spending is based on a tax increase from the progressive income tax on the ballot for Illinois voters to decide this November.
While those things aren’t certain, if they were, the spending plan has an $86 million surplus. But, Bergman said the state has already taken out a short term loan of $1.2 billion that comes with an interest rate.
“[The interest rate is] 3.82 percent, which on $1.2 billion is about $46 million of interest expense in order to fund the shortfall in the budget,” Bergman said.
“Even amid the pandemic, it’s as if the behavior hasn’t changed within the government,” Bergman said. “It’s as if you and I can borrow our way on to balancing our own budget by running up its credit card, so I guess the bottom line is Illinois hasn’t learned its own lesson.”