(The Center Square) – Gov. J.B. Pritzker said projections show the state could face a $7.4 budget shortfall in the next fiscal year if voters don’t pass his progressive income tax amendment in November as state revenue plummets because of the COVID-19 pandemic.
The governor said Wednesday that his office projects state revenue to decline $2.7 billion in the current fiscal year. State revenue could be down by $7.4 billion for the following fiscal year if voters don’t approve a progressive income tax amendment. Pritzker offered different projections based on short-term borrowing, leveraging $700 million from other state funds to cover government costs, and whether voters approve changing Illinois’ flat income tax to one with higher rates on higher earners.
Updated projections from the governor’s office for the coming fiscal year show declines in sales, individual and corporate income taxes.
“We will need to make extraordinarily difficult decisions on top of the difficult decisions that we’ve already made, but together with the state legislature, we will make them,” Pritzker said.
Pritzker also urged the federal government to pass another COVID-19 relief package to cover lost revenue for states.
Ted Dabrowski, president of public finance watchdog Wirepoints, said the federal government is responsible for fixing problems in Illinois that existed long before the pandemic. He said changes were needed to reduce the state’s pension costs along with measures to attract businesses – and jobs – to the state.
“And that starts, of course, with pension reform,” Dabrowski said. “It starts with labor reform, the collective bargaining reforms, and you’ve got to start cutting back on the spending. We just grow too fast on spending and we don’t allow our taxpayers to keep enough of their money to want to stay here.”
Dabrowski has called for an amendment to the state constitution to allow for cuts to pension benefits for public employees. Critics of that move have said it wouldn’t save a dollar in debt. Dabrowski said reforming pensions will save hundreds of millions of dollars in future costs per year.
He also said labor and collective bargaining changes were needed so the state and local governments can control costs and bring things in line with the private sector.
Lawmakers haven’t been in session for more than a month. State Sen. Robert Martwick, D-Chicago, said working groups have been discussing what next steps to take for when they can return to Springfield.
For the coming budget, he said what might be considered discretionary to one person could be considered essential to someone else.
“So we don’t have a lot of wiggle room and that’s going to be the real challenge here,” Martwick said. “We were already in a tough place with our budget before this pandemic hit and now we’re going to have to deal with a loss of revenue coupled with unexpected expenses.”
Martwick said those involved in state revenue policy have been “thinking creatively.”
Dabrowski said the state can’t tax itself out of the COVID-recession.
“We’re going to have to look at reducing salaries, we’re going to have to look at layoffs in the government sector,” Dabrowski said. “If not, it’s going to all be on the backs of the residents, the taxpayers who are without jobs and without a future right now. It has to be balanced, it has to be shared sacrifice, but the governor’s going to have to cut back billions in the budgets in order to make this thing work.”
Pritzker’s office said state agencies have been directed to hold off on all non-essential expenses, freeze travel and limit non-essential hiring.
The next fiscal year begins July 1.