(The Center Square) – Depending on who you ask, the pandemic-era budget Gov. J.B. Pritzker enacted to begin July 1 is either the best it can be given the state of affairs, a placeholder, or the worst budget ever.
The budget spends nearly $43 billion from state funds while only bringing in $36.4 billion from state revenue sources. It relies on borrowing from a federal reserve program and federal aid that Congress hasn’t approved to make up the rest.
State Rep. Mike Zalewski, D-Riverside, said the budget is the best the state can do during a pandemic because it funds healthcare and education. He said he is not worried that the federal government has not yet acted on another aid package for state and local governments.
“I’m confident in the federal government’s ability to offer some money to the states, I think it’s a bipartisan cause, so I think it will get done,” Zalewski said.
While aid packages have been approved for direct COVID-19 relief and to help businesses, the federal government hasn’t passed anything to cover lost revenue for states and local governments.
A separate measure that lawmakers approved allows the state to borrow up to $5 billion from a new Federal Reserve program. But, even that is seen as a placeholder by a credit-rating agency.
“If the federal government does not provide additional direct aid, Fitch anticipates that the state would revisit its spending plan later in the year rather than fully utilizing the $5 billion authorization,” Fitch Ratings Senior Director Eric Kim said in a statement about Illinois’ budget.
Zalewski said the budget gives the governor some leeway during the pandemic.
“Frankly it’s giving the governor appropriation authority to be able to move back and forth while we’re still trying to sort out the future,” he said.
Public finance watchdog Wirepoints President Ted Dabrowski said leeway during a crisis is fair, but he said there was nothing in the budget to change state spending practices or address structural deficits.
“On top of that it ends up with a $6 billion deficit and they want to cover that with tax hikes and a bailout from the federal government,” Dabrowski said. “It’s probably the most irresponsible budget ever.
“We’re continuing the same path we’ve been on which is the reason why we’re just one notch away from junk and I wouldn’t be surprised if we’re the first junk-rated state in the country,” Dabrowski said.
In April, Fitch downgraded the state’s Issuer Default Rating to BBB- from BBB, or one notch above speculative grade, or junk status, with a negative outlook.
That “reflected the risk that the depth and duration of the downturn would lead Illinois to implement nonstructural budget-management measures that the state could find difficult to quickly unwind once an economic recovery begins to take hold,” Kim said. “The adopted budget is consistent with that view, but we also anticipate that the actual implemented budget will vary from the adopted version, potentially considerably, over the course of the fiscal year depending on several factors.”
Gov. J.B. Pritzker has said the General Assembly may have to revisit the plan if federal aid isn’t granted. He has also promoted his progressive income tax amendment to bring in billions more from tax increases in future years.
###
