Pritzker administration optimistic about fiscal future with smaller deficits over next five years
SPRINGFIELD (WGEM) - Illinois received high praise from credit rating agencies over the summer. Now, the Pritzker administration is projecting a smaller financial deficit over the next five years.
Moving into the final year of his first term in office, Gov. JB Pritzker says the state is heading in the right fiscal path.
Illinois has long faced financial hurdles due to unbalanced budgets and pension debt. Of course, that’s completely separate from the budget impasse from 2015-2017 under the Rauner administration. But the Governor’s Office of Management and Budget is optimistic about the future.
GOMB officials provide this report to state lawmakers each year to help them understand where the state currently stands and what they could expect to see over time.
Director Alexis Sturm says revenue from income and sales tax from the first three months of this fiscal year exceeded initial expectations. That unexpected revenue brought the projected surplus up to $418 million in the general revenue fund. That’s a significant difference from the $88 million surplus projected in the FY 2022 budget signed in June.
Still, Sturm expects deficits to return in Fiscal Year 2023. The administration says FY 2023 could see a $406 million deficit, which is much lower than the initial projection of $2.9 billion. Yet, GOMB still expects the deficit could tower over $1 billion by Fiscal Year 2025.
Kent Redfield has followed Illinois state government for years as a political professor and researcher. The University of Illinois Springfield Professor Emeritus says he’s cautiously optimistic about the financial outlook.
“The indicators now in terms of both our revenue projections and our spending look an awful lot better,” Redfield said.
Sturm explained this deficit projection is the lowest level Illinois has projected since 2014. The administration also noted that paying off the debt from federal COVID-19 loans was a great move. They also highlighted Comptroller Susana Mendoza’s continued effort to pay down the state’s backlog of bills as an essential aspect of improving the outlook.
However, Republicans aren’t as optimistic about the state’s financial future. As a result, many GOP members stress that lawmakers should have a voice in how the state uses the remaining federal relief dollars.
Rep. Tom Demmer (R-Dixon) says Pritzker and Democratic leaders must address nearly $5 billion of debt in the unemployment insurance fund now because it is already gaining interest.
“To date, the Democrats have allocated zero dollars to pay off that debt. We’ve been pushing strongly,” Demmer said. “It’s COVID-related impact. We should use COVID relief funds to help pay that off.”
Demmer says that debt started to accrue interest in September. He also emphasized that the problem could cause unemployment tax increases for Illinois employers.
Redfield says the federal dollars for state and local governments relieved a lot of pressure. Although, Redfield stressed people have to remember that money won’t be there forever.
“There just is that effect from having that money coming in that’s giving you a bump,” Redfield said. “It won’t necessarily be there. So, there certainly could be warning signs and dark clouds on the horizon.”
He said inflation is already starting to become an issue that could drag on the economy. Redfield also explained a drop in continued consumer spending could lead to short-term hits for sales tax revenue in Illinois. He also noted another rise in unemployment could lead to fewer people spending money.
IHS Markit expects hiring to remain “sluggish” through the rest of 2021. However, the international analytics company expects hiring to improve slightly next year. They project a return to pre-pandemic levels of employment in 2023.
Demmer also noted the administration should remember the federal funds are taxpayer dollars. He says taxpayers and lawmakers on both sides of the aisle deserve to see transparency in how that money is spent.
“There have been repeated questions about how they’re using some of the federal dollars that have come in. We’re receiving just over $8 billion from the American Rescue Plan,” Demmer said. “The governor’s budget book today would indicate that we could use up to $6 billion of that in a single year. In a single fiscal year, you’d use three-quarters of the funds we got from the federal government.”
States could spread out the allotted ARPA dollars over four years. That’s why Demmer says Democrats and Republicans should ask the Pritzker administration how and why those funds are being used. He feels separating the funds across several fiscal years would be a more responsible decision.
Meanwhile, Pritzker says he’s committed to building on the state’s significant progress while tackling the remaining fiscal challenges.
“Together, we can build long term fiscal stability for Illinois while ensuring economic opportunity in all of our communities,” Pritzker said.
Still, the administration knows Illinois needs balanced budgets each year to address the underlying deficits.
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