Rich Miller

Rich Miller

State’s fiscal heath looking good

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By Rich Miller

After taking a pandemic-induced hiatus from proposing large, permanent base spending increases and instead using most revenue increases for one-time expenditures, Gov. JB Pritzker’s recently proposed Fiscal Year 2024 state budget appears to increase base operational spending by at least $2.75 billion, or 7.9%.

Annual pension payments will also rise by a relatively modest $201 million, which ups the total base spending increase to $2.95 billion.

The Republicans warned that Gov. Pritzker was setting the state up for a massive tax hike if revenues plummet. But Pritzker and his people repeatedly pointed out that their revenue projections actually factor in a recession later this calendar year. Their projections are, the Pritzker folks say, “conservative.”

RichMiller 1

Rich Miller

After raising the current (2023) fiscal year’s revenue projections by $1.24 billion, to $51.36 billion, revenues are projected to fall by $1.4 billion in the coming fiscal year.

Net individual income taxes are projected to rise in Fiscal Year 2024 by $778 million, or about 3.3%. But corporate income taxes are projected to fall by $175 million, or about 3%. Sales tax revenue will be relatively flat, rising by just $25 million.

The governor’s budget director said one factor in the sales tax projection is the gradual shift of sales taxes on motor fuel purchases from General Funds to the Road Fund, which was negotiated when the capital bill was passed in 2019. She didn’t say, but another aspect of the flat growth is likely the projected recession. Transfers in will fall by about $1.3 billion below the current fiscal year, which the governor’s budget office has been assuming since last year.

Even if their revenue projections are wrong, “We’ve cut budgets before,” one Pritzker administration official said.

Even Comptroller Susana Mendoza, who spent the past couple of years warning legislators and the governor not to increase permanent spending programs, backed off, depriving Republicans and conservative pundits of a Democratic champion who they had already been using as a cudgel against Pritzker and the super-majority party.

After the governor’s budget address, for example, Senate Republican Leader John Curran issued a statement saying, “We must heed the warnings of Comptroller Mendoza and be disciplined in our fiscal approach at a time when we are likely to experience a recession.”

Instead, Mendoza deemed the large base spending hike as “careful, strategic and necessary investments.”

Human services will receive the largest spending increase at $912 million. Education, including higher education, will receive the next largest increase at $791 million. Healthcare costs will rise by $709 million and public safety expenditures will go up by $224 million.

To some, particularly progressives and social service providers, the governor’s proposed increase is a floor, not a ceiling. “The proposed budget’s lack of investment in the home care workers who make it possible for seniors to stay in their homes may force some to forgo needed care or be forced into nursing homes,” claimed an SEIU Healthcare leader.

“We now ask the General Assembly to build on this proposed budget and advance our legislation to increase the wage rate for Direct Support Professionals by $4 an hour to help address the workforce crisis Gov. Pritzker discussed today,” said an IARF official.

The Illinois Education Association wants vision and dental insurance coverage for retirees, and several groups are pushing a $500 million-plus annual state child tax credit.

The governor’s people say their proposed increases are a hard ceiling. Any new funding proposals will have to come from within the proposed budget framework and forecasts. However, revenue forecasts have been known to change in the past. Often, even.

The two Democratic legislative leaders issued statements in general support of the governor’s outline. The House Democrats’ chief budget negotiator, Rep. Jehan Gordon-Booth, said she wanted to work toward a “budget that is both fiscally and socially responsible.”

The governor’s budget director, Alexis Sturm, pointed out some other good news.

“For the four years before the governor came into office, the average interest payment was about $400 million,” Sturm told reporters. “We’re running nearly $300 million, if not more, below that average now.”

Ralph Martire at the Center for Tax and Budget Accountability said the revenue this fiscal year is high enough “to create true balance at the end of FY 2023, with no accumulated deficit carrying forward into FY 2024.” He also claimed that the deficit at the end of the coming fiscal year will be the lowest “in nominal, non-inflation-adjusted dollars that it has been in 25 years.”

Not bad.

Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.

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