State’s revenue picture improves as economy recovers

State’s revenue picture improves as economy recovers

By PETER HANCOCK
Capitol News Illinois
phancock@capitolnewsillinois.com

SPRINGFIELD – Illinois budget officials said Thursday that revenues are flowing into state coffers at a faster pace than previously estimated, meaning lawmakers will have more money to work with as they try to finalize a new budget for the fiscal year that begins July 1.

The Governor’s Office of Management and Budget officially raised its revenue estimate for the current fiscal year by more than $1.4 billion and by $842 million for the upcoming fiscal year.

Those figures are similar to the latest revised estimates from the General Assembly’s budget monitoring agency, the Commission on Government Forecasting and Accountability, which said last week that revenues for the current year would go up about $2 billion while next year’s revenues would be $792 million more than previously forecasted.

That came as good news to state lawmakers who are trying to finalize the next fiscal year’s budget before their scheduled adjournment day on May 31, but it still was not enough to completely close the looming deficit in next year’s budget, which House Majority Leader Greg Harris, D-Chicago, estimated at around $1.3 billion.

“The choices are really clear,” Harris said during a news conference Thursday. “We’re either going to have to find ways to cut to fill that hole, or we’re going to have to review the proposals that the governor made to close corporate tax loopholes on wealthy individuals and corporations. Some mix of those will be required.”

In February, Pritzker proposed filling the budget hole with about $1.5 billion in revenue enhancements that included closing what he called “corporate tax loopholes,” but which Republicans prefer to call “business incentives.”

So far, however, lawmakers have not appeared anxious to take up Pritzker’s tax proposals, at least until they have a clearer idea of how big of a budget hole needs to be filled.

“I think there’s a number of things that the governor has proposed that we’ve asked members to take a deep dive and to be mindful of to think about how it would affect their constituents vis-à-vis the overall state budget…We remain very, very invested in trying to get a responsible budget to the governor’s desk,” said Rep. Michael Zalewski, D-Riverside, who chairs the House Revenue Committee.

Pritzker’s budget plan was drafted before Congress passed the American Rescue Plan, which will send about $8.1 billion in fiscal relief to the state. But the U.S. Treasury Department is still in the process of finalizing rules for how that money can be spent, and on Thursday, Harris cautioned against trying to use it to fill the state’s ongoing structural budget deficit.

“We know that this is an amount of money that can be spent over the course of four years, so we have to be very thoughtful as how we spend it over a period of time,” he said. “We know it’s largely one-time money. So I think we’re all going to want to look at it really carefully to be sure that we’re not building this into a base that then there would be a cliff when this money expired.”

State and local governments also stand to receive significant federal aid. According to Harris, the federal law will send about $5.9 billion to Illinois cities and towns, $5 billion to public schools, $1.3 billion to colleges and universities, $1.7 billion for public health programs, and $1.35 billion for child care and Head Start programs.

The Treasury Department has published interim rules that outline general categories of spending that qualify under the law. They include responding to the public health emergency or its negative economic impacts; providing premium pay to essential workers during the pandemic; making up for revenue lost due to the pandemic; and investing in water, sewer or broadband infrastructure.

The interim rules also say the funds may not be used for funding pension plans or paying down debt.

Pritzker and Comptroller Susana Mendoza have said Illinois should be allowed to use the money to repay short-term loans the state took out from the Federal Reserve during the pandemic, and they have urged federal officials to make that change when the final rules are published in July.

 

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government and distributed to more than 400 newspapers statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.

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