By: Mark Glennon*
The State of Illinois, like almost every state, has been pleasantly surprised over the past three years by revenues that soared and beat forecasts as federal pandemic stimulus kicked in. With that stimulus now ending, don’t be shocked if Illinois and other states get the same revenue surprise in reverse.
Federal pandemic relief was wildly oversized and stunningly irresponsible. It now totals over $12 trillion and counting. By June 2020, just six months into the pandemic, federal stimulus was already triple that for the entire Great Recession of 2008 – 2009.
Today, Illinois public and private direct federal stimulus receipts total almost $200 billion.
But that doesn’t count the indirect effect of all the new money created by the Federal Reserve Bank, which totaled about $5 trillion during the pandemic. Illinois’ share of that, based on population, comes to another $200 billion of stimulus.
Where did that new money go and how did it help? The central bank purchased bonds and mortgage securities with the money it created, driving down interest and mortgage rates, providing broad, powerful assistance across the economy (though inflation also followed as a consequence). Much of the resulting activity was taxed.
But the direct stimulus is now ending and the Fed has slammed its printing press into reverse. As the securities the Fed bought are getting paid off, the money the Fed gets is destroyed. It disappears.
The first real-time validation of those concerns came in the most recent monthly report from COGFA, the Commission on Government Forecasting and Accountability. For March, COGFA said the state’s mainstay General Fund revenues experienced their first monthly year-over-year decline of the fiscal year. That was no surprise, as COGFA pointed out, because this March’s revenue was not expected to keep pace with the torrid pace of last March, which was inflated by federal stimulus. Still, it’s a warning, and COGFA said a slowdown in revenues is anticipated during the final third of this fiscal year.
Illinois political bosses don’t seem very concerned. Most of them credit the improved revenue to their awesome leadership. Gov. JB Pritzker has been express about that. “Let me set the record straight for you,” he said last year. “Our state budget surpluses would exist even without the money we received from the federal government.”
Illinois Comptroller Susana Mendoza has been the only voice on the Democratic side warning about increased state spending. Give her credit for that.
The office of the Illinois comptroller is clerical. The comptroller just writes the checks for spending authorized by the General Assembly and governor. For that and other reasons, we regularly and harshly criticize Mendoza when she takes credit for the reduction in the bill backlog the state earlier faced. That reduction, as we’ve explained, resulted from many factors that don’t give bragging rights to anybody.
However, the comptroller does have a bully pulpit, and Mendoza has used it to warn against blowing Illinois’ surprisingly strong revenue over the past three years. Let’s hope she cranks up her warnings.
Congress, the Fed, Donald Trump and Joe Biden threw a nice party during the pandemic. It’s over. Beware the impact on state revenues.
*Mark Glennon is founder of Wirepoints.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
All of cash most likely wasted on new give away programs that don’t benefit anyone except a small targeted group. Has a politician every found a useful way to spend excess revenue? Not hardly.
Here in Evanston the idiots are pushing for a million – dollar “refugee welcoming center”, and a new animal shelter costing $1000.00 per square foot – much more per square foot than even the poshest North Shore mansion. We’ve also got a corrupt homeless “services” agency, Connections for the Homeless, that is awash in pandemic millions, and so they are turning once – nice Evanston into a Portland – style shitehole, with hundreds of beds in new shelters right adjacent to downtown. Then there are the “Green” initiatives… and the list goes ON and ON…!!!
Condolences. Time to get out and take your tax money elsewhere?
Anyone still in Illinois after 2023 will have wasted the additional time they were given to get out before Illinois raises taxes.
When the revenue drys up, and the recession hits, JB will deny any culpability and point to the national, if not global, recession. It’s not my fault he’ll bleat over and over. He’ll also blame Trump of course, because it’s all the bloviating buffoon knows how to do. His minions will nod in agreement and sing his praises. Nothing will change. Taxes will go up, people will continue to flee and dumbo Democrats will vote every D on the ballot into office. It’s the Illinois way.
It’s ‘bailouts or bust’ for the communists.
Never going to happen, they will always overspend other peoples money. That is taxpayer money. They spend money like a drunken sailor.
Remember when the Fair Tax failed in 2020 and everyone involved came to the realization that taxpayers don’t trust state government to approve of such a big change? The pandemic was the best opportunity to change that perception. They should have been forthright from the start about how and why state finances were doing so well. That would’ve built the trust they needed. Instead, they pandered.
The Dems have a fairly safe super-majority and most definitely safe majority status in Illinois. It’s not like they have much to lose. It’s a huge missed opportunity on their part.
IIRC, Mendoza voted in favor of making the 2011 state income tax hike temporary, which ultimately led to the bill backlog getting as bad as it did. Welch and JB might be the only higher ups not complicit in the 2017 backlog debacle.
Fat Fredo was clearly lying. He’s done nothing with the state finances to improve them independent of the funny money received from the Fed. So now that the Fed spigot has been turned off, the state will continue its death spiral into bankruptcy.
I tried to comment earlier. Once all the fed COVID $billions in revenue are spent in a year, I assume it will be next to impossible for an Illinois with all its public sector worker not to be diminished guarantees, Amendment 1, etc to CUT SPENDING on all the increased permanent increased salaries, permanent new employment position and permanent programs that the fed COVID $billions allowed/created. Hence, GIGANTIC revenue shortage that will have to be made up by taxpayers. An Indiana will just cut spending they have no crazy not to be diminished guarantees. Has anyone attempted to approximately calculate… Read more »
JB’s she’ll game. It’s that simple!
Name of the game—try the “fair tax” again….and shift tax revenues from the suburbs and downstate to vote rich Chicago in response to requests for “help from Springfield” and in the name of equity.
Maybe also some general assembly actions/mandates, such as the Unsafety Act, to degrade the suburbs, so the contrast to Chicago is not as bright.