Credit the near $200 billion federal bailout, not Pritzker’s actions, for Illinois’ “improved” 2023 budget – Wirepoints

By: Ted Dabrowski and John Klingner

Gov. J.B. Pritzker delivered Illinois’ combined, annual State of the State and Budget Address on Wednesday. He took credit for Illinois’ “improved” finances when he released his administration’s $45.4 billion spending plan for 2023. “Illinois received two credit upgrades – the first in over 20 years,” he said. He also touted the paydown of the state’s bill backlog and celebrated an expected $1.7 billion budget surplus in 2022, “the first of its kind in more than 25 years.” 

But little, if any, of the credit for Illinois’ temporary fiscal improvements belongs to Pritzker or his administration. Illinois residents will be hard pressed to find any actions the governor or the General Assembly took over the last two years that actually improved the state’s overall finances – unless last year’s $650 million tax hike on businesses can be deemed a positive. There’s been no pension reform, no regulatory relief, no rollback in the state’s collective bargaining laws and no promised property tax reform.

The real thanks belongs to the massive $186 billion in federal COVID relief funds that has been poured into Illinois’ public and private sectors over the past two years. It’s those dollars plus direct grants to the state that have pumped up state income and sales tax revenues in the short term, patched some budget holes, improved the position of state creditors, and more. 

The impact of federal aid on Illinois

Illinois’ financial improvements can all be traced back to Illinois’ $186 billion in federal bailout funds. Knowing he’d get pushback from government watchdogs for his victory lap, Gov. Pritzker tried to dispute that fact in his address:

“Let me set the record straight for you — our state budget surpluses would exist even without the money we received from the federal government.”

How can Pritzker say that given his many pleas – and those of his party – for federal government support over the past two years?  Pritzker proclaimed several times that the state’s budget and economy could not survive without federal aid.

From WBEZ Chicago: “There’s no chance we won’t have to suffer severe, damaging cuts to higher education, to K-12 education, to basic services that people need if we don’t get any support,” the governor said. “That’s what’s going to happen to our state. We’re going to see just an enormous hole where we’ve made so much progress.”

From the Chicago Tribune: Gov. J.B. Pritzker warned that the state faces ‘extraordinarily painful’ budget cuts if the federal government fails to provide states with relief funding to make up for tax revenue shortfalls caused by efforts to deal with the coronavirus pandemic.”

And consider the following:

  • Illinois was the first state to beg for support from the federal government, when Sen. President Don Harmon asked for $42 billion in aid. It triggered this New York Times headline: “Illinois Seeks a Bailout From Congress for Pensions and Cities.”
  • Illinois was the only state in the country to tap the Federal Reserve’s Municipal Liquidity Facility program – and was so in need, it did so twice.
  • Research by Wirepoints found that Illinois was one of only a few states still running a deficit after all the federal aid prior to the American Rescue Plan was added to state budgets.

What revenues say

If Pritzker’s own words aren’t convincing enough, even a cursory glance at the governor’s own revenue projections shows what difference the federal bailouts made to Illinois’ finances.

Just 14 months ago, before the American Rescue Plan became a possibility under Pres. Biden, Gov. Pritzker’s budget office projected the state would have only $39.8 billion in revenues for 2023. Today, his proposed 2023 budget projects $45.8 billion in revenues – a massive $6 billion increase.

There is little Pritzker can point to in the past year that he or the legislature did, other than the $650 million corporate tax hike passed in 2021, that explains the state’s massive jump in revenues in such a short period of time.

The only explanation is the federal government’s massive cash infusion into Illinois. About $130 billion in the hands of individuals and companies – $70 billion in grants and loans, $28 billion in income support and $30 billion in direct stimulus checks – helped spike income and sales tax revenues to record levels.

To appreciate the impact all that money had on Illinois taxes, compare Pritzker’s 2023 revenue estimates to Illinois’ pre-COVID 2019 revenues – when the national economy was booming, markets were at record highs and unemployment was at record lows.

Individual income tax revenues are up 23 percent. Corporate tax revenues are up 101 percent (72 percent when you back out the corporate tax hike) and sales tax revenues are up 20 percent. In all, the big three taxes are adding $8 billion more in revenues compared to pre-COVID 2019.

Again, Pritzker had little to do with those increases.

Gov. Pritzker’s budgets are also benefiting directly from $8.1 billion in direct aid for the state as a result of the American Rescue Plan.

There’s more, too. We count at least $3.5 billion that’s targeted to the state for coronavirus relief and another $2.7 billion in Medicaid funds. In all, that totals more than $14 billion in aid. The Committee for a Responsible Federal Budget lays it all out here.

Pension boon

The federal bailout nationally was also a boon for state pension plans across the country. The trillions in spending found its way into the market and led to the biggest stock market returns in 30 years – what Pew called a “once-in-a-generation” jump.

In Illinois, state pension funds earned record investment returns of 23 percent or more. All that new money helped bring down the state’s pension shortfall to $130 billion in 2021, down from $144 billion the year before. 

It’s worth reiterating that lawmakers did nothing to reform state pensions over the period. In fact, they only made things worse by agreeing to bigger labor contracts, increased sick leave benefits and even larger pension benefits for some municipal workers (See appendix for the full list). 

Not to mention, the market can take away any gains as quickly as it gave them.

Upgrades

Illinois has suffered a long history of downgrades from the big three credit rating agencies – 13 under Gov. Pat Quinn, eight more under Gov. Bruce Rauner and once under Gov. Pritzker. And just before COVID appeared, Illinois was under threat of becoming the first-ever junk rated state in the country.

But more recently, Moody’s and S&P upgraded Illinois’ credit rating by one notch each

What changed so dramatically in such a short period of time? Once again, credit the billions of dollars gifted to the state. They have significantly reduced the probability of a bond default in the near term, which is ultimately what the credit rating agencies really care about. 

Note, though, that the state’s rating is still only two notches away from junk and is still the lowest of any state in the country. 

**************************

A couple of points before we conclude.

First, while Illinois’ financials may be temporarily “improved” as result of the bailouts, it can’t be ignored that the federal bailouts are destructive for the nation overall. Everyone will eventually end up paying for today’s printing and spending spree through some combination of inflation, higher taxes and future cuts in services. And as Illinoisans can see from every purchase they make, the pain from inflation is already here.

Second, we’re not saying that Illinois was the only state to benefit from the federal government’s largesse. As we’ll soon write in a companion piece, every state in the country has benefited handsomely. 

An honest appraisal

An honest state of the state would tell Illinoisans that the massive inflow of COVID aid is only temporarily hiding the state’s major problems. That Illinois still has the country’s worst pension crisis. That it is one of the country’s few states with a shrinking population. That Illinoisans are still punished by the country’s 2nd-highest property taxes. And that Illinois is still only two notches away from a junk rating, the worst in the country.

And an honest assessment would tell Illinoisans that the state needs massive reforms to begin fixing the above. Unfortunately, that’s not what we got from a reelection-focused Pritzker.

To read more of Wirepoints’ work on Illinois’ budget, click here.

Appendix:

Pritzker and the legislature have been busy passing laws that only serve to drive taxes higher:

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Fed up neighbor
2 years ago

I have to add in the picture presented in the article it looks like Pritzker is either giving thanks are holding a sermon, either way great picture of the great preacher.

Zephyr Window
2 years ago

Somebody please give me $2 billion. Maybe I could pay off the credit cards and maybe I could put a few dollars in a rainy day fund. Maybe i could do a couple of other things. Maybe i would break my arm patting myself on the back. Maybe

Wolfnight
2 years ago

What a crock.

Freddie Pritzker – political hack of the year already.

Does not care one iota about the good people of Illinois.

Corrupt to his core.

NoHope4Illinois
2 years ago

Surprisingly in the address, Pritzker directly appealed to the Covidstan Cult (comprised of many Karens) when he talked about cloth masks, which have been scientifically proven to provide ZERO protection against an airborne virus and admitted as such by the CDC, and how great he was to mandate such nonscientific cult-like mask wearing saying it was the ‘polite’ thing to do.

Pritzker is absolutely convinced he can gaslight his way to re-election with the media in his pocket. The Tribune offered no pushback on Pritzker’s outlandish claims, which could have been easily fact checked as untrue.

Chatty Cathy
2 years ago

When this all started, I learned that masks were never a way to halt the spread of a virus, you know —– the chain link fence stopping mosquitoes example—- that circulated online so many many times. In the history of science concerning masking, there never was a time that research showed that they were found to be useful. It was theater for control freaks to use and a way to keep the drama and fear going. (Karens thought they were safe all along). Nope! As the truth and what is really “science” slow-lllly trickles out, particularly in the lamestream media… Read more »

debtsor
2 years ago
Reply to  Chatty Cathy

“EVERY SINGLE THING he did was against science.”

Every decision JB makes, every tweet he tweets, every hire he makes, every press conference he gives, is a political decision designed to increase his own power. The benefit for the residents of the state is not even given a consideration.

Not the Senator's Son
2 years ago

This doesn’t surprise those in Illinois who have a brain. Unfortunately Mr. Pritzker is in way over his head and never should have purchased the Governor’s seat. His purchase has cost us dearly and we’ve lost another term where a good person who is actually smart and has a business head on their shoulders could help dig the state out of ruin. Pritzker is yet one more liberal who is ruining the state all the while he benefits and prospers. Funny how that works.

lindap
2 years ago

Just about everybody, if you have half a brain, know Pritzker is a lying sack of crap! The federal government is responsible for any “credit” improvement for the state. He’s pedaling a pack of lies and trying to buy votes. Smoke and mirrors.

nixit
2 years ago

When JB says “Let me set the record straight for you — our state budget surpluses would exist even without the money we received from the federal government.” I guarantee he’s only thinking about direct payments to Illinois government, not the payments that went to individuals and businesses who then paid taxes on that free money. And he might be wrong on that anyway. Of course, he’s doing that on purpose.

nixit
2 years ago

Those pension plan returns from 1995-99 might have caused more harm than good because that’s when many states decided to enhance their pension systems.

Last edited 2 years ago by nixit
Tim Favero
2 years ago

Thanks for an excellent and information article Ted and John. Pritzker is a liar and moreover, he is incompetent!

Chatty Cathy
2 years ago

The work you guys do is first-rate; but I have to wonder if it’s worth it. I heard a few clips of fatso laying all this out earlier and couldn’t help shaking my head, again and again. I was marveling — not at his chutzpah regarding all his claims, because we’re used to it —- but that he could make them with such ease, one after the other. Such deceit and such hubris! He thinks that all is well because of him, or at least says that it is, and then he’ll just throw some crumbs our way to make… Read more »

Ex Illini
2 years ago
Reply to  Chatty Cathy

Very well said. Pritzker is an example of the absolute worst kind of politician. He did not run for office to improve the lives of those he serves and represents. He ran for his own gratification and to feed his insatiable appetite for power. It comes through loud and clear in his arrogant and condescending tone when speaking. I agree that resistance may be futile, but falling in line isn’t the answer either. I have one foot out the door of this disaster of a state. Not sure how much longer I’ll maintain a residence here but with his likely… Read more »

Chatty Cathy
2 years ago
Reply to  Ex Illini

I loved your reply! Imo, he is the absolute worst! And I know about the arrogance and condescension. (You’d think someone on his team would have advised him to tone it down a bit, but I’m sure they love his attitude.)

I’d like to exit, myself. Just have to figure out where to go …… :/

Admin
2 years ago
Reply to  Chatty Cathy

Cathy, I think all politicians know that most voters have just a soundbite level understanding of things like the budget. In Pritzker’s case I assume he also knows that the press won’t challenge him enough to make any difference, so he can lie with impunity.

debtsor
2 years ago
Reply to  Mark Glennon

Although he may lie with impunity, fortunately, less than half the state listens to his bloviating.

Rob M
2 years ago
Reply to  debtsor

You forget what a mind effing the media is doing on the electorate. All of the shenanigans that have been pulled over the years and our media barley covered it. And then there’s the cherry picking of facts. They don’t report. They carry water for the politicians. Covid is as case in point. These rules are so arbitrary and based on politics you even have gutless school superintendents questioning the Governor now. They make rules that hurt those with the least power like small businesses and school children. Pritzker and Rauner before him, we’re allowed to essentially buy the governorship.… Read more »

debtsor
2 years ago
Reply to  Rob M

What does any of this have to do with Trump? A Republican slate would be a good idea. Rauner tried the Contract thing with voters using mostly 2000’s Chamber of Commerce stuff, all necessary but boring. It was DOA when it reached the legislature as Madigan chose to sit on it for four years to smoke Rauner out of office. And it worked. Any contract with the IL Voters as a slate would need to be a healthy mixed of business AND cultural platforms. CRT drives Republicans to the ballot box in droves. Any candidate that promises to issue an… Read more »

Chatty Cathy
2 years ago
Reply to  Rob M

You had me until you mentioned Trump. He wasn’t perfect, but I thought he did alot of good for the nation. Just look at where we’re at now

Chatty Cathy
2 years ago
Reply to  Mark Glennon

I know what you mean; kinda sounds like things with Obiden.

For those of us who are still here, our hope might be that people REMEMBER what he has done and then vote AGAINST him, rather than FOR any other individual. He has done so much damage, and that’s separate and apart from the dictatorial and disastrous approach he has been taking with the virus.

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