By: Ted Dabrowski and John Klingner
The Illinois General Assembly has finally passed an emergency budget for 2021 after not being in session for two months. Tax revenues have taken a severe hit due to the impact of the shutdown in response to COVID-19, yet that hasn’t stopped lawmakers’ spending priorities.
The state will spend a record $42.9 billion while bringing in just $36.8 billion.
Lawmakers are counting on a combination of federal loans and grants to fill the official $6 billion deficit. It’s important to keep in mind that the state’s deficit is several billion dollars larger when the true costs of the state’s retirement costs are included.
Lawmakers did not include any potential revenues from Gov. J.B. Pritzker’s proposed income tax increase in the budget.
Here’s what you need to know about the 2021 budget numbers:
1. Record spending. The state plans to spend $2.5 billion more than its most recent 2020 spending estimates, a 6.2 percent increase. The new budget spends $42.9 billion in 2021 vs. the estimated $40.4 billion in 2020. That’s the state’s largest budget ever.
2. A $6 billion deficit. Lawmakers plan on spending far more than the $36.8 billion the state estimates it will take in. Income and sales taxes will be the most impacted by the shutdown. The deficit for 2021 totals $6.1 billion.
3. No cuts, no furloughs. The budget contains no government worker salary cuts or employee furloughs to provide tax relief for Illinois’ struggling private sector. State AFSCME workers are scheduled to receive a raise in July, even as more than one million Illinoisans are unemployed. In contrast, other states across the country are cutting operational costs. California, for example, recently announced plans to cut worker salaries and public education by 10 percent.
4. Counting on a bailout. The legislature expects to access a $5 billion short-term loan from the Federal Reserve to plug the majority of the deficit. Lawmakers are hoping they’ll be able to use federal grants from the not-yet-passed HEROES Act to repay the loan.
5. Retirement costs swallow more spending. The 2021 budget spends $11 billion on official state retirement costs. That will consume almost a third of the state’s own-source revenues.
6. The deficits aren’t what they say they are. Lawmakers might say the 2021 deficit is $6.1 billion, but the real number is far larger. True actuarial pension costs would add another $4 billion to the budget, while retiree health insurance costs would add at least $2 billion more. It’s this kind of accounting that’s led to the massive debt build up over the past three decades.
7. No reforms. The budget contains none of the reforms Illinois needed long before the coronavirus arrived. The pandemic makes them even more urgent. Lawmakers have seemingly forgotten the 22 downgrades slapped on Illinois over the past decade by the big three rating agencies.
8. Pay raises for politicians. No need to say much here. Lawmaker pay raises happen automatically, and the legislature passed no law to stop them this year. There’s some debate over whether the raise will actually happen. If it does, the $1,800 yearly raise will push salaries to $71,000 – already the fifth-highest in the nation.
Never mind the state of the economy, the record unemployment and the continuing COVID-19 crisis. With this budget, lawmakers have created an even bigger burden on the state’s private sector.
Some lawmakers argue that a record budget is needed because of the crisis. For sure there are essential parts that need more resources to deal with the pandemic, but that doesn’t mean that the rest can’t be delivered more cheaply. Public sector pay cuts and furloughs are needed to provide relief for the millions of private sector residents who have been devastated by the crisis and must pay for those public services.
There’ll be plenty more to say about this budget over the next few days and months, but consider it just the next step in Illinois’ long-running mismanagement…more borrowing, no cuts and big deficits. And this time, hope for a bailout.
Read more about COVID-19 and the impact on Illinois:
- COVID-19 spreads to half of all Chicagoland retirement homes. How did this happen?
- Big raises for Chicago Teachers Union, state’s AFSCME shows where federal aid to Illinois will end up
- Trading at junk levels: Illinois borrowing costs 5 times higher than AAA-rated states
- Pritzker’s overly-restrictive shutdown rules make Illinois a national outlier
- Half of Illinois’ deaths linked to retirement homes. Five key facts you should know.
- Wirepoints analysis reveals 92 percent of Cook County COVID-19 victims had pre-existing conditions