By: Mark Glennon*
GOMB, the Illinois Governor’s Office of Management and Budget, released updated budget deficit estimates on Friday.
The revised cash-based deficit projection for the current year is $3.9 billion, but with a total bill backlog of $10.2 billion remaining at the end of the year.
First, the good news. Revenue for 2021 fiscal year, which began on July 1, has been coming in better than expected. Through the first four months of fiscal year 2021, income and sales taxes exceeded budget forecasts by significant margins, resulting a $1.84 billion increase in revenue forecast from those sources.
That and other adjustments netted out to reduce the projected deficit by about $1 billion from earlier estimates. The state now expects to collect about $39.1 billion and spend about $43 billion.
Longer term projections are more dire, showing deficits of over $4 billion in each of the following four years with the bill backlog ending up at over $33 billion. The full five-year projection is below.
These projections include none of the hoped-for cash relief from the federal government, or further borrowing from the Federal Reserve. The 2021 budget does include repayment of the $1.2 billion emergency loan already borrowed from the Fed.
How will the state fill the current year’s $3.9 billion cash hole? That remains to be determined and negotiated, but the new report includes Governor JB Pritzker’s view that additional tax revenue is needed in addition to spending cuts and federal help:
[T]he Governor continues to believe that cuts alone cannot be the solution and revenue adjustments need to be considered as well. The Governor will work with the legislature to identify corporate and business tax loopholes that can be closed and tax adjustments that can be made that will minimize the impact to lower-and middle-class families while ensuring that Illinois can meet its financial responsibilities. Furthermore, the Governor will continue to work with the Congressional delegation to support additional federal funding to help Illinois bridge the loss of revenues brought on by the COVID-19 pandemic.
The long-term, structural deficits clearly result from more than the pandemic and were projected long before it. Particularly notable in the long-term projection is the huge total in unpaid bills — $33 billion by 2026. That unpaid bill balance has already been creeping up in recent months and now totals $7.86 billion.
Keep our usual warning in mind. Like all government budgets, these new projections are only about cash going in and out. They ignore growing debt, including growing unfunded pension liabilities, which are Illinois’ biggest problem. Illinois may fill its budget deficit as it usually does, but its true books haven’t been balanced since 2001.
*Mark Glennon is founder of Wirepoints.