Citing an improved economic outlook in the COVID-19 pandemic, Gov. J.B. Pritzker’s latest budget proposal will devote an extra $500 million to Illinois’ nearly insolvent pension funds, pump $200 million into a “rainy day” fund and tamp down the state’s unpaid bill backlog — all while providing $1 billion in tax cuts, freezes and rebates, administration officials said Wednesday.
Pritzker was scheduled to outline the ambitious $45.4 billion election-year spending plan during his “State of the State” speech at noon in Springfield, in a downsized event held at the Old State Capitol Building due to a massive winter storm sweeping the state.
In a media preview ahead of the speech, the governor’s top advisers claimed the new spending plan keeps the state on track to end in the black for back-to-back years for the first time in 25 years.
Spending in the state budget actually has increased – significantly – under Gov. J.B. Pritzker relative to baseline expectations in the state budget. Even if lawmakers and the governor make no further increases to spending in the fiscal year 2023 budget, which is unlikely given that Pritzker has proposed spending increases in each February budget address of his term, then total spending during Pritzker’s first term will be up nearly $5 billion, or 3% higher than when he took office.
In fact, the state originally did intend to pay off the Federal Reserve loan with other federal bailout money from ARPA, the American Rescue Plan Act, according to The Bond Buyer. But the “Treasury threw a wrench in repayment prospects” when the initial federal guidance barred the use of ARPA aid for debt repayment. “The state lobbied for a change in a letter to Treasury Secretary Janet Yellen. But as state tax collections turned rosier, state leaders opted instead to cover repayment with tax collections,” says The Bond Buyer.
The bottom line is that all of us, as federal taxpayers, will bear the cost of the federal bailout, for Illinois and other states, whether through higher taxes to repay the Treasury or inflation created by Federal Reserve money creation. And Illinois will be worse off because only Illinois borrowed extra and incurred interest costs.
So, no, Governor Pritzker, paying back this loan ahead of schedule doesn’t mean Illinois achieved a “level of fiscal prudence not seen in our state for decades.”
A proposed mandate to shutter the $5 billion Prairie State coal energy campus and a Springfield, Illinois? plant by 2035 would hit local ratepayers with the double burden of funding new energy sources while still paying down project bonds, a bipartisan group of state lawmakers warn.
Gov. J.B. Pritzker backs a state mandate to end coal generation by 2035 to meet de-carbonation targets included in pending energy legislation. The package stalled during the General Assembly?s spring session that ended last week, but Pritzker said he expects lawmakers will return in the coming weeks for a vote.
Retiring Prairie State early would mark the latest headache for some of the nine public utilities in Illinois, Indiana, Kentucky, Missouri, and Ohio that issued $4.5 billion of debt, some it under the federal Build America Bond program, to finance their ownership in project.
Peabody Energy Inc. initially sponsored the project in Washington County promoting it as an affordable source of energy with an adjacent mine and a cleaner one given its state-of-the-art technology at the time. Bechtel Power Corp. built it. It initially carried a $2 billion price tag that rose to a $4 billion fixed cost under the 2010 contract with utilities but cost overruns drove the price tag up to $5 billion.
The federal government will soon give the cash-strapped state of Illinois $8.1 billion to cope with the fallout from the COVID-19 pandemic, but next year state officials plan to use less than a third of the windfall.
That means that some $5.5 billion in unspent federal cash will remain in state accounts until lawmakers figure out how they want to use it. The state treasurer’s office will invest the money, along with the $38 billion it is already responsible for investing.
Ironically, Illinois is supposed to get its money faster than many other states because of its urgent need. Most states will get their money from the American Rescue Plan Act in two payments, a year apart. But Illinois is expected to get its full share all at once in the coming months, because it has a high unemployment rate.
The fact that Illinois is letting so much money sit in the bank, even when it has a long list of pressing financial needs, has a lot to do with the rules the federal government wrote for how states can use the Rescue Act money.
(Bloomberg) — The U.S. Treasury Department is sending a message to states and cities that the billions in aid from the American Rescue Plan should provide relief to residents, not their governments’ debt burdens.
The department on Monday released guidance on how state and local governments can use $350 billion in funding from President Joe Biden’s $1.9 trillion rescue package. The funds are intended to help states and local governments make up for lost revenue, curb the pandemic, bolster economic recoveries, and support industries hit by Covid-19 restrictions. In a surprise to some, these funds can’t be used for debt payments, a potential complication for fiscally stressed governments that had already etched out plans to pay off loans.
Illinois Governor J.B. Pritzker had suggested using some of the state’s $8.1 billion in aid to repay the outstanding $3.2 billion in debt from the Federal Reserve’s emergency lending facility and to reduce unpaid bills. Illinois was the only state to borrow from the Fed last year, tapping it twice. On Tuesday, Jordan Abudayyeh, a Pritzker spokesperson, said the administration is “seeking clarification” from the Treasury on whether Illinois can use the aid to pay back the loan from the Fed.
The rule could also affect New Jersey, which sold nearly $3.7 billion of bonds last year to cover its shortfall during the pandemic. Assembly Republican Leader Jon Bramnick, a Republican, in April had called for Governor Phil Murphy, a Democrat, to use some of the federal aid to pay down the state’s debt.
Of course, no one can know the true extent to which Pritzker has been able to reduce his tax bills through loopholes and carve-outs over the years, because he refuses to release his full tax returns. In recent years it has been revealed Pritzker went to great lengths to avoid paying taxes, removing toilets from his Gold Coast mansion to skimp on his property tax bill by $331,000 and establishing shell corporations in the Bahamas in a likely attempt to avoid U.S. income taxes. The toilet ploy earned him a federal investigation.
The letter, which pushes for tax reforms that would almost exclusively benefit the wealthy, comes less than six months after Pritzker’s progressive income tax amendment was rejected by voters and is a significant departure from his previous stance on taxation. In the letter, Pritzker claims the cap hurts middle-class taxpayers and is “untenable” during these dire economic times. Because the data is clear on who directly benefits from the SALT deduction, one can only assume the governor is implying higher taxes on the wealthy also hurt Americans with lower incomes.
That is precisely the argument opponents of the “fair tax” made after the governor first unveiled his tax-the-rich scheme in 2019.
Anybody who’s been following Chicago knows the last thing the city needs is more debt. Chicagoans are being swamped by pension debts, already the biggest per-capita burden of any major city in the country. By signing the new legislation into law, Pritzker has shoved more debt onto ordinary Chicagoans.
Not surprisingly, Moody’s has called the action “credit negative…because it will cause the city’s reported unfunded pension liabilities, and thus its annual contribution requirements, to rise.”
Two important facts to note about the city’s pension shortfalls. First, Chicago officially says its four city-run pension funds – police, fire, municipal and laborers – are short by some $31 billion. But Moody’s puts the number at nearly $47 billion using more realistic, market-based assumptions.
Second, those debt numbers don’t include the Chicago Public Schools. When you add its $23 billion (Moody’s, 2018) pension shortfall, the total burden on Chicagoans for Chicago-only debts jumps to $70 billion. Divvy that between Chicago’s 1.04 million households and you’re talking about $67,000 in debt each. And that number far underestimates the real household burden considering nearly 20 percent of the city’s population don’t have the means to contribute a dime to that pension shortfall.
Chicago households are on the hook for a combined $63,000 in Chicago-only debt, based on Moody’s calculations. It’s why the city and the school district have been junk rated for years.
Pritzker’s COLA increase runs against what most of Illinois’ political elite already know – COLA cuts are necessary and inevitable at all levels of government. As Greg Hinz said in his review of Wirepoints’ Pension Solutions, “…that juicy perk over time has amounted to megabillions that state government just doesn’t have.”
The COLA hike will cause more financial headaches for Chicago. Mayor Lori Lightfoot says the COLA increase will cost the city an additional $18 to $30 million a year in pension costs. In all, the perk will force taxpayers to pay an additional $850 million over time.
Illinois Gov. J.B. Pritzker signed legislation that benefits retired Chicago firefighters, rejecting city warnings adding to its already burdensome pension tab could damage ratings and drive up taxes.
The added cost to bring cost-of-living adjustments for all firefighters in tier one up to a simple 3% annual increase despite their birth date amounts to $18 million to $30 million annually and up to $823 million in full by 2055 when the fund is slated to reach a 90% funded ratio.
Pending legislation to do the same for the police fund carries a steeper price tag of up to $90 million annually and $2.6 billion through 2055.
* The Illinois Hotel & Lodging Association live-tweeted testimony today by Chicago Federation of Labor President Bob Reiter to the Senate Tourism and Hospitality Committee about the city’s convention business…
@BobReiterJr from @chicagolabor during IL Senate Tourism Cmte. hearing: Decisions made now will impact the #travel industry for this summer and beyond. Without a roadmap, current regulations are causing events to be canceled as far out as 2022.
@BobReiterJr: Other states like Nevada & New York are moving ahead w/ changes to allow for events to reopen. We have been working w/ health experts on protocols and believe events should resume w/ 50% occupancy cap and no maximum as long as precautions are implemented.
A balancing act needs to be had that protects people’s health but also need to look at what needs to be done to get people back to work. 25-30,000 union hospitality & convention workers are out of work & are making the decisions b/w paying for healthcare, mortgage or buying food
Gov. J.B. Pritzker’s administration has a Wednesday deadline to start turning over documents justifying why it ordered restaurants to limit their operations during the COVID-19 pandemic.
Attorney Greg Earl, with Myers, Earl and Nelson P.C., represents Geneva-based FoxFire restaurant, which sued the governor last fall.
“FoxFire is continuing this fight because what happens if another strain, that’s what we’ve heard of, another strain from Europe or South Africa hits and the governor decides to put in another 30-day window,” Earl said.
The governor has already issued 12 months of executive orders related to the pandemic. His most recent order issued Feb. 5 expires March 7.