If I had told you in the brief legislative session last May, when the state was still under a stay-at-home order and everything seemed to be falling apart, Illinois would have an additional $ 2 billion for paying off the rest of the $ 3.2 billion federal loan, you would have thought I was crazy.
But here we are.
A few weeks ago, the federal government said states could not use the billions of dollars they receive from the US bailout to pay off loans. This caused deep consternation in Illinois, which had planned to use some of its $ 8 billion federal aid to wipe out what was left of the loans it had received from the Federal Reserve’s municipal liquidity facility. .
However, the General Assembly’s Committee on Forecasts and Government Accountability revised its estimate of revenue for the current fiscal year the same week. The new forecast moved COGFA’s March projections up by about $ 2 billion. The governor’s Office of Management and Budget revised its own forecast upward by about $ 1.5 billion on the same day.
And then last week, the governor, Democratic legislative leaders, and the comptroller announced that the state would use its own revenues to pay off the federal government instead of relying on US bailout money.
The loan repayment will save the state about $ 100 million in interest, but it also frees up $ 1 billion in fiscal year 2023 that otherwise would have gone to the federal government if the state had remained on the original repayment schedule. “It prepares us for the future,” said a legislative budgetist.
The reimbursement decision was also viewed as prudent by some, as the newly ‘found’ money sparked a horde of expense claims from members, even though COGFA and the Governor’s Office of Management and Budget have all two pointed out that most of this revenue increase was one-time and would not recur in fiscal year 2022, which begins July 1.
Using the increased revenue to repay the federal loan therefore has the effect of bypassing this flood of new spending demands. It’s a fiscally smart move, which you usually can’t say about Illinois.
But that is not yet done, as many Democratic lawmakers will be unhappy that they cannot tap into the new revenue to fund what they see as crucial programs.
Some fear that the immediate spending pressures will win out in the end and undermine the Democratic leadership. House higher education credits committee chairman La Shawn Ford, D-Chicago, however, was pretty firm last week when asked for his opinion on using state revenues to pay back federal debt.
Ford warned of the state’s projected $ 1.3 billion deficit in the coming fiscal year and the absolute obligation to repay federal debt. He said both of these issues needed to be resolved while finding a way to “protect social services, public safety, education and general services,” adding: “There is a way to meet all of our obligations before the end. of the session “.
Looking ahead to the next fiscal year, the House’s main budget negotiator, Majority Leader Greg Harris, said last week that new revenue was needed to avoid “severe” cuts to just about everything. Nothing, he said, will be spared until the projected $ 1.3 billion deficit is closed.
The governor has proposed to close nearly $ 1 billion in “business loopholes” to avoid serious cost cuts, and there is an overwhelming reluctance to use one-time federal aid to close gaps in recurring government spending. State. Doing so would only kick the box and not allow the state to finally put its budget on the path to some semblance of stability.
The chairman of the only Senate appropriations committee, Elgie Sims, D-Chicago, has been telling me for several days that he hopes the budget produced this spring will result in real credit improvement for the state.
Illinois has hovered just a little click or two above junk bond status for a very long time, so an upgrade would be a very unusual and much appreciated event.
Controller Susana Mendoza has argued for such an upgrade before, but you should understand that evaluators in New York will wait and see how the final week of the session goes before venturing into this territory.
Rich Miller also publishes Capitol Fax, a daily political bulletin, and CapitolFax.com.
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