PRESS RELEASE from the
ILLINOIS POLICY INSTITUTE

MEDIA CONTACT: Melanie Krakauer (312) 607-4977

What to know: Illinois’ unbalanced budget
Illinois Policy Institute warns a $7.5 billion federal stimulus isn’t enough to cover Illinois’ budget deficit, backlog of bills and pension payment, absent reform

SPRINGFIELD, Ill. (Feb. 17, 2021) – Going into Gov. J.B. Pritzker’s budget address today, Illinois’ financial condition is projected to be near its lowest point in history and worse than any other state in the nation.

Recently announced federal legislation – estimated to bring Illinois $7.55 billion in aid – would only partially close Illinois’ budget deficit for two years and wouldn’t be enough to halt Illinois’ long-term slide without additional reform, according to analysis from the nonpartisan Illinois Policy Institute.

Absent changes, an existing $3.9 billion budget deficit this year, a $4.8 billion budget hole for next fiscal year and a $4.7 billion gap for fiscal year 2023 were projected to grow the backlog of bills to $33 billion. Meanwhile, the federal relief would not be enough to cover the state’s estimated $11.6 billion pension payment for 2022.

The Institute’s analysis shows the only path to balance Illinois’ budget long term, while protecting services for the state’s most vulnerable residents, is to couple this influx of cash with a constitutional amendment for pension reform.

Fast facts on Illinois’ budget:

• Gov. Pritzker has already passed 20 tax and fee hikes during his first term and has indicated he is proposing more in his budget address through what his administration calls “closing corporate tax loopholes,” or raising taxes on businesses by eliminating existing credits and deductions. Pritzker’s administration is separately pursuing a small business tax hike worth as much as $1 billion. Prior to the promise of federal funds, his administration had threatened up to a 20% increase in the income tax and 15% reductions in all program spending to close the deficit.
• Illinois would have no budget deficit if Pritzker and lawmakers in the General Assembly had done two things differently when passing the current budget last May: 1) reformed pensions for $2.4 billion in structural savings, and 2) kept spending flat, rather than increasing it by nearly $2.4 billion.
• If the congressional legislation passes and is signed by President Joe Biden, the bill would also provide $5.68 billion to Illinois local governments. That would add $13.23 billion to the $10.8 billion in state and local government aid Illinois has received so far.
• A “hold harmless” pension reform plan developed by the Illinois Policy Institute would save the state roughly $2.4 billion the first year and more than $50 billion through 2045, while fully eliminating pension debt.

Adam Schuster, senior director of budget and tax research at the nonpartisan Illinois Policy Institute, offered the following statement:

“Illinois’ fiscal crisis was built on decades of bad fiscal policy, not caused by COVID-19. It will take several years of commitment and reforms to repair it. Springfield lawmakers should use this lifeline from Congress to prevent tax increases during an economic crisis and cancel any previously planned cuts to government programs for vulnerable Illinoisans.

“If lawmakers wisely use this opportunity to enact pension reform and other structural spending reforms, we can improve Illinois’ long term financial health once and for all. Without structural changes, we’ll be right back to a record budget crisis when federal aid expires – threatening taxpayers, programs for the vulnerable and the state’s economic recovery from COVID-19.”

To read more about the budget address, visit illin.is/budgetbailout.

For bookings or interviews, contact media@illinoispolicy.org or (312) 607-4977.