March 24, 2022
While robust economic recovery, federal funds help put Illinois in strongest financial position in years, significant challenges remain
(CHICAGO)—In a report released today, the Civic Federation offered its support for Governor JB Pritzker’s proposed FY2023 budget. The budget benefits from extraordinary revenue growth as the State has recovered strongly from the pandemic, with surpluses projected for FY2022 and FY2023. As detailed in the analysis, Governor Pritzker has prioritized the use of much of the surpluses to pay down debt, increase reserves, make supplemental payments and advance other priorities that the Civic Federation supports. The State is in a much stronger position than it has been for many years, as recognized by two recent credit rating upgrades, and the backlog of unpaid bills is the smallest it has been in many years.
“The Civic Federation is pleased to support Governor Pritzker’s budget recommendation for the coming fiscal year, including responsible allocation of billions of dollars in federal aid and the prudent use of surplus funds to begin to chip away at some of Illinois’ staggering longtime financial burdens,” said Civic Federation President Laurence Msall. “Before the window of opportunity opened by this stability slams closed, the Governor, Illinois General Assembly and all leaders in Springfield must develop a comprehensive plan that will stabilize the State of Illinois’ finances in the long-term and prepare for future unexpected economic adversity.”
The Federation strongly supports Governor Pritzker’s proposal to use higher-than-expected State revenues to make supplemental pension payments beyond the statutory minimum, a step which has never been taken since implementation of the 50-year statutory funding plan in the 1990s.
“The Governor’s proposal is in stark contrast to gimmicks and dubious accounting changes that have historically been implemented to make or reduce already insufficient statutory payments,” said Msall.
In addition to the aforementioned supplemental payments and proposed rainy day fund contributions, the Civic Federation can support three of the four tax relief proposals included in the budget recommendation. Proposals for suspension of the sales tax on food and drugs, a property tax rebate and some license-fee waivers are narrowly targeted, have limited revenue impact and will sunset after one-year. The fourth proposal—a freeze in the scheduled cost of living increase in the motor fuel tax—provides minimal benefit to consumers and risks significant loss of current and future revenue while potentially setting a negative precedent for further tax freezes or even reductions at the expense of critical transportation improvements.
Civic Federation recommendations for the State of Illinois, all of which align closely with the primary recommendation to establish a long-term financial plan, include eliminating Prompt Payment Act interest penalties in favor of more market-based rates, using a portion of American Rescue Plan funding to pay down outstanding Unemployment Trust Fund liabilities, establishing a rainy day fund equal to 10% of General Funds revenues and various transparency and modernization initiatives.
“At the risk of sounding like a broken fiscal record, everything comes back to long-term planning for the State of Illinois and its local governments,” said Msall. “The COVID-19 pandemic is not yet over, there are significant disruptions in the international economy right now and we cannot be certain when another disruption will emerge. These would cause uncertainty for even the most fiscally stable of governments. Accordingly, it is vitally important that State leaders make plans and investments to ensure that Illinois is in a strong position to weather whatever storm comes next.”