May 11, 2023
The Federation praises the State’s responsible choices but urges caution around long-term agency spending plans, Tier 2 pension expansion proposals and public transit funding shortages
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(CHICAGO)—In a report released today, the Civic Federation offered its support for Governor JB Pritzker’s proposed FY2024 budget. The budget reflects the State’s continued recovery from the pandemic-fueled recession. The State has seen unexpected revenue growth and budget surpluses in recent years, and the Civic Federation strongly supported Governor Pritzker’s prioritization of using the surplus funds to pay down debt, make supplemental pension payments and increase reserves. Credit rating upgrades the State received in FY2022 and FY2023 are further indicators of the State’s strong financial position. However, the Federation has some concerns about the sustainability of sizable increases to recurring agency spending as proposed in this budget.
“The Civic Federation is pleased to support Governor Pritzker’s budget recommendation for the coming fiscal year, including smart choices about how to spend higher than expected revenue growth,” said Civic Federation Acting President Sarah Wetmore. “Increases to the State’s rainy day fund and fewer outstanding liabilities are noteworthy improvements; prudent management of funds places the State in a better position to handle future economic instability while at the same time supporting future growth.”
The Federation also supports increased appropriations to some of the State’s long-term investments, such as the Monetary Award Program (MAP) grants for college students and the Evidence-Based Funding (EBF) formula, which supports P-12 education. However, the Federation urges caution around the size of the Governor’s budgeted $2.7 billion, or 8.3%, increase in agency spending over the previous year.
“Weakening revenue projections for FY2024 both here in Illinois and in states across the country should serve as a warning to State policymakers, and all proposed increases in recurring agency spending should be closely evaluated to ensure long-term sustainability,” Wetmore said.
The Civic Federation continues to call for a long-term financial plan to address the State’s fiscal challenges, particularly as states and taxpayers continue to feel the strain of inflation and many experts project a national recession in the coming year. Budget shortfalls are already expected to return to the State budget in the coming years, and the State likewise must continue to navigate its massive unfunded pension burden. The State requires a long-term strategy to safeguard its stronger financial position while at the same time ensuring long-term financial sustainability.
The Federation also calls for a careful evaluation of proposals within the Illinois General Assembly to enhance Tier 2 pension benefits. The supporters of these legislative proposals bill them as a “fix” to meet federal requirements, but have released neither analysis to show that such enhancements are necessary immediately nor that the proposals “fix” the safe harbor issue.
“The Federation strongly recommends that the General Assembly conduct a comprehensive, statewide analysis to understand to what extent Tier 2 pension enhancements are necessary, when they might be needed and what long-term cost they would impose on taxpayers,” Wetmore said.
Also of concern to the Federation is the financial sustainability of public transit systems in Northeastern Illinois, which have critical implications for the State economy. Public transit agencies in the Chicago region, including the Chicago Transportation Authority, Metra and Pace systems, face a major funding crisis due to long-term shifts in work and travel patterns stemming from the pandemic, and what is considered to be a permanent decrease in ridership. Service disruptions as a result of funding shortages could have severe consequences for business and employment in the State of Illinois.
“Public transportation is an asset that the General Assembly must support as a critical component of the State’s broader economic engine,” Wetmore said. “It is important that the legislature and the Governor develop a plan for the future sustainability of transit with close consideration of the legislative recommendations expected early next year from the Chicago Metropolitan Agency for Planning, Regional Transportation Authority and civic leaders.”