Don’t blow this federal bailout, please

Of course, an enormous infusion of federal money will have its own effect on the Chicago-area economy, and here, too, our leaders must not allow yesterday’s habits of thought and deed to shape future actions. Our elected officials—Gov. J.B. Pritzker and Chicago Mayor Lori Lightfoot—must seize this opportunity to put the city and state’s financial affairs in the best possible order. Paying down debts and fulfilling IOUs is not the sort of spending that’s splashy, but it’s the kind that can go a long way toward repairing our battered fiscal image. Proof of that effect is already starting to emerge: On the same day President Joe Biden signed the American Rescue Plan, Moody’s Investors Service upgraded Chicago Public Schools’ debt slightly, citing the prospect that federal aid will help stabilize the still-junk-rated school system’s finances. With luck, more such upgrades are in the offing for all local government bodies, as new federal money helps put budgets back into balance.

Even before the $1.9 trillion federal COVID relief bill was signed into law on March 11, Crain’s columnist Greg Hinz enumerated how the money is going to be distributed locally. Aside from dollars being funneled to individuals and businesses—for example, about 11 million Illinoisans will get stimulus checks of up to $1,400 each, Hinz figures—local governments and agencies are big winners. 

The single largest chunk of the local stimulus will go to the state of Illinois, which is earmarked to receive $7.5 billion to shore up its budget and pay off old bills. The Pritzker administration is expected first to pay off more than $2 billion in outstanding loans from the Federal Reserve, Hinz reports, and to reduce its backlog of unpaid local bills.

The city of Chicago, meanwhile, is in for roughly $1.8 billion. The Regional Transportation Authority: $1.5 billion. 

The Lightfoot administration is also likely to use a large portion of its federal allotment to pay off debts. Officials had planned to balance much of her 2021 budget by refinancing $500 million in debt and deferring repayment costs years into the future, a tactic known as scoop and toss. But they also said they’d hold off until seeing what, if anything, Biden was able to get out of Congress. Some progressive members of the City Council already have been urging that any new money be spent, not saved or used as a substitute for borrowing. Lightfoot should stand firm that repairing the city’s finances, balanced with smart investments in infrastructure, are the best way to position Chicago for the economy of the future, not the money-wasting, slow-motion deterioration of the past.

via Crain’s Chicago Business

March 13, 2021 at 10:26AM

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