Illinois should use the more than $8 billion in federal stimulus funds to apply toward a projected $1.3 billion budget deficit in the next fiscal year and forgo Gov. JB Pritzker’s suggested elimination of $932 million in corporate tax breaks, a nonpartisan public-policy research group says.
The Chicago-based Civic Federation said in its analysis that Pritzker’s proposal — a spending plan that would provide essentially flat funding for most parts of state government in fiscal 2022 — was a “reasonable one-year short-term response” to the state’s “stressed financial and economic situation” during the COVID-19 pandemic.
The federation said in its 51-page report issued late last week that it could support the proposed budget if the tax breaks were removed. The money Pritzker hoped to save by repealing those tax breaks could be made up with federal money from Illinois’ share of the $1.9 trillion American Rescue Plan, Civic Federation President Laurence Msall said.
Pritzker’s proposed elimination of the tax breaks, which the governor has called “corporate loopholes,” would amount to tax increases for the business owners and others directly affected, Msall said.
“Increasing taxes during a recession can easily exacerbate the negative impacts of the recession and hamper the economic recovery,” Msall said in a news release.
The federation also didn’t like the part of Pritzker’s plan that would generate $182 million for state government through a 10% reduction in state income tax transfers to local governments and transit districts.
Stimulus money also could be used to make up for the $182 million Pritzker hoped to funnel back to state government, the federation said in its report.
“Reducing state assistance to cash-strapped local governments makes it harder for them to meet their obligations in a time of fiscal distress and may well force property tax increases,” the report said.
“Stimulus funds primarily should be used to stabilize the state’s financial position,” the report said. “They should not be used to add expansive new recurring programs that do not have a recurring revenue source.”
The Democratic governor’s $41.58 billion plan for general-funding spending is being debated in the General Assembly and is expected to be tweaked before the legislature’s scheduled May 31 adjournment.
The report noted that the proposal would make the full statutorily required requirement for the pensions of retired state workers and would “appropriately” shift some capital funds to the general fund for one year.
But the report said the budget outline “does not begin to address the state’s long-term structural problems, such as its massive unfunded pension liabilities.” Those unfunded liabilities exceed $130 billion.
Aides to Pritzker didn’t respond to a request for comment on the Civic Federation report.
Illinois House Majority Leader Greg Harris, D-Chicago, told reporters last week that additional costs Pritzker and lawmakers have discussed since the governor issued his budget proposal in February will require “some mix” of eliminating tax breaks and budget cuts — even with the federal stimulus money.
Harris said Pritzker at first proposed forgoing a recommended $350 million increase in the K-12 school aid formula for a second consecutive year but now wants to find money for the increase. Many lawmakers have expressed support for the $350 million boost.
Harris said $296 million also needs to be appropriated for the Medicaid program to deal with pandemic-related medical expenses for low-income Illinoisans.
Lawmakers also are considering using some of the stimulus funds to reduce the years-long waiting list of developmentally and intellectually disabled people in line for state services, he said.
Elected officials are asking the federal government for permission to use some of the stimulus funds to pay off government debts related to the pandemic. Officials had hoped to use pandemic relief money over several years to pay off $3.6 billion Illinois borrowed from the federal government for this purpose.
The U.S. Treasury Department’s interim guidelines prohibit the use of stimulus funds to pay off borrowing, even if it’s related to the pandemic.
U.S. Sen. Dick Durbin, D-Springfield, and 10 other Democratic members of Congress from Illinois wrote to Treasury Secretary Janet Yellen on May 13, asking clarification of the guidelines to allow for the funding “to directly repay short-term borrowing by the state and localities which was necessitated by the pandemic and used to help mitigate their response to it.”
May 19, 2021 at 06:05AM