(The Center Square) – Illinois’ Comptroller thinks the state needs to take a page out of its residents’ books when it comes to saving for a rainy day.
Susana Mendoza, a Chicago Democrat, has introduced a plan to strengthen Illinois’ rainy day fund, something that’s been neglected for years compared to other states.
The proposal, House Bill 4118, calls for triggering monthly transfers into the Budget Stabilization Fund and the Pension Stabilization Fund when the state’s bill backlog is less than $3 billion. That’s the point in which Mendoza’s office estimates the state is paying bills within a 30-day cycle, which is customary in business.
“Illinoisans understand it’s in their best financial interest to put at least a little money into their savings every chance they get so they can be prepared for unexpected expenses,” said the bill’s sponsor, Mike Halpin, D-Rock Island. “State government should be no different.”
In February 2020, Illinois’ rainy day fund contained $60,000, enough money to pay for approximately 30 seconds worth of state operating expenses.
“Today it has about $9.3 million, which is the most we’ve seen in a long time, but when you compare the fact that our budget is billions of dollars, that’s nothing, right?” Mendoza told The Center Square.
The lack of sufficient rainy day savings is a major reason Illinois was the only state to borrow from the Federal Reserve during the pandemic to continue paying unemployment benefits.
According to Pew Charitable Trusts, the total amount set aside in state rainy day funds fell for the first time since the Great Recession. State rainy day funds nationwide had a balance of $71.6 billion in the fiscal year 2020, an amount second only to the pre-pandemic record-setting total of $78.7 billion.
“These are really a state’s best line of defense for eliminating budget gaps without harming residents or their economies during a recession or in response to unforeseen emergencies like the coronavirus pandemic,” said Justin Theal, an officer with Pew.
Illinois has been taken to task for its lack of reserve funds. A Volcker Alliance report gave the state a “D” for its reserve fund. That was the lowest grade given to any state, with only Kansas earning the same grade.
What little reserve funds the state had accrued after the Great Recession was used amid the two-year budget impasse between former Gov. Bruce Rauner and the Democratically-controlled Legislature. During that time, appropriation authority was limited to court-ordered spending and existing labor contracts, which saw uncontrolled overtime spending increase statewide.
“There is no question our state must do a better job of planning for future emergencies,” said Mendoza. “It’s the fiscally responsible thing to do.”
August 13, 2021 at 04:43PM