The state’s “rainy day” fund — spent to virtually nothing during the 2015-17 budget stalemate — now has its highest balance of $750 million after depositing $320 million this week.
Although statutory remittances don’t usually make the headlines, the fact that the state pockets money is a rarity that merits closer examination.
The Fiscal Stabilization Fund, as it is officially called, was enacted into law in 2000 with the goal of “reducing the need for future tax increases, maintaining the highest possible bond rating, reducing the need short-term borrowing, to provide resources available to meet government obligations whenever occasional deficits or declines in income occur, and to provide the means to remedy budget deficits”.
He has remained woefully underfunded since his first deposit of $600,000.
“The first year I took office in 2016, the rainy day fund had crashed to about $60,000 — not enough to run state operations for 30 seconds,” Comptroller Susana said Thursday. Mendoza in a statement.
Mendoza took office in December 2016, smack in the middle of a two-year period in which the state has failed to pass a budget, spending billions of dollars more each year than it has. received income.
Thus, the “Rainy Day” fund was used to keep the cogs of state government moving, and its balance of $276 million in June 2016 hit a low of around $69,000 at the end of 2017. It rebounded to around $17 million at the end of 2021 while seeing lows amid the COVID-19 pandemic.
Although the $750 million covers only about a week of state spending, given the overall budget of $46 billion for the coming fiscal year, it still marks a near tripling of its previous high.
According to Governor JB Pritzker’s signed spending plan for the next fiscal year, he will receive an additional $280 million after July 1, bringing his balance to more than $1 billion. The budget also removed more than $1 billion in other interest-bearing state debt.
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This was noted by all three major rating agencies, which raised Illinois’ credit rating by two notches each over the past year.
As Illinois remains at the bottom of all states in credit ratings, reversing the downward trend for the first time since the Pat Quinn administration is something Pritzker will hang his hat on as he seeks a second mandate.
It’s a message he brought this week to the Chicagoland Chamber of Commerce, where he compared the six cumulative credit rating upgrades to eight notches of downgrades received by the state under the former government. republican. Bruce Rauner, who presided over the two-year standoff.
“The state’s long-standing structural deficit is almost gone,” Pritzker said. “Our pension debt is lower than I was when I took office and is now 10% below its peak.
“I am in the process of restoring the state’s rainy day fund. In fact, we have invested a billion dollars in it. This is the highest amount he has ever had. And by the way, we did all of this without the help of federal money from the (American Rescue Plan Act) program.”
The state’s pension debt stood at about $130 billion at the end of 2021, up from about $144 billion the previous year, although the Commission on Government Forecasting and Accountability noted that the decline was largely the result of unprecedented – and likely unsustainable – investment gains. by more than 20 percent.
As for the governor’s ARPA claim — referring to about $8.1 billion in direct federal payments to the state — it’s true that federal funds were spent on one-time spending and the budget wasn’t directly balanced. by the influx of funding.
But officials from COGFA and the state’s Department of Revenue told lawmakers at a February committee that the indirect results of federal spending largely propagated some of the strong revenue performance of the “big three” revenue streams. State – personal income tax, corporate income tax and sales. tax. This led to state coffers receiving $4.8 billion more in the current fiscal year with one month remaining than the previous year, according to COGFA.
In part, the income gains resulted from increased unemployment benefits and direct payments to Americans, which increased the tax base and consumer spending. Additionally, spending habits shifted toward purchasing taxable goods and away from untaxed services as Illinois people stayed home.
Republicans also pointed to “inflation-induced high sugar” because higher prices drive up tax revenue.
Still, Pritzker points out that the influx of funding largely served to reduce interest-accumulating debt and reduce a backlog of bills, which exceeded $17 billion under Rauner, to a regular cycle of accounts payable.
The kick, he told attendees of the House event: “Our stronger fiscal base has allowed us to help families respond to the current inflationary environment by providing $1.8 billion in dollars in direct tax relief this year.”
This includes a six-month pause on the state’s automatic 2.2 cent fuel tax increase, an expansion of the earned income tax credit by two percentage points, a suspension of a year of the 1% grocery tax, a one-time property tax rebate of up to $300, and a one-time income tax rebate of $50 per person and $100 per person to charge, up to three.
While Republicans have criticized the relief as temporary election-year freebies, Pritzker argued that the budget sets the stage for additional growth in his second term if voters give it to him.
“If we stay the course, we can do much, much more,” he said.
Jerry Nowicki is the bureau chief of Capitol News Illinois, a nonprofit, nonpartisan news service covering state government and distributed to more than 400 newspapers statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.