Coronavirus torpedoes plan for Illinois legislative session

Register now

Legislative action to respond to Illinois' gaping state budget hole won't come before January after the General Assembly canceled its fall veto session.

Democratic leaders who control the House and Senate announced the decision Tuesday amid a dramatic rise in COVID-19 cases in the state capital.

I’m very very focused on making sure that our credit rating agencies don’t downgrade the state of Illinois,” Illinois Gov. J.B. Pritzker said Wednesday.

The Springfield area’s rolling average positivity rate for confirmed COVID infections hit 14.4 % recently, prompting concerns about hospital capacity, legislative leaders said in a joint statement.

With the state’s bond ratings at one notch above junk, Gov. J.B. Pritzker warned last week after voters rejected his proposal to amend to the state constitution to allow for a progressive income tax structure that the state needed to act “expeditiously” on spending cuts and possibly new revenue sources.

Pritzker's plan to scrap the flat rate and raise rates on top earners was expected to generate between $1.2 billion to $1.3 billion in the current fiscal year that runs through June 30 and $3.1 billion going forward.

“I’m already convening the leaders. There’s a great deal of work that needs to be done. I’m very, very focused on making sure that our credit rating agencies don’t downgrade the state of Illinois,” Pritzker said after a public appearance Wednesday.

“We’ve trimmed across the executive branch throughout the last two years and there’s more to be done than just trimming,” said Pritzker, who was elected in 2018. “Now we are going to have to make some serious and frankly painful cuts; those aren’t things I can do alone. The legislature has to be right there with us, so we are going to work on that long before they get together in January.”

With the size and timing of future federal relief up in the air and the progressive tax canned, the state must cut spending and identify potential new revenue sources amid a backdrop of legislative opposition to tax hikes.

Rating agencies have warned that downgrades loom if the state relies too heavily on one-time or risky maneuvers that add to its structural budget woes.

The goal is now to act during a lame-duck, early January session ahead of the swearing-in of the new legislature Jan. 13. Lame-duck legislation requires a simple majority, though debt authority always requires a super-majority.

“We will be trying to look at getting maybe more done in early January. That’s my goal,” Pritzker said.

House GOP Leader Jim Durkin said his caucus had warned of the budget’s reliance on uncertain revenues in the spring and called on the governor to move quickly on cuts within his power to make.

Legislative sources said the governor has authority to withhold and cut appropriated spending as he sees fit, but the governor wants the legislature to play a role and help make his case for new revenues to avoid cutting too deeply.

Pritzker recently ordered state agency heads to identify 5% spending cuts this year and 10% for the next year and administration officials had previously warned that the amendment’s failure could require a 1% across-the-board rate hike, although there’s little appetite among lawmakers to raise taxes.

The state’s last forecast warned of a $2.7 billion revenue blow in the fiscal year that ended in June and more than $4 billion of losses in fiscal 2021. Repaying $1.2 billion of notes borrowed through the Federal Reserve’s Municipal Liquidity Facility and $400 million of treasurer note rollovers due this year along with the loss of graduated tax revenue pushes the gap up to more than $7 billion.

A preliminary November revised forecast projects revenues will perform better by more than $2 billion from prior projections for the fiscal year. In the absence of borrowing from the Municipal Facility Liquidity or issuing GOs to make up for the loss of the tax amendment, the state has a $4 billion hole to fill.

Banking on the eventual receipt of federal relief to make up for tax losses, the $43 billion general fund budget approved in May included authorization to borrow another $5 billion from the MLF. The state faces an early December deadline to file a notice of intent for the program, which is scheduled to expire at the end of 2020. The budget also relied on $1.2 billion in existing GO backlog authorization should the income tax amendment fail.

The state’s unpaid bill backlog stands at $8 billion and its unfunded pension liabilities at $137 billion although preliminary actuarial reports in the process of being released for fiscal 2020 are expected to show growth in both unfunded liabilities and in the amount owed by the state for fiscal 2022.

The state’s bonds are trading at high-yield spreads to the Municipal Market Data’s AAA benchmark of 180/304/292 basis points on the one year, 10 year, and 20 year, respectively. That’s a 10 basis point narrowing from the 30 bp widening they saw the day after the amendment failed.

The state has record daily positive COVID-19 case counts this week of more than 12,000. The state on Wednesday reported a total of 523,840 cases, including 10,434 deaths, in 102 counties in Illinois. COVID-19 has killed more than 10,000 people in Illinois.

“The front page in today’s Springfield paper warns of a COVID ‘tsunami’ sweeping the region and its health care system. This is not the time to physically bring together hundreds of people from all around the state,” Senate President Don Harmon said in a statement.

The legislature is not authorized to hold remote sessions. The House rejected a measure that would have allowed it. The Senate passed its own rules allowing for remote committee meetings and so hearings have continued.

State revenues are faring better than expected. The Governor’s Office of Management and Budget first quarter report showed overall state revenues were up $1.35 billion from revised budgeted levels and federal sources were $358 billion below estimates resulting in a nearly $1 billion, or 9.4% improvement over budgeted levels with revenues at $10.7 billion.

Income tax revenues up $688 million, or 14.4% from budgeted levels; corporate income taxes were up $324 million, or 59.3%, higher than the budgeted levels; and net sales taxes were up $202 million, or 9.9%, higher than the budgeted levels.

For reprint and licensing requests for this article, click here.
Illinois State budgets State of Illinois J. B. Pritzker Coronavirus