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Pritzker exploring three additional steps to button up state’s fiscal progress as report reflects improvements

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Tuesday, November 22, 2022  |  Article  |  Ben Szalinski

Gov. JB Pritzker signs the Fiscal Year 2023 budget in April at Chicago State University. [Ben Szalinski/The Daily Line]  

Two new reports show Illinois is on track to once again bring in more revenue than expected this fiscal year, prompting Gov. JB Pritzker to suggest three additional steps for state lawmakers to take by the end of the year to shore up the state’s fiscal stability and pay down debts. 

 

Reports released last week by the Governor’s Office of Management and Budget (GOMB) and the non-partisan Commission on Government Forecasting and Accountability (CGFA) revised revenue projections for Fiscal Year 2023 upward thanks to better-than-expected revenue numbers over the first month of the fiscal year that began July 1. 

 

“GOMB estimates Fiscal Year 2023 revenues will exceed expenditures by $1.689 billion,” the report from the governor’s office read. “This is a major sign of notable progress on state finances considering that when Gov. Pritzker came into office, the structural deficit was estimated to be approximately $3.2 billion a year.” 

 

GOMB estimates Illinois will finish the year taking in $50.1 billion of revenue after state lawmakers passed a budget in April that projected $46.4 billion in revenue. CGFA puts the number higher at $51.3 billion. Both reports credit an extra income tax payment of $1.3 billion the state received in the beginning of the fiscal year plus overall better-than-expected revenue performance. 

 

Fiscal Year 2022 closed with $50 billion of revenue. 

 

With the improved outlook for the fiscal year in which numbers were expected to normalize, Pritzker announced he would be seeking three uses for the extra funds.  

 

In a news release last week, Pritzker announced his first priority would be asking lawmakers to use the extra $1.3 billion income tax receipt to boost the “rainy day” fund to about $2.3 billion from its current level just over $1 billion.  

 

“It’s already at a higher level than it ever has been historically, but we’re not as high as we need to be,” Comptroller Susana Mendoza told The Daily Line last month. 

 

Mendoza said her goal is to boost the “rainy day” fund’s size to $3.25 billion, which could fund the state for a month. 

 

Pritzker also announced he wants to use excess revenue from Fiscal Year 2023 to pay down a $561 million debt from $1.5 billion of revenue bonds issued over a decade ago during the Great Recession. He proposed some of the funds to pay the debt should come from a recent settlement reached by the Illinois Attorney General’s Office against tobacco companies.  

 

Pritzker is also proposing state lawmakers make an additional unspecified contribution to the unemployment insurance trust fund. The state still has a $1.35 billion deficit in the fund, not including interest payments. Because a deal was not passed to pay down the deficit by Nov. 10, Illinois businesses lost their federal tax credit that they receive for each employee. Other “speed bumps” are inscribed in state law if a deal isn’t completed by Jan. 1 that results in more tax increases for businesses as well as benefit reductions for employees.     

 

“Even with a balanced budget for Fiscal Year 2023 and a significantly improved financial trajectory, the state must continue to build on the progress made in recent years while carefully preparing to face an uncertain fiscal outlook due to national economic conditions,” the report from the governor’s office read. 

 

Recession fears were outlined in both reports, which noted potentially more pessimistic outcomes if unemployment rises and national economic growth slows. 

 

“GOMB is continuing to monitor these forecasts closely as inflation and national/international factors may impact the economy in uncertain ways,” the report from the governor’s office read. “Note that most of this fiscal year 2023 revenue forecast revision is assumed to be one-time in nature.”

The GOMB report also revised the state’s long-term revenue projections and predicted more sunny outcomes. In 2019, Pritzker’s GOMB’s first annual report projected Fiscal Year 2023 would run a $2.9 billion deficit and increase each year. Fiscal Year 2023 and 2024 are now on pace to finish with surpluses. 

 

But after the next fiscal year, GOMB predicts the state could start running smaller deficits each year based on more stable revenue projections and growing spending, particularly on education and the rate of pension payments. 

 

GOMB predicts Fiscal Year 2025 will have a $384 million deficit that will increase to $708 million by Fiscal Year 2028. Revenue is also projected to decrease to $47.6 billion in Fiscal Year 2024 before rising to $50 billion again in Fiscal Year 2026. Expenditures are projected to rise each year to $54.1 billion in Fiscal Year 2028, meaning GOMB projects the state will run deficits in Fiscal Years 2025 through 2028. 

 

State lawmakers used the Fiscal Year 2022 surplus to provide $1.8 billion of temporary tax relief this year. Going forward, providing permanent tax relief hinges on the General Assembly passing balanced budgets and the state’s financial position continuing to improve, Pritzker told reporters earlier this month 

 

“I would love to work on continuing to balance the budget, run surpluses, so that we can look at permanent tax relief,” Pritzker said. 

 

A conservative economic think tank, Truth in Accounting, isn’t buying the improved financial picture reported by the two offices. Citing $200 billion of pension debt, the organization said in a news release the state cannot claim to have paid down debts. 

 

“Without consideration of the pension contribution deficiencies, this report also indicates projected deficits from 2025 to 2028. This seems contrary to the governor's claim that long-term budgetary deficits will be nearly eliminated,” the news release said.  

 

Though the Fiscal Year 2023 budget made an additional $200 million contribution toward pensions above the statutorily required amount, the organization pointed out the state’s pension system remains underfunded. 

 

“The $1.3 billion that will be put into the rainy-day fund would not exist if the pensions were properly funded,” the organization said.