IL To Borrow $5 Billion in FY21 For Budget Deficit

By Benjamin Cox on August 4, 2020 at 8:56am

The three-month shutdown in the state’s economy has blown a large hole in the state’s budget. According to WBEZ, Illinois is looking to borrow $5 billion to cover the budget deficit created by COVID-19.

According to data collected by the Urban Institute’s State and Local Finance Iniatitve, from March to May, Illinois’ tax revenue was down 23% compared to last year, or a total of $1.1 billion. That percentage is 6 points better than the 29% average across the country.

With revenues down and the state’s amended budget passed in an emergency session in May, the current plan will be to borrow nearly $5 billion from the Federal Reserve next year. Despite the lost revenue, the General Assembly passed a budget that kept spending relatively the same from the previous year.

According to the new budget, the Illinois Department of Public Health’s budget increased by 144% compared with last year due to COVID-19 response. The state is also set to make the full required payment of more than $10 billion to the state’s pension funds. The grand total for appropriations for the entire year is just shy of $160 billion.

Governor J.B. Pritzker warned in a press conference in Springfield yesterday that deep cuts to essential services and to state jobs could be coming: “I continue to do my part to make calls, to make sure that people understand that Republican-led states and Democratic-led states all have this challenge of revenues that fell off a cliff because of COVID-19. But this is going to be up to the Congress. They’re the ones who have the ability to help us and to help all 50 states with the challenge we all have. But there are going to be layoffs across the country, not just related to state government, but when you don’t fund state and local governments you’re going to see, and you’ve already seen to some degree, layoffs. Not to mention those who provide services to state and local governments, private companies whose contracts no doubt will be put aside because the money isn’t flowing, because we don’t have the ability to balance the budget in the way that we had originally intended to.”

Illinois has partnered with 6 other states asking Congress for additional funds for their budgets to keep essential services running. Congress is currently in a deadlock on a 5th COVID-19 relief package to the country. The Democrat-led House passed a relief package late last month that included $500 billion in aid to states, but a current version of the newest COVID relief package by the Senate does not include such aid.

U.S. Treasury Secretary Steven Mnuchin told CNBC on July 23rd that President Donald Trump would not sign an aid package that would bail out states that he felt were mismanaged prior to the pandemic.