By: Mark Glennon *
“Our state has made great strides in its finances, even in the face of the pandemic. We pay our bills on time. This is a frequent message from Governor JB Pritzker and Controller Susana Mendoza.
This claim is extremely difficult to reconcile with a call for more federal taxpayer bailout assistance, but Mendoza has done both in one friday letter printed in the Chicago Sun-Times.
While claiming progress on the Illinois budget crisis, she reiterated the request she made last month to the federal Treasury Department. In that request, she and financial officers in seven other states requested a waiver of any interest on loans made by the Treasury during the pandemic to consolidate trust funds used to pay unemployment insurance. Illinois owes the treasury about $ 4.5 billion on its loan and the interest charges will be substantial. Over $ 100 million will be accumulated over a year.
Thus, Mendoza is essentially asking federal taxpayers, including the Illinois, to waive the interest accrued in their favor on the loans.
Most states have either repaid what they borrowed for their unemployment funds or have never borrowed. Illinois is one of ten states with outstanding loans. The other states that have joined Mendoza’s request to the treasury are, like Illinois, strongly Democrats – New York, Colorado, Pennsylvania, Connecticut, New Jersey, Massachusetts and Minnesota. A recent research report detailed how federal pandemic rescue money, in general, has gone disproportionately to Democratic states.
As for Mendoza’s claim that Illinois is footing the bill, that is simply not true. The state has totally ignored the hole in its unemployment fund in its current budget and future budget forecasts. In reality, the state will not only have to repay the loan but will also have to restore the fund to a healthy balance, which will likely require at least an additional $ 1.5 billion, which was the balance before the pandemic. Illinois is also not paying its full bill for the 800-pound gorilla pensions. Year after year, it contributes far less to its pension funds than actuaries say is necessary to prevent the growth of unfunded liabilities.
Mendoza backed up her claim that Illinois pays its bills by claiming, as it frequently does, that Illinois has reduced its backlog of bills by about 80% since its all-time high of $ 16.7 billion in the 2015-2017 budget stalemate.
That does not make sense. Illinois borrowed $ 6 billion through a bond offering to reduce the backlog. It just kicked the box, shifting debt from one account to another. And the backlog of bills is just one of hundreds of accounts the state has, making it a meaningless clue of how the state is doing. The delinquent account can be reduced simply by ignoring other debts, as has been the case with the unemployment fund loan and pensions.
It is also extremely misleading to claim that resolving the 2015-2017 budget deadlock reduced the backlog of invoices. This impasse was resolved simultaneously thanks to the massive tax increase in 2017 – worth $ 5 billion – which the General Assembly passed by overturning the veto of then-governor Bruce Rauner. The backlog started to shrink when this new revenue started coming in at the end of 2017. Rauner and the General Assembly both mismanaged the budget deadlock, but it was the increase in taxes that helped reduce the backlog.
Finally, remember when you hear claims about Illinois’ fiscal progress, it floats on a federal bailout money bubble. The total amount of money paid to the state, its municipalities and the private sector exceeds a staggering figure $ 180 billion for Illinois only. This will not last and nothing has been done to correct the underlying structural deficit of the state.
* Mark Glennon is the founder of Wirepoints.
Previous Relevant Wirepoints Columns
- Misleading response from Deputy Governor Andy Manar to Wirepoints – Wirepoints Original, December 6, 2021
- Some “plans”. Illinois wants more federal bailout money for the unemployment trust fund. – wire points,
- Illinois Budget 2022: State’s financial cliff to wait after federal largesse runs out,
- Susana Mendoza just can’t stop with her biggest Whopper,
- Dig or shovel? Pritzker’s great leap back, February 15, 2019 – Crain’s
- Snake Oil, Budget Deadlock, and Illinois $ 1 Billion Delay Penalties Jan 29, 2018