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With a state budget $4 billion dollars out of balance, Illinois is running out of options to fill the gap.
Gov. J.B. Pritzker was hoping to raise revenue by changing the tax code for Illinoisans, but voters rejected the amendment in November.
During the lame-duck session last week, lawmakers failed to pass a small business tax increase. Pritzker wanted to eliminate state-level tax benefits created as a form of economic relief when Congress passed the CARES Act.
Wes Tharpe, deputy director for State Policy Research for the Center on Budget and Policy Priorities, said early in the pandemic, some states like Illinois approved budgets that didn’t add up.
“There are a lot of states that are simply operating under unrealistic spending plans, that are going to have to be revisited, and in many cases are going to involve debates over harmful spending cuts,” Tharpe said.
Some governors have turned to state workers to reduce expenses, including in New York where a pay freeze was extended for about 135,000 workers. It is a different story in Illinois.
Pritzker allowed $261 million in contractual state worker raises to go forward in 2020 and is getting ready to pay another $313 million in raises this year, according to the Illinois Policy Institute.
In December, Pritzker announced $711 million in cuts that included $75 million from personnel “cost adjustments” and furlough days, but that requires negotiations with state employee unions.
President Joe Biden is proposing $350 billion dollars for state and local governments, a plan Pritzker says Congress should take up immediately.
“When you look at what President Biden has proposed, it would support, not just Illinois, but other states across the nation in their filling the hole that was left by the loss of revenues from COVID-19,” Pritzker said. “It will be helpful to our budget in the fiscal year 2021.”
Many oppose sending federal funds to states that have approved unrealistic budgets, calling Biden’s plan a bailout for reckless state governments. Several states aren’t facing budget deficits during the pandemic and some have budget surpluses.
Other states are dipping into rainy day fund to cushion the losses caused by the pandemic. Illinois can’t do that because its rainy day fund is nearly empty.
“Certainly not the time to say ‘you should have saved better’ or anything liked that, but it does point to really the importance of states working to drive dollars during the good times into those reserve accounts,” Tharpe said.