By JERRY NOWICKI
Capitol News Illinois
jnowicki@capitolnewsillinois.com

SPRINGFIELD — Gov. JB Pritzker signed a state budget for fiscal year 2021 Wednesday, but there is no more financial clarity now than there was when lawmakers passed the measure last month.

The $42.9 billion operating budget relies upon borrowing up to $5 billion from the federal government, which would be necessary if Congress does not pass any laws providing extra funding for states amid revenue shortfalls stemming from the novel coronavirus pandemic. The budget includes repayment of $1.6 billion in borrowing to cover shortfalls in the current fiscal year budget due to the pandemic.

According to the May report of the Commission on Government Forecasting and Accountability, or CoGFA, the revenue estimates for the upcoming fiscal year beginning July 1 are $37.6 billion if a graduated income tax constitutional amendment passes. That figure drops to $36.4 billion if voters do not approve the change to Illinois’ tax structure.

If voters approve the graduated income tax amendment in November, the rates — which would shift to charge those earning more than $250,000 annually a higher income tax rate — are estimated to generate about $1.2 billion, according to CoGFA. If the public health crisis had not hit, that number would be $286 million higher.

Sales tax estimates were revised downward from March to May by nearly $1.5 billion, to $7.5 billion total for fiscal year 2021.

In a press release, the governor’s office emphasized that the spending plan “maintains funding for critical programs, such as education, health care and human services.”

Funding will remain level from the current year for K-12 education, community colleges and public universities.

“The COVID-19 pandemic highlighted the enormous role government plays in keeping communities safe and providing the tools people need to build better lives,” Pritzker said in a statement Wednesday. “While the pandemic has had a devastating impact on our state revenues, investing in our people will allow the state to rebound and recover from this pandemic as we safely re-open. I will continue to advocate for a national program to support state and local governments to make up the difference in the revenues that fund vital services like hospitals and salaries for teachers and first responders.”

According to the governor’s office, more than $5 billion in federal aid — including funding from the Coronavirus Aid, Relief, and Economic Security, or CARES, Act — will be directed to public health, social services, small businesses, local governments and households, including funding earmarked for communities disproportionately impacted by COVID-19.

That includes $270 million in CARES Act funding to supporting child care providers, the governor said at an event in Moline Wednesday.

“And here’s the best part,” Pritzker said at the event. “Because there’s no blueprint for this kind of program, we’re asking providers to tell us how to design the approach that best helps them reopen safely with smaller group sizes, without imposing large tuition increases on families.”

Illinois’ Coronavirus Urgent Remediation Emergency, or CURE, Fund distributes CARES Act dollars, including Business Interruption Grants specifically designed to support businesses that endure lost revenue due to the COVID-19 pandemic.

The Department of Commerce and Economic Opportunity, in partnership with the Illinois Department of Human Services, is charged with developing the grant program for licensed childcare providers. The Child Care Restoration Grants will be administered by the Illinois Network of Child Care Resource and Referral Agencies, or INCCRRA.

An “Intent to Apply” survey also launched Wednesday to gather information for the development of the grants program, and money is to be released in July. Providers are asked to respond to the survey by 5 p.m. June 19. More information is available at inccrra.org or by clicking here.

Other CARES Act disbursements from the CURE Fund and Local CURE Fund for local governments include: $636 million for small business/child care centers assistance; $458 million for household and community support programs; $830 million for health care providers for pandemic-related stability payments; $250 million to local governments for reimbursements of COVID-19 related costs; and $1.5 billion for state agency COVID-19 related expenses.

The governor’s office also said the budget includes “reductions of operations appropriations of $200 million and another $140 million in transportation funds at the Department of Transportation from the governor’s introduced levels.” Some of those savings is the result of “a continued partial hiring freeze and restricted operations expenditures,” according to the office.

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SPRINGFIELD – Lawmakers approved a state operating budget shortly before 2 a.m. Sunday, but despite the passage of the document, nothing about the next fiscal year is black and white.

The state is depending on a broad package providing federal monetary aid to states passing through the U.S. Congress, or, failing that, borrowing up to $5 billion from the U.S. Federal Reserve at an interest rate of approximately 3.8 percent.

“Well there’s no doubt that we’re going to have to revisit the budget if the federal government doesn’t come through,” Gov. JB Pritzker said when asked if the state had a plan for a revenue stream to pay back the borrowing. “I think all 50 states are going to have to be revisiting their budgets if the federal government doesn’t come through.”

Pritzker took questions in his office at the Capitol on Sunday morning, about nine hours after the General Assembly adjourned on just its fourth day of legislative session since March 5.

The $42.8 billion budget keeps spending roughly flat from a year ago despite revenue for next year decreasing by an unknown number of billions and the potential of even further economic devastation should COVID-19 see a resurgence in the fall that coincides with a virulent flu season.

“The budget the General Assembly has sent to my desk acknowledges that massive economic disruption leads to difficult decisions,” Pritzker said.

Democrats, upon the bill’s passage, said in times of economic crisis, government needs to continue to spend instead of balancing the budget on the backs of the less fortunate.

Pritzker echoed the argument Sunday.

“There was a strong look at, you know, what could be cut,” Pritzker said. “Remember, though, this was all in the frame of a vastly increased need by families, workers, individuals all across the state.”

Republicans, however, called the budget balanced only on “a wing and a prayer.”

In House debate Saturday, Rep. Tom Demmer, R-Dixon, the GOP’s chief budget negotiator in the House, said there were billions of dollars, including some from the federal CARES Act, to be spent at Pritzker’s discretion with only limited guidance included in the budget.

“The ability for an administration to engage in emergency rulemaking and have control of more than $7 billion of state funds, with only broad strokes, broad umbrellas of programs and allocations for those dollars, I think should give members of this body pause,” Demmer said.

Rep. Gregory Harris, D-Chicago, said during debate the fact that the Legislature passed a full budget instead of a lump sum appropriation showed that it was exercising more oversight than other states were doing for their governors.

But Demmer said the governor’s emergency rulemaking track record – that he sought authority to implement misdemeanor fines for businesses disobeying his stay-at-home order – shows he didn’t earn the public’s trust when it comes to rulemaking.

“This talk about earning the authority, nobody knew a pandemic was coming,” Pritzker said when asked about Republican objections Sunday. “There’s just no way that anybody had any clue that we would be in this situation that we’re in right now.”

He said he would “do anything, give anything” to go back to a pre-COVID-19 level of normalcy.

“But here we are,” he said. “So, I think that there is a recognition anyway that we’re gonna have an unusual year here.”

Asked if he would be comfortable with the authority the Legislature has afforded him being wielded by his former Gov. Bruce Rauner, a Republican, Pritzker said, “no, that’s why I ran against him and beat him.”

“I’m going to try very hard to operate, as I have by the way, with transparency, letting everybody know what we’re doing and also why we’re doing it. And the biggest thing is listening to the science and the data.”

In regard to transparency, Pritzker said the way this year’s budget was negotiated was not ideal. The measure and everything else passed in the four-day session was negotiated by working groups of lawmakers without official avenues for public input.

“I will say that although the public wasn’t able to come in to hearings that the Legislature had, their representatives from both sides of the aisle were in fact in the working groups, it wasn’t a one-sided set of working groups, there were bipartisan groups working on these things.”

Sometimes those groups sought executive branch input, sometimes they didn’t, he said.

While Republicans went into the special session calling for a vote on the governor’s Restore Illinois five-phased business reopening plan and some sort of check on his executive authority and ability to continuously extend disaster proclamations, no such vote occurred.

The closest thing to oversight was passed in a broad-ranging COVID-19 response bill that created a 14-member commission of eight Democrats and six Republicans that would work with the Department of Commerce and Economic Opportunity to discuss the reopening plan.

The commission would be scheduled to release its first report on the reopening plan on July 1, at which time the state could already be entering the fourth phase of the plan.

Republicans called the commission “window dressing.”

“Well, the Legislature has chosen not to be involved in many of the decisions that needed to be made by the executive branch,” Pritzker said when asked about the commission. “And I think, you know, when you think about it – That’s why you have an executive branch in an emergency, I can act quickly. The executive branch can act quickly.”

While he said the General Assembly could not have met quickly enough to have input on his decisions early in the emergency effort, Pritzker said he was hoping the General Assembly would have gathered “much earlier” than last week.

On one particular measure, he said he believed the Legislature fell short. He had asked lawmakers to approve a measure allowing for monetary fines of businesses defying his stay-at-home order.

“I am very disappointed, I think it was a complete abdication of responsibility on the part of the Legislature,” he said, noting the director of the Illinois State Police asked for a measure providing such authority.

“None of us want to exercise the ability to take away someone’s license that’s been given to them by the state to do business. Nobody wants to shut down a business. What we were looking for was a way to issue a citation,” he said.

He said the state would have to “look at other mechanisms” for such enforcement, but he did not say what they are.

The governor said he is also looking at ways to implement the next phases of the plan and is considering issuing a fourth consecutive 30-day disaster proclamation.

“We want to make sure we can implement the Restore Illinois plan, and that we’re taking care that the health and safety of the people of Illinois is paramount, so we’re looking at it,” he said.

The governor also announced the release of broad guidance for industries reopening under phase 3 of his plan. That is viewable here: https://www2.illinois.gov/dceo/pages/restoreILP3.aspx.

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CARES Act funding

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SPRINGFIELD – Gov. JB Pritzker has tied his second-year state budget proposal to the unfinished marquee policy initiative of his first year – a constitutional amendment that allows the state to impose higher income tax rates on higher income earners.

If voters approve that graduated income tax initiative in the November general election, Pritzker is asking for a roughly $1.6 billion increase in state general revenue fund spending for the upcoming fiscal year, which begins July 1.

That would bring total state spending in that fund to just over $42 billion, helping to pay for a $350 million increase in K-12 education, a 5-percent increase in higher education operating funds and an increase in contributions to the state’s backlog of unpaid bills and unfunded pension obligations.

If the constitutional amendment fails, overall state spending would increase by about $200 million from a year ago in the general fund under the governor’s proposal, equaling roughly $40.6 billion. In that scenario, $1.4 billion in spending authority would be held in reserve in a combination of budget cuts and withholding of new spending on state programs.

“Because this reserve is so large, it inevitably cuts into some of the things that we all hold most dear: increased funding for K-12 education, universities and community colleges, public safety and other key investments – but as important as these investments are, we cannot responsibly spend for these priorities until we know with certainty what the state’s revenue picture will be,” Pritzker said in his budget address in the Illinois House chamber Wednesday, Feb. 19.

To pass, the graduated tax needs approval from 60 percent of those voting on the question or the majority of those voting in the election in November.

But Republican leaders in the General Assembly argued that the choice between the two budgets is a false one, and Pritzker’s address was nothing more than a sales tactic for the graduated tax.

“The reserves he’s calling for are a marketing plan to sell his (graduated tax) increase,” Senate Minority Leader Bill Brady, R-Bloomington, said. “If those resources weren’t there, I don’t think this is the way he would have approached the spending plan and it’s not a way we would approach it.”

Both House and Senate Republicans called for “greater efficiencies” and reduced state spending in certain state agencies. They also said $656 million in increased base revenue projections for the fiscal year mean the level of state investment in programs from a year ago can be maintained without new tax revenues.

House GOP Leader Jim Durkin, of Western Springs, also pointed to a surplus of roughly $180 million from the current year’s operating budget as a sign of the effectiveness of bipartisan budgeting.

“We have the money to be able to fulfill our obligations in every need for the state of Illinois,” Durkin said in a news conference. “So, to say that you go on two different tracks and say, ‘Well, you know, if you don’t pass a constitutional amendment, we’re going to have a world of hurt that’s going to be delivered upon state employees, and also state retirees as well, and health care providers.’ I just felt that that’s a wrong approach.”

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BUDGET REACTION – FISCAL OFFICERS: Illinois’ chief fiscal and investment officers lauded the economic opportunities afforded if voters approve Gov. JB Pritzker’s “fair tax” proposal in November. But several Republican lawmakers said they objected to the governor’s plan, outlined in his annual budget address Wednesday, Feb. 20, to cut spending in several key areas if the constitutional amendment fails to pass.

The proposal to establish a graduated income tax structure — which would levy higher income tax rates on higher thresholds of income — is a hallmark of Pritzker’s policy agenda.

His $42 billion budget proposal includes $1.4 billion the state would expect to receive if the amendment passes on the November general election ballot. But that spending authority would initially be set aside pending the results of that election.

“Because this reserve is so large, it inevitably cuts into some of the things that we all hold most dear,” Pritzker said, “…but as important as these investments are, we cannot responsibly spend for these priorities until we know with certainty what the state’s revenue picture will be.”

Democratic Comptroller Susana Mendoza said key items on her priority list — including higher education investment, safety-net contributions and decreasing Illinois’ bill backlog — depend on voters deciding “which direction they want the state to move.”

The choices are driving “a little bit more fiscal security and greater investment in job creation, building the economy, or the status quo, which frankly hasn’t been working for us,” she said.

Democratic Treasurer Michael Frerichs, who said he still wants to hear details about Pritzker’s budget proposal, highlighted the state’s need to make pension payments. Voters need to approve the income tax change first, he said, to create a “virtuous cycle.”

“When we pay down our bills, we pay less in interest. When we pay down our pension unfunded liability, we improve our credit rating, which means when we go out for bonding, we pay a lower interest rate,” Frerichs said. “If we do things right up front, it will save us money years down in the road.”

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BUDGET REACTION – BLACK CAUCUS: Members of the 32-lawmaker Illinois Legislative Black Caucus said Gov. JB Pritzker’s budget proposal for the fiscal year starting in July is a good start but needs more money and support for people of color.

“I was so pleased to hear so many things that the governor mentioned that have been issues that the black caucus has fought for for many years,” said black caucus chair Sen. Kimberly Lightford, D-Maywood.

Every member of the black caucus is a Democrat, the same party of Pritzker, who delivered his second annual budget address to members of the House and Senate Wednesday, Feb. 19, at the Capitol.

Among the top issues discussed by caucus members after the address was education funding, from kindergarten through college graduation.

Pritzker’s proposed budget would increase K-12 school funding by $350 million, but $150 million of that is tied to the passage of a graduated income tax. That tax will go before voters in November in the form of a constitutional amendment that increases income taxes on people earning more than $250,000 annually.

“While his speech suggests that $350 million (would) allocate toward funding, we know the reality based on the revenue outlook,” said state Rep. Will Davis of Homewood. “Our message to the governor is this funding level must be realized.”

PRESS RELEASE FROM SENATOR CHAPIN ROSE ON PROPOSED BUDGET

“There’s a lot that I agreed with him on, and there were certainly some worthy priorities in this budget, but the Democrats just passed one of the biggest income tax hikes in state history in 2017, and it’s still not enough,” Rose said. “They want more money in tax increases to cover their $1.6 billion in new spending. At the end of the day, I am concerned that it seems like it’s never enough for them.”

SENATOR SCOTT BENNETT’S COMMENTS ON PROPOSED BUDGET

“If we want to continue to grow as a state, we need to continue to make investments in opportunities for our children,” Bennett said. “The governor’s budget proposal focuses on keeping our best and brightest in Illinois.”

“I’ve always believed that higher education is the best and smartest investment that a state can make,” Bennett said. “I look forward to working toward a budget that achieves stability and certainty for the University of Illinois, Parkland College and Danville Area Community College.”

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