Illinois’ finances are going
from bad to worse.
The coronavirus pandemic has been a disaster for the administration of Gov. J.B. Pritzker, who probably never imagined the public-health crisis he would confront after becoming this state’s chief executive.
As it continues to devastate the state, the coronavirus is exacerbating its severe financial woes while at the same time distracting public attention from the fallout of its bad habit of spending far more money than it has available.
To cover a massive shortfall, Pritzker announced last week that the state will borrow another $2 billion from the Federal Reserve’s Municipal Liquidity Facility. That’s on top of borrowing $1.2 billion from the fund in June.
The Fed’s fund, which will expire at the end of the year, was established to help states and municipalities address financial needs in the event they are unable to borrow in the traditional market.
The fact that Illinois is the only entity to take advantage of this option is just one indication of the state’s dire financial condition.
The additional $2 billion in borrowing is intended to cover shortfalls in revenue.
But there is more than one kind of shortfall here. Legislators have for years passed one deficit budget after another, and that was their plan again this year. However, the coronavirus pandemic that hit the nation in March severely complicated Illinois’ financial problems due to the economic freeze resulting from Pritzker’s lockdown. His subsequent modifications of that lockdown eased the problems but haven’t generated enough revenue to solve them.
As a consequence, Illinois is borrowing from Peter to pay Paul.
Pritzker expressed concern about borrowing from the Fed’s fund because he said it will “saddle our state with a large amount of short-term debt” that must be repaid.
“Our collection intention is to repay this line of credit as early as possible, after either the awarding of stimulus by Congress or a sufficient recovery of state revenues,” he said.
It seems clear Illinois’ economy is not going to come roaring back soon.
The University of Illinois Flash Index, a gauge of the state’s economy overseen by Professor J. Fred Giertz, was progressing nicely, but Giertz’s latest report said “progress stalled” in November.
The index revealed that equity markets are looking strong but that “the flash index is based on current results that do not reflect these expectations.”
That means that Pritzker is left depending on a federal bailout to pay back federal loans, all in the face of an estimated $4 billion budget deficit, $7 billion in unpaid bills and more than $300 billion in unfunded state pension and retiree health insurance obligations.
All those numbers add up to big trouble. As hard as it is to imagine, Illinois is closing out 2020 in even worse shape than it was at the beginning.