Election years are “silly season,” it’s often said in Illinois, but this year is one for the record books.
Gov. J.B. Pritzker and his party last week made astonishingly dishonest claims about the reason why Republican lawmakers voted against new legislation to partially fix Illinois’ insolvent unemployment trust fund, attributing to them a position that is precisely opposite from what they had taken.
Pritzker also made claims about the state’s financial performance during his tenure that, if true, would make his own ally a liar – Comptroller Susana Mendoza.
First, some background. At his Thursday press conference Pritzker proudly announced that he would be signing new legislation that includes a $2.7 billion repayment on $4.5 billion of loans owed by Illinois’ unemployment trust fund to the US Treasury. That fund, which pays unemployment claims, had its entire balance of $1.9 billion wiped out during the pandemic and was also forced to borrow the additional $4.5 from the federal government to cover unemployment claims made.
The problem therefore totals at least $6.4 billion and is a major financial problem for the state – a problem that was entirely ignored in the state’s budgets. Interest on the loans alone has been running at a clip of about $100 million per year. To pay off the loans and restore the fund to solvency, the state will have to either raise taxes on employers, cut unemployment benefits, come up with the money some other way or some combination thereof.
Pritzker boasts about the partial solution, saying “Today we mark yet another milestone in getting Illinois’ fiscal house in order. Democrats in the General Assembly are overcoming the difficult circumstances of our past and putting working families first.”
But he went on to claim that Republicans, who unanimously voted against the authorization, did so because they were against paying down debts with cash that the state has on hand that came from the federal government. “Every republican voted against paying down our states debts,” Pritzker said and just “putting politics ahead of the people….. It drives me crazy to see that it drives them crazy to acknowledge that Democrats have done what they have not done – pay down debts and balance the budget while giving tax relief.”
That could not be further from the truth. Republicans unanimously opposed the bill because they wanted all of the $4.5 billion paid off, not just $2.7 billion as the bill provides. Their votes didn’t matter anyway because the Democratic supermajority in both houses voted unanimously for the bill.
Republicans have been vehement on the record about paying down the entire debt. As reporter Hanna Meisel put it in an excellent column on the subject, “Republicans and business leaders have pushed hard on the narrative that not using every possible dollar of Illinois’ unspent [federal] funds to stabilize the unemployment fund is malpractice.” They estimate that almost $7 billion of federal cash remains available from ARPA, the federal government’s American Rescue Plan Act.
Republicans further complain that, instead of paying down debts, ARPA money is going to pork barrel projects for Democrats.
That’s true. As Meisel noted, that’s “a claim top budget negotiators in the majority party didn’t deny in a Chicago Tribune review of those projects last summer.” Also remember that early this month a group of Democrats got Gov. J.B. Pritzker to freeze projects tied to former Speaker Mike Madigan. But the next day, they said never mind. That’s about the Rebuild Illinois program, but money is fungible. The Better Government Association estimates that “some $4 billion in projects were clouted in, legally, by legislative leaders and Gov. Pritzker.”
The next collection of whoppers from Pritzker’s press conference were his claims about cutting Illinois debt and setting its fiscal house in order.
“Fiscal responsibility is the only way forward for us to focus on balance budget and paying down debt,” he said. “It’s the Democrats that are taking on the tasks” of overcoming fiscal problems. Both short term and long term debts have been cut, he claimed, during his tenure, and he added,
Every year over the last three years we have paid off debts by our predecessor that have been a drag on Illinois finances, in some instances for decades…. reduced the burden on that would have fallen on future generation and stopped irresponsible practices that would have kicked the can down the road.
That’s preposterous, flatly contradicting what both the state’s auditors and Comptroller Mendoza say. Illinois’ balance sheet sank further into the hole during each of the three years since Pritzker took office in January 2019.
It’s called the state’s net position, which sank from negative $188 billion to negative $194 billion to negative $198 billion in 2019, 2020 and 2021. That’s from the state’s audited financial statements contained in its Comprehensive Annual Financial Reports, except for 2021 which is from Mendoza’s interim report. “When examined over time, increases or decreases in net position measure whether the State’s financial position is improving (increases) or getting worse (decreases).” Don’t take my word for that; it’s from Mendoza’s own interim report, and it is routinely said in government CAFRs.
Pritzker also made his usual claims about “balanced” budgets, claims that are nonsense for reasons we have detailed in columns linked below.
Whatever improvement there is currently for Illinois’ finances is attributable only to the gush of federal money poured into the state, now approaching $200 billion, which we explained here. Pritzker has made no meaningful structural reforms of any kind and the fiscal crisis will revert once the federal money runs out.
Pritzker was not alone in telling these whoppers. A parade of Democratic lawmakers followed him in his press conference and are quoted in an accompanying press release, all saying much the same thing.
Finally, what will Illinois do to address pay the remaining $3.8 billion – at least – needed to restore the unemployment trust fund to solvency? Part of the solution will likely include a tax increase on employers.
But a movement is also afoot to borrow money through a bond offering to bail out the fund. That’s right – just the kind of borrowing to cover debt that Pritzker claims is a thing of the past. From Meisel’s column:
The most likely funding scenario is a case of deja vu: Just like after the economic downturns of 2001 and 2008, Illinois could go to the bond market to raise a yet-to-be-agreed-to sum. And like it’s already done twice in the past two decades, Illinois may trade one interest rate for another, borrowing from private lenders to pay back what it borrowed from the feds.
Pritzker also said in his press conference that an additional, unscheduled, one-time contribution of $300 million that’s also authorized under the new law will reduce unfunded pension liabilities by $1 billion.
I don’t get that. Putting $300 million more in should reduce unfunded liabilities by the same $300 million.
We are adding all this to the catalog of Pritzker’s whoppers that we will publish it at some point, but give us some time because that’s quite a project. He is deeply and persistently dishonest.