(The Center Square) – Even though Illinois is facing a budget shortfall in the fiscal year that began this month, a budgetary analyst said the real pain will come when the state's federal loans come due the year after.
The current 2021 fiscal year is projected to be billions of dollars short, but lawmakers plan to borrow $5 billion from the Federal Reserve Bank’s Municipal Liquidity Facility to cover costs.
Although Illinois Comptroller Susana Mendoza warned that the state “may not make it through” the current year without some sort of untethered state aid, others said the crunch will come once the borrowing done in the current year comes due in tandem with a pension tab that will reflect COVID-19 market losses.
“The unpaid bills at the end of this year are going to remain about the same as what they were last year, which was $8.49 billion,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability. “But then there’s that $5 billion in debt that the state incurred this year that it’s using as ‘revenue’ this year that won’t be there next year. Next year will start with a revenue shortfall of over $13 billion.”
The state’s unemployment insurance trust fund, for instance, is expected to borrow $3.8 billion from the federal government. That money is due one year from issuance. The state had borrowed to replenish its unemployment trust fund in 2010 and was required to pay it off using bond issuances. Some of those took six years to pay off.
Even before the pandemic, Illinois’ pensions were not fully funded to meet the estimated costs of current and future payouts, according to a report from the Commission on Government Forecasting and Accountability.
The report said that the total debt, referred to as unfunded liability, had gone up $3.6 billion in the fiscal year that ended last July to $137.2 billion from $133.5 billion the year before. Illinois devotes more of its budget to pension payments than any other state.
Martire advocates for a restructuring of the debt that would require the state to pay more upfront but keep a flat rate that would last through the life of a pension obligation bond. Others recommend a constitutional amendment to allow for a renegotiation of pensioner contracts that would allow for immediate relief.