(The Center Square) — As many states facing imminent cash flow issues dip into reserves amid the coronavirus outbreak, Illinois' rainy day fund is nearly empty.
The state’s emergency measures have temporarily shut down thousands of businesses, suspending revenue streams such as video gambling, casinos, and other programs while simultaneously increasing emergency public health spending to fight the spread of COVID-19, the novel coronavirus that emerged in late 2019 and is at the center of a global pandemic.
Like other states, Illinois could see income, sales, and other tax revenues start to decline. A number of other governors have announced that they would tap into reserve funds. Maryland Gov. Larry Hogan, for instance, signed legislation last Monday allowing him to use the state’s rainy day fund to pay for emergency operations. Unlike most other states, Illinois has relatively little money held in reserve. The state’s Budget Stabilization Fund had a balance of $1,189,505.06 in it as of Monday. That would account for less than an hour of state spending.
In a report released Thursday, Fitch Ratings said most states were benefiting from the money they put away in recent years of low unemployment, record investment returns, and overflowing state coffers. Not all states were in that position, according to the Fitch report.
“Some governments, as reflected in lower Issuer Default Ratings (IDRs), are more vulnerable to budget strain from unexpected stress events such as the coronavirus pandemic,” the report said. “Ongoing market declines could increase pension liabilities and contribution needs over time.”
Fitch Ratings has rated Illinois’ general obligation debt just above speculative, or junk, grade. The state does have a large, diverse economy that is likely able to absorb any short-term closures in the hospitality industry, said Eric Kim, senior director of public finance with Fitch Ratings.
“Neither Illinois nor Chicago are at the top of the list when it comes to exposure to that sort of discretionary economic activity ... but they are absolutely more vulnerable than the majority of state and local governments and that’s reflected in their ratings,” he said.