Unusual fiscal year leads to surplus, but tough times still hurt

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The Illinois Senate adjourned on April 9 just after 3 a.m. The House adjourned approximately three hours later as the sun rose.

This wasn’t the first time Chambers worked to the finest detail to complete their job, including a budget, and it probably won’t be the last, but it’s getting to be a bit too much.

Senate Speaker Don Harmon told me afterwards that in the future he would like to “avoid” adjourning the session this late.

Harmon claimed that because of the “remarkably collaborative and cordial working relationship” between Statehouse Democrats, the willingness to accommodate and try to make “late adjustments to deal with ideas that came from that party of a caucus or this part of another caucus”, it all led to a very long night.

“Before,” Harmon said, “a former president might have said ‘noon Thursday and we’re done.’ This time we were trying to work, adjust, adapt, add and subtract things at the request of the caucuses. And that led to a scheduling challenge at the end.

I can understand that explanation, but it was still serious for a lot of people. Start earlier.

OK, let’s talk about this state budget. I’ll give you some numbers, but I’ll try to make it as simple as possible.

If you want to get a sense of how crazy this fiscal year is, just check out the revenue projected when the fiscal year 2022 budget was passed last year and compare it to where it is now.

Last spring, budget officials agreed on a total revenue projection of $44.4 billion for fiscal year 22. By last week, that figure had risen to $49.2 billion, or an increase of more than $4.8 billion, or almost 11%.

The new unforeseen funds did not come directly from the federal government. But it was undoubtedly the result of the federal economic stimulus programs.

The only debt repayment credit in the original FY22 plan was $928 million to repay interfund borrowings, and no tax relief was included.

But, now, because of that new revenue, additional debt repayments, a larger rainy day fund, and mostly one-time tax relief will total $5.3 billion this fiscal year, an increase of 4, $4 billion over originally enacted spending plan (not including federal covid-related loan gain).

The year-end surplus was expected to be $1 billion, but that money has been incorporated into the overall spending plan by the new FY22 supplemental appropriation, and the state will now end that fiscal year in June with only $68 million in cash, but with $1 billion in its rainy day fund so far empty instead of the $600 million originally proposed.

The new fiscal year, which begins July 1, will see its projected revenue drop $2.6 billion, or about 5.4% from the last estimate for this fiscal year. But that still represents a 5% increase ($2.175 billion) from the FY22 estimate that budget officials relied on last year.

Debt repayment and tax relief will drop from a high of $6.37 billion (including about $1 billion to repay federal covid-related loans) this fiscal year to just $640 million next fiscal year, a difference of $5.73 billion.

Non-discretionary spending will drop by a net $51 million, but most of those who spend the most will see increases. This may happen because, as noted above, the state’s remaining $1 billion in covid-related debt will be paid off by the end of this fiscal year. Pension payments and transfers out will each increase by about $300 million, and group health insurance payments will increase by about $400 million.

“Discretionary” spending — outside of debt repayments and tax relief — will increase by about $2.6 billion ($22.289 billion this fiscal year from $24.867 billion next fiscal year). Increases include P-12 Education ($550 million), Higher Education ($240 million), Human Services ($1.2 billion), Public Safety ($300 million), and general services ($225 million).

The end of the coming year may be tight on paper. General Fund revenues are expected to be only $2 million higher than total expenditures next year. Yes, the state will have a billion dollars in its rainy day fund just in case, and the state’s bill payment cycle can easily be extended well beyond its current two weeks. But a worse-than-expected economic downturn could still cause fiscal difficulties, but not as much as when the state had no cushion (or even no budget).

Rich Miller also publishes Capitol Fax, a daily political newsletter,

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