With Congress and the White House having yet to agree on a coronavirus relief package that would send additional money to ailing state and local governments, Gov. J.B. Pritzker said Tuesday that he’s asked the heads of state agencies to prepare for 5% cuts to budgets for this year and 10% cuts next year.
The $43 billion spending plan Pritzker signed for the budget year that began July 1 relied heavily on federal aid and borrowing to plug a massive hole caused by revenue lost to the COVID-19-induced economic slowdown.
Republicans, who largely opposed the budget, were critical of its reliance on uncertain assistance from Washington and a provision giving Pritzker additional leeway to shift money between different budget lines.
The partisan lines continued to be drawn on Tuesday as the first-term Democratic governor blamed the threat of budget cuts on the GOP.
“Every state in the nation has suffered, every municipality in the nation has suffered from the fiscal effects of COVID-19,” Pritzker said at an unrelated event in Chicago’s Bronzeville neighborhood.
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“However, until Republicans in Washington decide otherwise, middle-class, working-class and poor families across our state and across the nation will likely suffer from cuts to public safety, education, human services and environmental safety,” he said. “And the potential layoffs will make the economic recession worse.”
Members of Pritzker’s Cabinet are reviewing the budgets of agencies under their control to identify potential cuts “and will need to implement those if there is no action taken by the Congress,” he said.
“I can’t tell you exactly when each cut will take place,” Pritzker said.
A memo Tuesday to agency directors from Deputy Gov. Dan Hynes and budget director Alexis Sturm said this year’s budget “is only affordable in its current form with federal support to bridge the pandemic-related shortfalls and that now appears not to be forthcoming.”
The governor’s budget office estimates that the state will lose out on a combined $6.5 billion in revenue this year and next year. Agency heads were given until Oct. 2 to outline 5% reductions for the current year, including measures such as limiting or freezing hiring or new spending commitments.
Directors also were asked to prepare two budget scenarios for next year: one that maintains level spending from the current year and one that anticipates a 10% reduction in appropriations from the state’s general fund.
“I can promise you that for everyone and anyone who got into public service who actually wants to serve the public, this is a nightmare scenario,” Pritzker said.
This year’s budget allows for borrowing of up to $5 billion from the Federal Reserve that would be repaid with anticipated but uncertain federal aid. Illinois became the first state to tap a new Fed program designed to aid state and local governments when it borrowed $1.2 billion in June to plug a hole in last year’s budget.
Illinois officials also have been hoping for a loosening of restrictions on how the state can spend $3.5 billion in federal aid the state has already received. Currently, those funds are designated for expenses directly related to the COVID-19 response.
In addition to the uncertainty of federal aid, the fate of Pritzker’s signature policy initiative, a proposed amendment to the Illinois Constitution that would allow a graduated-rate income tax to replace the mandated flat tax, won’t be known until the November election.
If voters approve the amendment, higher tax rates on higher incomes would bring in an estimated $1.3 billion in additional revenue in the second half of the budget year. If not, the state plans to make up the difference with additional borrowing.
The White House and Senate Republicans have balked at proposals to send direct relief to state and local governments to offset lost revenue. But House Speaker Nancy Pelosi told Democrats on a conference call Tuesday that the House would remain in session until there’s a bill, The Associated Press reported.
This isn’t the first time the Pritzker administration has asked agency heads to prepared for belt tightening. A memo last fall asked for proposals based on a 6.5% across-the-board budget cuts. Despite that exercise and the havoc the pandemic has created for the state’s finances, the budget lawmakers approved for the current year held spending in the operating budget essentially flat.
Republican state Rep. Tom Demmer of Dixon, a lead budget negotiator for the House GOP, called the request for budget-cutting ideas “an appropriate exercise.” Demmer said he would like to have seen some of the suggestions from agency heads last year incorporated into the current budget.
“I’m glad that they’re renewing that effort now,” Demmer said.
Pritzker’s grim budget pronouncements came the same day state health officials reported 1,466 newly confirmed cases of COVID-19 and 20 additional deaths. That brings the total number of known cases to 264,210 and the death toll to 8,332 statewide since the pandemic began.
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