Illinois rainy day fund has record balance after $320 million deposit

The state’s “wet day” fund – spent right down to basically nothing throughout the 2015-2017 finances deadlock – now has its highest-ever stability of $750 million after a $320 million deposit this week.

Whereas statutory fund transfers don’t often make for headline fodder, the truth that the state is socking away cash is a rarity worthy of a deeper look.

The finances stabilization fund, because it’s formally referred to as, was written into statute in 2000 for the aim of “lowering the necessity for future tax will increase, sustaining the best potential bond score, lowering the necessity for short-term borrowing, offering accessible sources to satisfy state obligations every time informal deficits or failures in income happen, and offering the technique of addressing budgetary shortfalls.”

It has remained woefully underfunded since its first deposit of $600,000.

“The primary 12 months I took workplace in 2016, the wet day fund had withered to about $60,000 – not sufficient to run state operations for 30 seconds,” Comptroller Susana Mendoza mentioned in a press release Thursday.

Mendoza took workplace in December 2016, proper in the course of the two-year interval by which the state didn’t move a finances, spending billions of {dollars} extra every year than it collected in income.

Thus, the “wet day” fund was used to maintain the wheels of state authorities in movement, and its $276 million stability as of June 2016 bottomed out to round $69,000 on the finish of 2017. It rebounded to about $17 million on the finish of 2021 whereas seeing dips amid the COVID-19 pandemic.

Whereas the $750 million might cowl solely a few week of state spending, contemplating the general $46 billion finances for the upcoming fiscal 12 months, it nonetheless marks a near-tripling of its earlier high-water mark. 

Per the spending plan signed by Gov. JB Pritzker for the upcoming fiscal 12 months, it’ll obtain one other $280 million after July 1, bringing its stability to over $1 billion. The finances additionally retired greater than $1 billion in different interest-accruing state liabilities.

Extra:This is why Moody’s Traders Service gave Illinois a credit standing improve

That’s been famous by the three main credit standing companies, which have upgraded Illinois’ credit standing by two notches every prior to now 12 months. 

Whereas Illinois stays on the backside of all states when it comes to credit standing, reversing the downward slide for the primary time for the reason that Pat Quinn administration is one thing Pritzker will grasp his hat on as he seeks a second time period.

It’s a message he delivered to the Chicagoland Chamber of Commerce this week, the place he in contrast the six cumulative credit standing upgrades to eight notches of downgrades obtained by the state below Republican ex-Gov. Bruce Rauner, who presided over the two-year deadlock.

“The state’s longstanding structural deficit is sort of gone,” Pritzker mentioned.  “Our pension debt is decrease than after I took workplace and is now 10 % beneath its peak.

“I am restoring the state’s wet day fund. The truth is, we put a billion {dollars} into it. That is the best quantity that it is ever had. And by the way in which, we did all that with out the assistance of the federal cash from the (American Rescue Plan Act) program.”

The state’s pension debt got here in at about $130 billion on the finish of 2021, down from about $144 billion the 12 months prior, though the Fee on Authorities Forecasting and Accountability famous that the lower was largely a results of unprecedented – and sure unsustainable – funding good points of greater than 20 %.

As for the governor’s ARPA declare – referring to about $8.1 billion in direct federal funds to the state – it’s true that the federal funds have been devoted to one-time expenditures and the finances wasn’t instantly balanced by the funding inflow.

However representatives of COGFA and the state’s Division of Income instructed lawmakers in a February committee that oblique outcomes of federal spending have largely propagated a number of the sturdy income performances within the state’s “large three” income sources – private earnings tax, company earnings tax and gross sales tax. It’s led to state coffers taking in $4.8 billion extra within the present fiscal 12 months with one month left than they did the 12 months prior, in accordance with COGFA.

Partially, income good points resulted from elevated unemployment funds and direct funds to People, which elevated the tax base and shopper spending. As nicely, spending habits shifted towards the acquisition of taxable items and away from untaxed companies as Illinoisans stayed residence.

Republicans have additionally pointed to an “inflation-induced sugar excessive,” as larger costs drive up tax receipts.

Nonetheless, Pritzker factors out that the funding inflow has largely gone to lowering interest-accruing debt and lowering a invoice backlog, which exceeded $17 billion below Rauner, to a daily accounts payable cycle.

The kicker, he instructed attendees on the Chamber occasion: “Our firmer fiscal footing has allowed us to assist households reply to the present inflationary atmosphere by delivering $1.8 billion in direct tax aid this 12 months.”

That features a six-month pause on the automated 2.2 cent enhance within the state’s motor gasoline tax, an enlargement of the Earned Earnings Tax Credit score by two share factors, a one-year suspension of the 1 % tax on groceries, a one-time property tax rebate as much as $300, and a one-time earnings tax rebate of $50 per particular person and $100 per dependent, as much as three.

Whereas Republicans have criticized that aid as momentary election-year giveaways, Pritzker argued that the finances units the desk for additional development in his second time period ought to voters give it to him.

“If we keep the course, we are able to do a lot, far more,” he mentioned.

Jerry Nowicki is the bureau chief of Capitol Information Illinois, a nonprofit, nonpartisan information service protecting state authorities that’s distributed to greater than 400 newspapers statewide. It’s funded primarily by the Illinois Press Basis and the Robert R. McCormick Basis.