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Illinois budget allows governor to spend billions in federal COVID-19 aid without legislative input

Dan Petrella, Chicago Tribune on

Published in News & Features

But budgeting $2 billion in coronavirus aid to cover allowable expenses essentially frees up that much cash to pay down debts for which the federal funds can’t be used.

As a result, the state expects to be able repay $1 billion remaining from the $3.2 billion it borrowed from a special Federal Reserve program designed to help governments weather the pandemic and more $900 million borrowed from other accounts within the state treasury. Those moves will increase overall expenditures from the state’s general fund this year to $44 billion.

Demmer said that without the additional $2 billion from the federal pot, Democrats would’ve had to either reduce spending in other areas or hold off on repaying debts.

“It seems like it could be a shell game to cover the borrowing because without that, it doesn’t work,” Demmer said.

But from the perspective of ratings agencies that grade the state’s creditworthiness, that’s an acceptable use of the relief money.

“With this initial allocation, the state appears to have avoided the use of (American Rescue Plan Act) aid for any material ongoing program costs in this budget,” Fitch Ratings wrote in a note last week.

Fitch is the one major ratings agency that has not upgraded the state this year. It has maintained its rating of the state’s credit at one notch above junk bond status, noting that yawning gaps in pension funding and other structural issues remain.

 

Despite those challenges, Fitch also maintains a positive outlook for the state’s finances.

The firm gave Pritzker high marks for planning to use a projected surplus in the current year to help pay down the state’s bill backlog and shore up its rainy-day fund, cautioning that revenue estimates, while “realistic,” are “subject to pandemic-driven uncertainty.”

As for its spending plans for the federal aid, Fitch wrote that lawmakers “focused on one-time investments rather than recurring operating needs,” adding that the firm “will carefully assess the state’s plans” for the remaining funds.

As of Tuesday, Pritzker had directed $500 million in federal relief money to the special fund under his authority. Of that, nearly $144 million had been spent to reimburse the state’s general fund “for operational costs of Department of Corrections and Department of Juvenile Justice” during the previous budget year, Abudayyeh said.

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