House Republicans push for fiscal responsibility. Reimagine Illinois, the comprehensive package of reform proposals issued by House Republicans in spring 2021, calls for responsible fiscal leadership for our state. Illinois’ credit rating has dropped to near junk-bond level. Illinois Democrats routinely make promises that they cannot keep, spend beyond our means, and then leave Illinois taxpayers with billions of dollars in unpaid bills. This pattern, repeated over and over, has created Illinois’ ‘BBB-‘ credit rating. Illinois routinely has to pay interest rates and charges that are five times, seven times, or even nine times the interest rates that taxpayers of ‘AAA’ rated states like Indiana have to pay.
Springfield has used a series of budget tricks to work around the balanced budget requirement mandated in the Illinois Constitution. Delayed payment cycles, fund sweeps and interfund borrowing, and phantom revenues from proposed tax increases subsequently defeated by Illinois voters are just a few of these budget tricks. There is little accountability and transparency in Illinois’ budget process. The General Assembly spends months hearing testimony from agencies, advocates and interest groups regarding the Governor’s proposed budget. Then, in the final days and hours of the spring session, majority Democrats drop massive budget bills containing hundreds of pages of spending, giving rank-and-file legislators and the public little time to review or debate the budget.
The end-of-session midnight budget is never balanced, and almost always contains some special incentives meant to bring in “yes” votes from members of the majority party. After a short “debate,” the new budget is passed by partisan roll calls, as Illinois sinks further into debt.
House Republicans are calling for an end to this behavior. While many reforms are needed to Illinois’ budget process, creating an honest budget and sticking to it is a task of absolute necessity. As part of April, Tax Month, House Republicans call for passage of HB 3037, which would require the adoption of a revenue estimate for the following fiscal year. This estimate, to be adopted by April 30 of each year, will be a real, binding commitment to our fellow citizens of how much money the State actually has available to spend in the next fiscal year.
BUDGET
March 2021 revenue numbers show strong cash flow amid continued fiscal pressures. The Illinois Commission on Government Forecasting and Accountability (CGFA), the nonpartisan budget-monitoring arm of the Illinois General Assembly, looked at March cash-flow activity in Springfield. Billions of dollars came into State coffers in the third month of calendar year 2021, but a large chunk of this sum was newly-borrowed State money that taxpayers will have to pay back. Immense spending pressures continue to cloud the fiscal picture of the State.
Some of this pressure is being alleviated by new tax money coming in. While the COVID-19 pandemic continues, and Illinoisans are still being urged to maintain social distancing and to wear masks in public, many facets of “normal” economic life – including work and spending – are showing numbers that indicate a sharp recovery in many sectors of the Illinois economy. The largest single component of Illinois general-funds tax revenue, the moneys that come in from Illinois personal income tax withholdings and payments, rose by $223 million in March 2021 over the cash flow from this source one year earlier. In percentage terms, this sharp jump of 9.6% was a signal of how severely affected the Illinois economy was by the sudden shutdown on March 2020. When gauged on a year-over-year basis, the March numbers for this year are coming off a baseline that, one year ago, was marked by empty streets and shut-down offices.
Other general-funds tax revenue numbers were equally healthy in March 2021. Corporate income tax payments were up by $101 million, and sales tax revenues were up by $80 million. With these and other revenue sources increasing their flows of dollars to Springfield, overall general funds revenues were up $465 million in March 2021 from the cash flows achieved one year earlier.
On March 16, 2021, Illinois sold more than $1.25 billion in General Obligation (GO) bonds, a series of financial instruments backed by the full faith and credit of the State. These securities were sold at a variety of price points, interest rates, and maturity dates, and Illinois taxpayers will be covering their costs for up to 25 years to come, until the year 2046. Illinois’ major and growing debt load has led the three biggest New York credit-rating forms to rank Illinois GO debt as the lowest-quality fiscal paper being offered by any of the 50 states. The credit raters combine in ranking Illinois GO debt at only one step above “junk bond” level. For example, credit rater Standard & Poor’s has slapped a BBB- rating on Illinois GO debt, one notch above BB+ “non-investment-grade” debt securities.
S&P accompanied this ranking with an announcement that they could lower this ranking if they see Illinois’ bill backlog climbing significantly, or see the State’s cash flow being affected by ongoing liquidity pressures. Liquidity pressures of this type forced Illinois to turn to borrowing from the U.S. Federal Reserve in the summer of 2020, when fears associated with the pandemic were at their peak. S&P’s statement serves as a clear warning of possible consequences to Illinois, and its taxpayers, should this situation reoccur. CGFA continues to track the warnings published by credit rating firms such as S&P, and has shared a summary of these analyses in its March 2021 briefing.
COVID-19
Vaccine supplies increase even as new cases are diagnosed; full adult vaccine availability throughout Illinois on April 12. Although the first U.S.-approved vaccine for coronavirus was rolled out in December 2020, supplies at first were very limited. As time has passed, more and more Illinois adult residents have become eligible to receive a COVID-19 vaccination, and on Thursday, April 8, the Illinois Department of Public Health (IDPH) announced full statewide adult vaccine availability starting next week. Starting on Monday, April 12, all Illinois residents aged 16 and up will be eligible to make an appointment for vaccination. More than 900 vaccination locations are now operating throughout Illinois.
Even before this announcement, in more than 80 of Illinois’ 102 counties, officials had begun to offer vaccine appointments to all residents age 16 and older. Counties in this status include most of Illinois’ largest Downstate counties, bringing in regional areas such as Champaign, Peoria, and Winnebago. In these counties, universal adult vaccine availability is already in place. Residents of the Greater Chicago area, including Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will Counties, will soon join them.
With universal adult availability becoming a reality throughout all of Illinois soon, the importance of this procedure continues to increase. New variants of the contagious virus continue to create a deepening caseload of diagnosed COVID-19 illness. Positivity rates, as measured by the ratio of persons with the disease as a percentage of all tests taken, are once again increasing. The coronavirus continues to kill more than 1% of those who come down with the virus, and could cause potential severe and long-term health complications for some patients. More than 1.2 million cases of the disease have been diagnosed in Illinois, which signals the ease with which the virus can jump from person to person. More than 21,000 confirmed deaths, and more than 2,000 additional probable deaths, are attributed to the disease in Illinois.
Public health officials warn that new variants of the virus, which have been genetically typed and confirmed to be chemically different from earlier viruses, are more infectious and could well be more deadly. They redoubled the advice given to everyone to get vaccinated as soon as possible in line with one’s group and location, and to maintain social distancing, face mask use, and other safety precautions during this “surge” period.
GAMBLING
As casinos reopen, aspiring sports betters must register in person. Illinois’ 2019 Sports Betting Act created a transition period for national brand names headed by DraftKings and FanDuel. These firms have been urged to develop affiliate relationships with so-called “brick and mortar” casinos, racetracks, and off-track betting parlors throughout Illinois. Other sports betting firms can also set up affiliations with established gaming facilities. A person wanting to place legal Illinois wagers on worldwide sporting events may sign up, or “register,” with one of these affiliation partnerships.
One of the key elements of these affiliation arrangements, from the point of view of the casinos and other facilities, was that first-time bettors had to physically come to the facility and register in person, adding to the casinos’ potential in-person customer base. During the worst months of the COVID-19 pandemic, however, under a series of “stay-at-home” orders and social distancing rules promulgated by Gov. Pritzker, the casinos were fully closed, and then only partly reopened. In June 2020, the State gave Illinois residents the right under Executive Order 2041 to temporarily register as sports bettors online.
However, now that Illinois casinos have reopened, this temporary online sports betting registration status has disappeared. Wagerers looking for a way to sign up were told this week that they must physically go to a casino, racetrack, or off-track betting (OTB) facility that is affiliated with a sportsbook, and sign up in person.
Although gamblers will continue to have the opportunity to place sports bets in person in casino wire rooms and other betting windows, industry experts believe less than half of all sports bets will flow through this corridor. In pandemic-affected 2020, with Illinois casinos and face-to-face sports-betting windows closed or partly closed, registered betters placed more than 96% of all Illinois sports bets online. During this online period, Illinois became the fourth largest sports betting market in the U.S.
WEEK IN REVIEW
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