Illinois Democrats seeking more than $40 billion in Federal bailout funds for pensions, budget deficits

SPRINGFIELD (The Center Square) — Illinois lawmakers – citing the state’s pension costs, budget shortfalls, and empty unemployment trust – are asking for more than $40 billion in no-strings-attached aid from the federal government.

In a letter to the state’s Congressional delegation, Senate President Don Harmon said Illinois state government is projecting significant budget shortfalls in the current, coming and preceding fiscal years.

“Illinois could see an estimated revenue loss of $14.1 billion for 2020-2021 due to this pandemic,” they said in the April 14 letter. “This loss would deplete approximately one-third of Illinois’ general funds in one fiscal year, significantly impacting state services and long-term obligations.”

The request is in addition to the funding the state is receiving through the CARES Act, which was passed by Congress and signed by President Donald Trump last month.

Harmon’s office wasn’t immediately available for comment on the request, but John Patterson, a spokesman for state Senate Democrats, confirmed the letter in an email to The Center Square.

“Of note, the federal aid so far has been focused on direct COVID-19 costs,” Patterson said. “The massive, negative effect on state and local economies in Illinois and across America has not yet been addressed. I’m not familiar with any similar efforts, but Illinois’ situation is not unique and I would expect most every state is doing something similar.”

Illinois’ five state pension systems are underfunded by at least $138 billion. Critics have been calling for significant pension reform for years, including a Constitutional amendment to change its pension protection clause.

In a “preliminary assessment” of aid, Harmon’s office lists off the requests:

• $15 billion in block grant funding to go directly into the state’s coffers. The letter says that would allow the state to address “unique needs” for the current fiscal year, fiscal 2021, and the beginning of fiscal 2022.
• $10 billion in state pension relief. The letter warns that Illinois’ $138 billion pension liability and $54 billion in future health care costs threaten to crowd out core services in a normal budget year but the loss of revenue combined with lower expected market returns could send the annual bill even higher. Harmon requests a direct cash injection as well as a low-interest federal loan.
• $6 billion in unemployment trust funds: Harmon asks that the federal government inject the state’s unemployment insurance trust to help keep checks going out to unemployed workers, especially now that they’re set to open up the program to gig workers in May who previously wasn’t eligible. Illinois has one of the nation’s lowest-funded unemployment trust accounts in the U.S.
• Raise in federal medical help: While there’s no dollar amount tied to the request, Harmon is asking the feds to increase the Federal Medical Assistance Package to 65 percent, three percent higher than what it was in the wake of the Great Recession.
• Hardship payments to health care facilities: Harmon requests an additional hardship payment to hospitals, nursing homes, and health care facilities that he says “are waging war against an invisible enemy.”
• $1 billion in additional public health spending in disproportionately impacted communities. The ask says the pandemic has hit some communities worse than others with “lingering disparities in health conditions and access to care.” Statistics have shown that a high percentage of COVID-19 fatalities are from the black community.
• $9.6 billion in aid for municipalities: In concert with the Illinois Municipal League, Harmon says the state needs $9.6 billion to be sent directly to towns and cities. He says municipalities are on the front lines of the fight against the pandemic but “anticipate unbearable revenue losses as a result of the crisis.”

In a blog post, Illinois financial watchdogs and Wirepoints writers Mark Glennon and Ted Dabrowski criticized the bailout request.

“Harmon and the Democratic caucus admit that even in a normal year, pension costs at the state level are crowding out funding for services and programs, yet they show no intention whatsoever of making reforms to correct preexisting problems,” they said. “Instead, they seek $10 billion for state pensions alone. And the rationale for the $9.6 billion sought for municipalities is clear.

Revenue losses resulting from the pandemic, their letter says, “will dramatically impact municipalities’ abilities to fund retirement systems.’

“Illinois government spent the last three decades creating the nation’s worst pension crisis. Now it wants taxpayers across the nation to bail it out,” they added.

Reporting by Cole Lauterbach