Gov. J.B. Pritzker notified the Federal Reserve on Wednesday that Illinois plans to borrow an additional $2 billion from a special lending program established earlier this year to aid state and local governments ailing because of the coronavirus pandemic.
The state is facing a nearly $4 billion hole in the budget year that ends June 30 due in part to voters’ earlier rejection of Pritzker’s proposed graduate-rate income tax plan in the Nov. 3 election.
The spending plan approved by the Democratic-controlled General Assembly and signed into law by Pritzker also relied heavily on uncertain aid from Washington, which has been blocked by Republicans in the U.S. Senate.
The plan authorizes the state to borrow up to $5 billion from the Fed program, but Pritzker said he doesn’t want to saddle the state with that much short-term debt.
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Illinois’ budget calls for spending $43.1 billion from the state’s general funds, but the state currently only anticipates bringing in $39.2 billion in revenue, creating a shortfall of $3.9 billion, or about 9%.
While the governor said he’s optimistic that President-elect Joe Biden and Congress will reach a deal on an aid package to help offset the revenue states have lost due to the pandemic, the state is going ahead with more borrowing.
The plan is to repay the Fed as quickly as possible if federal aid comes through or if revenues rebound more quickly than expected, Pritzker said.
He said he would look to cutting state spending to fill the rest of this year’s budget hole.
Illinois so far has been the only state to tap the Fed’s Municipal Liquidity Fund, which will expire after Dec. 31.