Illinois will borrow $2 billion more from the Federal Reserve to pay bills associated with COVID-19, Gov. J.B. Pritzker announced Wednesday.
Sales tax revenue has dropped due to the economic disruption while health care costs, including personal protective equipment, have gone up. Pritzker emphasized the move to borrow is only a short term solution. The money must be paid back within three years.
Illinois lawmakers had approved borrowing as much as $5 billion, but the governor wouldn’t go that far.
“I believe it would be irresponsible to borrow that entire amount, given the persistent pain it would cause over the next three years as we would struggle to re-pay that entire amount,” he said.
Illinois was the first state to take advantage of the new federal reserve program, borrowing $1.2 billion this summer to shore up the state's budget for the fiscal year that ended on June 30. A spokesperson said Wednesday about $200 million of that loan has been repaid.
Pritzker said short-term borrowing could be paid off as the economy rebounds. He also continues to hold out hope for a federal stimulus package that could provide money to help states. The governor said his confidence level is rising as a bipartisan group of federal lawmakers appear to back he idea. But Pritzker added his confidence is still “modest.”
"Short term borrowing is a short term band-aid to address the urgency of a short term problem like one caused a pandemic,” he said.
The Illinois Treasurer and Comptroller are both on board with the plan, as required for short-term borrowing.
“The Illinois Office of Comptroller will use federal matching dollars to turn the $2 billion into $3 billion to pay critical medical bills and avoid paying late-payment interest penalties," Comptroller Susana Mendoza said. "Our responsible approach will stretch every borrowed dollar to its maximum benefit to taxpayers."
Illinois faces a growing structural deficit projected to be at nearly $4 billion at the end of this fiscal year in June 2021. The state's poor fiscal condition long preceded COVID-19.
Pritzker said he will work with state lawmakers on longer term solutions, which he has previously indicated could involve a tax hike and deep budget cuts.
When asked if he would push for a tax hike in the “lame duck” legislative session – when current lawmakers return in January before any new members are seated a few days later – Pritzker sidestepped the question.