By: Ted Dabrowski and John Klingner
There’s little doubt that Illinois politicians are salivating over the $13.7 billion windfall they’re about to spend. Those billions are Illinois’ share of the $350 billion in aid dedicated to state and local governments, a key part of President Biden’s $1.9 trillion stimulus package passed earlier this year. The state of Illinois itself will get $7.75 billion and the remaining $6 billion will go directly to counties and cities.
The numbers are big. Take the city of Berwyn, Illinois, which is set to receive $32 million in stimulus dollars, according to a data release from the Illinois Municipal League. The city’s take is equal to a whopping 81 percent of its 2019 general budget. Peoria expects $46 million, or nearly half of its $100 million budget. And the city of Chicago will get nearly $2 billion, worth 60 percent of its general budget, based on financial data from the Illinois Comptroller.
Even the state, which nearly broke even in revenues in 2020 compared to 2019, will get more than $7.75 billion, nearly a fifth of its budget.
That flood of federal dollars is nothing to celebrate. After taking into account previous COVID aid and the improving economy, Biden’s stimulus simply isn’t needed. It will only encourage Illinois’ worst habits and delay reforms.
The money will help some struggling residents and cities in the short term, but it will ultimately harm all Illinoisans in the long-term. Lawmakers will be too tempted to spend the billions in “free” federal money on new programs instead of paying down old debts and reforming Illinois’ structural problems.
When the money runs out, Illinois will be right back where it was in 2019 – only the deficits and debts will be worse due to additional neglect. All Illinoisans will lose under that scenario.
The battle over how to spend the money earmarked for the state itself has already started, as reported by the Chicago Tribune.
“I look forward to working with the Pritzker administration and our budget leaders on how to best appropriate these funds so they meet the needs of our most vulnerable communities,” says House Speaker Chris Welch.
“Before we spend money on anything else, any stimulus money that comes to Illinois is earmarked to pay back money we borrowed from the Federal Reserve for the state’s COVID and other medical expenses during this pandemic.” Comptroller Susana Mendoza.
And in Chicago, Mayor Lightfoot and city aldermen are already arguing over spending priorities for the city’s share of the stimulus.
Where local dollars go
Many of Illinois’ local governments are going to find it hard to spend their stimulus money responsibly.
Some cities are getting funds equal to a half of their general budgets, or even more, as seen in the chart below.
The money will be distributed by the federal government over the next year and it must all be spent by Dec. 31, 2024. The spending is restricted to public health emergencies, aid to pandemic-impacted industries, filling in lost revenue and infrastructure spending.
The stimulus can’t be used to pay down pension debts nor, it appears, to provide tax cuts to residents. This fits neatly in with Congress’s plan to further federalize government spending, as we’ve written about here.
By handing out trillions in additional dollars, but restricting the money largely to spending on new programs, the federal government is setting up local and state governments for a budget crisis a few years down the road. By the time the stimulus money runs out, any new programs and initiatives will be fully entrenched in state and local budgets. That will either force cities and states to raise taxes by heavy amounts or go begging to the federal government for more funds.
That’s evident in how the money is being distributed, where the poorest communities are getting disproportionately far more in stimulus funds.
Kankakee, for example, will receive $14.6 million, equal to nearly $570 per resident and about half of its 2019 general budget. Danville will receive $25 million, which is over 100 percent of its general budget and equal to more than $800 per resident.
Meanwhile, wealthy Naperville is getting just $13 million, equivalent to just 10 percent of its budget and $91 per resident.
That difference in per capita funds is due to the methods used to determine their distribution. Rather than provide the stimulus based on population, distribution is based on the HUD’s Community Development Block Grant (CDBG). That CDBG formula takes into account a community’s poverty level, housing stock, previous grants and more, though it appears the precise formula has not yet been fully determined.
The $350 billion stimulus wasn’t needed in the first place
The last several months have provided ample evidence that the economy and state revenues are recovering on their own. Scores of analyses nationally have proven that.
Wirepoints also calculated the numbers earlier this year in our special report: The states’ 2020 financials are in: Biden’s billions in new federal aid aren’t needed. We found that after state reserves, CARES Act funds and 2020 revenues were accounted for, 44 state governments expected to end up with revenue surpluses.
Only six states – New York, Illinois, New Jersey, Maryland, Hawaii and Nevada – were projected to run a revenue deficit. Combined, the six states were short by just $12 billion.
But none of that mattered to Congress. In what will likely go down as one of the biggest budgetary overkills in history, the Biden stimulus is going to dole out $220 billion to state governments that are already running a collective surplus of $93 billion.
The state of Illinois itself is going to get $7.5 billion to cover a revenue shortfall of only $3 billion.
On top of that, the combined $13.7 billion for state and local governments is only a part of what Illinois is expecting overall from the full stimulus package. Billions more will end up in Illinois through education, healthcare and transportation aid.
That includes:
- $5.0 billion for Illinois K-12 schools
- $1.3 billion for Illinois institutions of higher education
- $1.3 billion to support child care providers in Illinois
- $1.5 billion in testing and public health money for Illinois health departments
- $1.5 billion in transit funding
In all, U.S. Sens. Durbin and Duckworth say Illinois’ total windfall is estimated to be over $25 billion.
The state’s pre-pandemic mismanagement, corruption and failed policies are essentially getting a bailout from the feds.
