• Greg Hinz On Politics
  • Greg Hinz On Politics

    Coronavirus poses a dire threat to city and state budgets

    The cost of the virus and a possible recession are terrible news for City Hall and?Springfield, both?already struggling to pay their bills. “We don’t have any reserves.?We don’t have any unrestricted funds that are being held in abeyance,” warns a civic watchdog.

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    79彩票注册网址A state and city that have had trouble paying their bills even in good times are facing a potential budget body blow as the coronavirus begins to infect the local economy.

    79彩票注册网址Fiscal experts and some officials are warning that a region that serves as a logistics and meetings center and as a major international exporter is particularly vulnerable to disruption from the spreading virus. That means less tax receipts at a time when government needs more.

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    Already, one of the city’s largest trade shows has canceled its annual McCormick Place gathering, costing the city millions in lost revenue from the 60,000 visitors who aren't coming and the 47,000 room nights at area hotels they won't book.

    If that disruption turns into a full-fledged recession—not certain, but a real possibility—City Hall and Springfield may have to make some very difficult choices to shore up budgets that lately have been balanced with one-time revenues, tax hikes and IOUs.

    79彩票注册网址Though some of the concern centers on the cost of dealing with the developing outbreak, local officials are expecting big help from Washington in paying medical bills. Key federal lawmakers including Sen. Dick Durbin, D-Ill., and House Appropriations Committee member Rep. Mike Quigley, D-Chicago, already have been drafted to make the city’s case for extra funding.

    But the main concern is on the revenue side of the equation.

    79彩票注册网址“We don’t have any reserves. We don’t have any unrestricted funds that are being held in abeyance,” either at the state or city level, warns Laurence Msall, president of the watchdog Civic Federation.

    “It is reasonable to forecast tens of millions of dollars of revenue impact for the city and hundreds of millions for the state, depending on how long a possible recession continues,” he added. Both state and city officials should be doing the same thing now, in his view: “They should be refreshing their Plans B and preparing alternatives.”

    Another warning comes from Illinois Treasurer Mike Frerichs.

    “I’m greatly concerned, both about the public health implications of what’s occurring as well as our financial well-being,” said Frerichs, one of the state’s top financial officers. “It will definitely affect our state budget . . . (and) put additional burdens on our over-stretched pension system,” which has more than $135 billion in unfunded liabilities.

    “The city and state have done little to address the long-term debt crisis other than to continue to base pension fund investment earning forecasts on totally unrealistic growth rates,” says Paul Vallas, a former state financial officer and city budget chief who was defeated by Lori Lightfoot in last year’s mayoral election. “Illinois is a state whose economy is heavily dependent on exports. Anything that slows or disrupts the world’s economy has a greater impact (here).”

    79彩票注册网址Current city and state budget officials are downplaying the risk of a recession, but quickly add they’re carefully monitoring the situation.

    In a statement, the city budget office said it “likely is too soon to say what the impacts will be on tourism” and emphasized it has seen no dip yet in economically sensitive sales tax receipts, perhaps in part because the recent NBA All-Star Game attracted lots of out-of-town visitors. It also noted flights from O’Hare International Airport to China79彩票注册网址 represent less than 1 percent of the airport’s total passenger volume.

    79彩票注册网址The city toned down an early version of its statement after the International Housewares Association announced the cancellation of its Chicago show. And it did not note that the city needs hundreds of millions of dollars a year in increased income—from a proposed new casino, a pending plan for Medicaid reimbursement of city ambulance costs and other sources—if it is to balance 2020 and 2021 budgets. That task will be more difficult if revenues dip because of a recession.

    In even stronger terms, Deputy Gov. Dan Hynes said he currently has “no concern” about a fiscal hit stemming “from an issue that has only existed for a couple of weeks.” The state “is monitoring the situation from every angle,” but Gov. J.B. Pritzker’s proposed fiscal 2021 budget did somewhat reduce expected year-to-year growth in income tax receipts.

    The current year’s budget was balanced in part because of an unexpected pop in income tax revenues from capital gains. Those gains will not occur again if the stock market continues to drop.

    The governor’s proposed budget counts on approval of a graduated income tax hike by voters this November. It reserves $1.4 billion in spending on schools, local government aid and other matters until and if voters approve. 

    UPDATE—Illinois Comptroller Susana Mendoza now is commenting, and she’s sort of in between on the worry scale.

    79彩票注册网址“We’re monitoring this very closely. It’s too soon to know what the effects will be. Wild speculation isn’t helpful,” she said.

    79彩票注册网址However, she added, after three years of “economic triage,” the office is sharpening its bill-processing skills just in case. The top priority: Make sure the state has enough cash on time at all times to meet federal requirements for matching aid.

    Overall, “We are nowhere near the point where people should be freaking out,” and the state has taken some very smart steps on the health side to contain the illness, Mendoza said. But it will take a month or two to get revenue totals and know for sure.

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