Pritzker budget proposal to include extra $500 million in pension payments

The governor’s top advisers say the new spending plan keeps the state on track to end in the black for back-to-back years for the first time in 25 years. 

Citing an improved economic outlook in the COVID-19 pandemic, Gov. J.B. Pritzker’s latest budget proposal will devote an extra $500 million to Illinois’ nearly insolvent pension funds, pump $200 million into a “rainy day” fund and tamp down the state’s unpaid bill backlog — all while providing $1 billion in tax cuts, freezes and rebates, administration officials said Wednesday.

Pritzker was scheduled to outline the ambitious $45.4 billion election-year spending plan during his “State of the State” speech at noon in Springfield, in a downsized event held at the Old State Capitol Building due to a massive winter storm sweeping the state.

In a media preview ahead of the speech, the governor’s top advisers claimed the new spending plan keeps the state on track to end in the black for back-to-back years for the first time in 25 years.

And in committing an extra half-billion dollars to pension funds, it would be the first time since 1994 that Illinois would contribute more than its legally required annual payment — not much of a dent in the unfunded obligations that soared over $144 billion in 2020, but a move that will save the state $1.8 billion in the long run, administration officials said.

Budget officials revised their estimate for the current fiscal year ending June 30 to close out with a $1.7 billion surplus that’ll be put toward paying down some of the state’s massive accrued debt.

The governor’s office says that’ll help get the state’s unpaid bill backlog down to about $2.7 billion by the end of the next budget year — down from nearly $9 billion midway through 2020.

Pritzker will also propose using $600 million from the current fiscal year surplus and $200 million from next year’s budget for Illinois’ “rainy day” fund, which hasn’t seen a cash infusion in 18 years.

The fiscal moves are proposed with an eye toward Wall Street credit ratings agencies who have issued some of their first credit upgrades to the state in decades under Pritzker — who would surely welcome another boost heading into a tough re-election battle.

Pritzker’s office says they can do all that while offering almost $1 billion in tax relief for families feeling the “pinch” of inflation. That includes $495 million in combined savings by suspending a 1% tax on groceries and freezing a scheduled increase in the gas tax, while offering $475 million in property tax rebates to homeowners. Roughly 2 million residents would be eligible for those rebates, with direct payments of up to $300 each.

Administration officials say the perennially cash-strapped state is on better financial footing after negotiations with state worker unions and health insurance companies to save about $1.2 billion in health care expenses for employees and retirees. Selling state properties and getting out of leases also have shored up funds, along with lowering interest payments as debts have shrunk.

Federal COVID-19 relief dollars have also helped the state make ends meet over the past two years. About $3.5 billion will still be left over from those funds after the upcoming fiscal year, though some of those dollars go directly to local governments.

Here’s an overview of the budget proposal provided by Gov. J.B. Pritzker’s office:

This is a developing story. Check back soon for more.