WASHINGTON — Illinois built a foundation for future revenue streams during the spring legislative session that will allow it tochip away at the state’s massive fiscal challenges, according to Deputy Governor Dan Hynes.
During his keynote remarks at the eighth annual Brookings Municipal Finance Conference Monday night, Hynes touted a number of measures lawmakers approved to bring in new revenues from expanded gambling, sports betting implementation, legalized marijuana and raising the state’s gas tax.
He also credited Gov. J.B. Pritzker with pushing through a proposal that will go before voters in 2020 to eliminate the requirement that Illinois have a flat income tax structure.
Hynes is one of several deputies appointed by Pritzker, who took office in January.
“We wanted to make sure we had something that was fair, comprehensive, long-lasting and that would set Illinois on the right trajectory financially,” said Hynes of the proposed progressive rate structure that would raise about $3.5 billion in new annual revenue by hiking taxes on the top 3% of earners. “That flat tax has been raised and lowered, raised and lowered…many times over the years which creates budgetary and economy uncertainty.”
Illinois is pressured by $133.7 billion of unfunded pension liabilities and an unpaid bill backlog that stood at $5.9 billion Monday.
It has the worst general obligation ratings among states at Baa3 by Moody’s Investors Service, BBB-minus minus by S&P Global Ratings and BBB by Fitch Ratings. The S&P and Moody’s ratings are one notch above junk territory and Fitch’s is only two steps. Fitch assigns a negative outlook and the other two assign a stable outlook. Moody's affirmed its rating after the legislative session ended in late spring.
The Pritzker administration is planning on putting $200 million annually from the new graduated tax revenue toward pensions if voters approve next year’s progressive tax constitutional amendment.
Lawmakers approved a structure that raises taxes on the top 3% of earners to generate more than $3 billion annually. Hynes said Monday the state is also looking to monetize or transfer state assets such as the James R. Thomson Center in Chicago that can be used to improve the pension system’s funding ratio that is at only 40%. A task force is expected to report back on asset sales and transfers this summer.
“We have a massive liability in our pension system that has to be paid, but we also have a balance sheet of assets that could maybe help offset those liabilities,” said Hynes, who served three terms as the elected state comptroller from 1999 to 2011. “We have a whole inventory of surplus properties.”
Illinois is the only state that has not yet released its fiscal 2018 comprehensive annual financial report and officials have blamed the delay on the transfer of power from former Gov. Bruce Rauner to Pritzker.
Hynes said in an interview after his remarks during a discussion moderated by Brookings senior fellow David Wessel that he spoke to Illinois Auditor General Frank J. Mautino last week about the status of the CAFR and is expecting the report to be released “soon.”
— Yvette Shields contributed to this story.
