Illinois Senate Democrats Seek Massive Federal Bailout for State, Going Far Beyond Coronavirus Impact

Submitted by Mark Glennon and Ted Dabrowski of Wirepoints

Wirepoints has obtained a copy of a letter detailing a federal bailout request sent by Illinois Senate President Don Harmon (D-Chicago) in substantially similar form to all members of the Illinois Congressional Delegation. The letter, which is reproduced below, was sent on April 14 on behalf of Harmon’s 40-member Democratic caucus, which holds a majority in the Illinois Senate.

The requested bailout is galling in scope and shameless in purpose – a clear attempt to use the pandemic as cover to get federal money to pay for Illinois’ pre-pandemic fiscal mismanagement, particularly of its pensions.

The Democratic caucus seeks well over $41.6 billion, including important crisis-related relief such as $1 billion in public-health aid to minority communities and unspecified amounts for increased Medicaid reimbursements and hardship payments to health care facilities.

But the vast majority of their request amounts to a national bailout of Illinois’ pre-pandemic failures. It includes:

• $15 billion for a no-strings-attached block grant;

• $6 billion for the state’s unemployment trust fund;

• $10 billion for the state’s pension funds; and,

• $9.6 billion in unrestricted aid to Illinois municipalities, again for pensions.

The $15 billion for the state is more than double the state’s projected losses caused by the pandemic and downturn, depending on how you count it. Gov. J.B. Pritzker released estimates on Wednesday. Pritzker said total budget shortfalls for this year and next total $6.2 billion, assuming the state’s pending constitutional amendment to allow for a progressive tax increase passes in November. Harmon’s letter claims revenue losses could exceed $14.1 billion, without explanation for the difference with Pritzker’s numbers.

Also notable is that the $6 billion bailout for Illinois’ unemployment trust fund stems from the state’s comparatively poor management of it. Illinois, prior to the pandemic, had the fourth-worst funding level for that state fund.

The new bailout would be in addition to federal assistance already authorized by Congress and the Federal Reserve Bank. They include, for Illinois, approximately $4.9 billion under the new CARES Act and about $9.6 billion in a new Federal Reserve facility to purchase municipal bonds.

Chicago may also be seeking its own federal bailout money separately.

The biggest intended beneficiary of the requested bailout is obvious from the letter: pensions.

Harmon and the Democratic caucus admit that even in a normal year pension costs at the state level are crowding out funding for services and programs, yet they show no intention whatsoever of making reforms to correct preexisting problems. Instead, they seek $10 billion for state pensions alone. And the rationale for the $9.6 billion sought for municipalities is clear. Revenue losses resulting from the pandemic, their letter says, “will dramatically impact municipalities’ abilities to fund retirement systems.”

Illinois government spent the last three decades creating the nation’s worst pension crisis. Now it wants taxpayers across the nation to bail it out.

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UPDATE: The response by Republican members of the Illinois Congressional delegation is linked here.

Read more about how Illinois politicians created the nation’s worst pension crisis:

• Overpromising has crippled public pensions: A 50-state survey – Special Report

• Illinois pension plans were running out of cash long before the Coronavirus hit

• Moody’s new report shows Illinois is nation’s outlier when it comes to pension debts

• Illinois state pensions: Overpromised, not underfunded – Special Report

• Coronavirus impact may push Illinois state pension debt to over $300 billion

• Illinoisans overwhelmed by a ‘shadow mortgage’ of pension debts

The letter to Illinois Congressional delegation: