Our update today will focus on reopening views from the Governor, program expansion and a newly signed bill, and more covering budgets, funding, and tax revenue.
Reluctance to Roll Back
Governor Pritzker suggested today that he is reluctant to dial back the state’s economic reopening, even as new COVID-19 cases show a marked increase here which is good news. He did, however, admit to asking himself if there needs to be a possible future “dimming.” And he hinted that, if that time arrives, indoor bars and indoor restaurant dining will be first in line for closures. This comes as unfortunate news, especially for those that have been adamantly following the rules and guidelines set up. Hopefully, we will not get to this decision point and cases will cease to reemerge.
The governor was more definitive in saying he has no plans to issue a quarantine on people traveling to Illinois from COVID hot spots. He underlined that Chicago Mayor Lightfoot has issued a 14-day quarantine order, not the state as a whole.
Governor Pritzker Announces New Investments Expanding Illinois Apprenticeship Program
Governor Pritzker and the Illinois Department of Commerce and Economic Opportunity (DCEO) today announced a $4.7 million investment that will expand the Illinois Apprenticeship Program to serve an additional 568 residents in training programs over the next two years. To help more Illinoisans take part in apprenticeship training programs aligned with high-demand career fields, the administration is awarding grants to 25 organizations across the state to expand training programs and employer partnerships, with an emphasis on growth in underserved communities. With additional grant funding to sustain and expand the program, the Illinois Apprenticeship Program will see a record level of investment of $20 million and will serve a record 17,000 participants in 2020.
DCEO is awarding grants to 25 partner organizations through a new $4.7 million investment, made possible by a $2.8 million grant from the U.S. Department of Labor awarded to DCEO as well as $1.9 million in discretionary workforce funds invested by the state. These investments will pave the way for training in new industries, while also helping more residents in underserved communities to unlock jobs in high-demand and highly paid career fields. Investments announced today to increase capacity, along with a $5 million investment in the Apprenticeship Tax Credit and $10 million for the historic Illinois works initiative bring the total investment to a record $20 million for 2020.
Country Budget Deficit
The U.S. budget deficit reached $3 trillion in the 12 months through June as stimulus spending soared and tax revenue plunged, putting the federal government on pace to register the largest annual deficit as a share of the economy since World War II. As a share of gross domestic product, the 12-month deficit came to 14% last month, compared with 10.1% in February 2010, when the U.S. was still recovering from the last recession. In June alone, the deficit widened to a monthly record of $864 billion, the Treasury Department said Monday. This is nearly as much as the gap for the entire previous fiscal year, which totaled $984 billion.
State Government Funding
As the COVID-19 pandemic swept through the United States, economic shutdowns swiftly and unsparingly disrupted many of the ways that money flows into state budgets. States have lost revenue, for example, from income not withheld from furloughed workers’ paychecks, tolls not collected from traffic absent from state highways and bridges, and sales taxes not tacked on to bills for hotel rooms that have sat empty.
The full extent of the fiscal damage is not yet known, and aftershocks are likely to plague state budgets for years, even if no additional shutdowns become necessary. Individual states will feel different impacts depending on the specific mix of revenue they rely on to fund their budgets.
Taxes make up about half the money that finances state governments and the services provided to residents; they are the largest revenue source in 44 states. States therefore will experience different degrees of budget stress depending on how COVID-19 affects their economies and mixes of tax sources. For example, economies reliant on live entertainment and tourism were hit hard when businesses were shut down.
The pandemic dealt immediate blows to both largest sources of state tax revenue: levies on personal income, which account for 37.9% of total state tax revenue nationwide, and on general sales of goods and services, which generate 30.9%. Broad-based personal income taxes on wages and investment earnings were battered as unemployment zoomed higher this year than at any point during the 2007-09 recession and as the stock market plummeted; the latter has since nearly recovered.
General sales tax revenue also was slammed when restaurants, bars, retail stores, and other businesses were shuttered and consumer spending fell sharply, starting in March. Typically, states can rely on sales taxes from day-to-day spending on goods such as food and clothing to be more stable than taxes tied to more volatile aspects of the economy.
Besides taxes, which make up 48.8% of total state revenue, other major components are federal funds (32%), which tend to increase during a recession, and service charges (11.2%), which include sources such as public college tuition payments and highway tolls that have proved vulnerable in the pandemic. For 20 states, taxes make up at least half of their total revenue. Pre-pandemic, federal funds were the greatest source of revenue in six states.
Since the current recession began in February, Congress has approved an extra $150 billion to help state and local governments fight the effects of the coronavirus. More aid for these governments is under consideration currently and will be a major discussion point during the next few weeks as Congress decides on components in the next (and maybe final) funding bill.
Six Month Report on Cannabis Sales
Illinois took in $52 million in tax revenue from adult-use marijuana sales in the first six months. Since recreational marijuana became legal, dispensaries statewide have sold $239 million worth of product. The state collects both general sales taxes and taxes specific to marijuana.
This is the first report since the state disclosed their first month take of $10 million. As we reported last week, sales hit a record $47.6 million in June, up from $44.3 million in May.
About half the tax revenue will go to the state’s general fund. One-fourth will be spent on reinvestment programs in communities impacted by the war on drugs, another 20% on substance abuse and mental health, and 8% on local crime-prevention programs.
Invite to Conversation with Dr. Fauci
Path Forward Special Edition: A Conversation with Dr. Anthony Fauci
Hosted by the U.S. Chamber of Commerce Foundation
When: Friday, July 17, 2020 at 10:00 AM
What: A dialogue led by U.S. Chamber president Suzanne Clark on helping America prepare to restart the economy and get millions of people back to work.
Who: Next week’s special edition of Path Forward with National Institute of Allergy and Infectious Diseases director Dr. Anthony Fauci will focus on protecting employees and customers from COVID-19, the barriers to a successful reopening of the economy, where employees can get access to testing and personal protective equipment, and much more.
Click here to register for the special edition Path Forward event with Dr. Anthony Fauci.
Finally, in addition to the lineup of topics to be covered by Congress, one item has been less talked about. The economic downturn caused by the pandemic has led to the largest decline in health coverage on record: An estimated 5.4 million American workers lost their health insurance between February and May. It will be interesting to see how this situation fits into the conversation. With that said …
Access to Health Care in Illinois
State Senator Mattie Hunter’s legislation aimed at improving access to health care in communities across Illinois that have been disproportionately affected by the COVID-19 pandemic was signed into law yesterday by Governor Pritzker.
Senate Bill 1864, known as the Health Care Affordability Act, eliminates or loosens requirements on who can access Medicaid by:
- Providing HFS with the authority to accept an applicant’s or recipient’s attestation of income, incurred medical expenses, residency, and insured status when electronic verification is not available.
- Eliminating resource tests for some eligibility determinations.
- Suspending redeterminations.
- Suspending changes that would adversely affect an applicant’s or recipient’s eligibility.
- Allowing phone or verbal approval by an applicant to submit an application in lieu of applicant signature.
- Allowing adult presumptive eligibility.
- Allowing presumptive eligibility for children, pregnant women, and adults as often as twice per calendar year.
- Suspending premium and co-payment requirements.
The law allows individuals who are not otherwise eligible for Medicaid to qualify for medical assistance for the duration of any federal or State declared emergency due to COVID-19. However, these services are limited to testing and treatment related to COVID-19. SB 1864 takes effect immediately.
Joliet Region Chamber of Commerce & Industry Staff and Board of Directors
Vice President – Government Affairs
Joliet Region Chamber of Commerce & Industry