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Experts weigh in on giving federal aid to states like Illinois

Gov. J.B. Pritzker speaks from his office in Springfield on Wednesday.

(The Center Square) – S&P Global Ratings called Illinois’ spending plan, which relies on borrowing billions from the Federal Reserve, “precariously balanced” as nonprofit groups weigh in how federal aid should be distributed to states.

The organization Truth in Accounting hosted a webinar titled “Federal aid to the states … with strings?” on Tuesday.

Adam Schuster, budget and tax research director with the Illinois Policy Institute, said federal aid to Illinois should include conditions.

“If you gave any money to Illinois politicians without strings attached, without conditioning that aid on some type of significant financial reform, the money is going to be squandered,” he said.

Truth in Accounting CEO Sheila Weinberg said the COVID-19 pandemic has put states in challenging financial situations, but the federal government could go back to a state’s 2019 finances to determine how much aid should be paid out.

“If you are going to provide relief for lost revenues, do that based upon what revenues they had before and what loses they have from there,” Weinberg said.

Gov. J.B. Pritzker has said if the federal government doesn’t approve a bailout for states amid the pandemic, lawmakers may have to rework the budget.

Schuster said Greece was an example of a financially-strapped government that received help with conditions.

“When the (International Monetary Fund) and the European Union came to bail them out, they said ‘if you are going to get money, you need fix up your pensions,’ ” Schuster said. “That is exactly what we want Congress to do with Illinois.”

Lawmakers have yet to build a consensus around a plan to address the state’s pensions. Some Republicans want to see pensions reduced, but that would require changing the state’s constitution. Democrats have generally rejected any plan that would reduce pensions for former state employees. Pritzker has said the state must pay its pension debts.

Illinois pension debt is estimated to be upward of $130 billion. The state spends about a quarter of its general revenue on pension benefits.

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