Illinois’ ‘rainy day’ fund hits record-high balance ahead of new fiscal year

There were no champagne toasts or fireworks, but when the clock struck 12 a.m. on Saturday, it marked the start of a new year in Illinois – a new fiscal year, that is.

And just as a new year is a time to contemplate recent accomplishments and make resolutions for the future, Illinois Comptroller Susana Mendoza is ringing in fiscal year 2024 by celebrating a record-high $1.94 billion in Illinois’ “rainy day” fund and setting her sights on doubling that figure in the next decade.

“$2 billion sounds like a lot of money, certainly in contrast to $48,000,” Mendoza said in an interview Friday, citing one of her most frequently repeated stories about the fund’s balance in August 2018 – when the state was still recovering from a two-year budget impasse between Republican Gov. Bruce Rauner and Democrats in the General Assembly.

The paltry sum would have only funded state government operations for 30 seconds, Mendoza estimates.

In contrast, nearly $2 billion “gives us about 10 days’ worth of operating reserves for our state,” she said.

But despite achieving that high-water mark – and celebrating Illinois’ eight recent credit ratings upgrades from the three major finance agencies that determine public and private creditworthiness – Mendoza joked that it’s her job to be the “party pooper” or “Debbie Downer” of state government.

“The majority of states in our country have about 40 days’ or more worth of reserves for their state operation,” she said. “So we’re doing great, but we have a far path yet to trek through.”

While Mendoza would love to someday get Illinois to the same roughly 40 days of reserves that 26 states have socked away, she’d settle for 20 – which would be roughly 8 percent of Illinois’ operating budget for a given year. She said that’s what the major credit ratings agencies have advised if Illinois is to receive future credit upgrades.

Mendoza has been pushing legislation to mandate that lawmakers put more into the state’s rainy day and pension stabilization funds during strong fiscal years, but it has never received a vote in either chamber of the General Assembly despite clearing a House committee unanimously. The comptroller said she plans to reintroduce the bill through her allies in the General Assembly.

“There is no good reason to not move forward with this legislation,” Mendoza said, adding that credit ratings agencies haven’t forgotten about Illinois’ reputation of not “being a good fiscal steward year after year after year.”

She boasted that Democratic leadership – including her, Gov. JB Pritzker and the Democratically controlled General Assembly – has helped right Illinois’ fiscal ship in the last several years.

“However, governors change. Legislatures change,” she said. “This is the time to do it. I don’t see any good reason to, to delay it any further.”

Mendoza said lawmakers should be able to increase the rainy day fund’s balance to 8 percent of Illinois’ budget in the next 10 to 15 years regardless of whether her bill requiring greater contributions becomes law.

From there, she said, Illinois should focus on paying down its unfunded pension liabilities, which stood at $139.7 billion at the end of Fiscal Year 2022. The most current figure will be made public in the coming months.

Unfunded pension liabilities would never come due at the same time; pension payments are doled out monthly when state workers retire, while the state pays into its five pension systems monthly as well.

Mendoza rejected the “crisis” label often ascribed to the pension issue, but she said it’s not a problem to be ignored.

Paying more into the pension systems now will negate the piling up of interest costs in the future, reducing the crowding out of services that money could otherwise be used to fund, she said. Mendoza pointed to the $700 million above the minimum required amount that the state has paid into its pension systems in recent fiscal years, which she said will save Illinois “about $2.4 billion on the back end.”

“And the more we do that, the quicker we’re going to get out of this hole,” she said.

That’s why Mendoza said her proposed legislation targets the pension stabilization fund as well as the rainy day fund.

“It’s not sexy,” she said. “There’s no ribbon cutting with saving money, but I think it’s the best and most incredible use of taxpayer dollars to actually protect our budgets…the moral document that we’re going to live off of that year.”

Mendoza earlier this year had advised Pritzker and lawmakers to not start any new state programs in the coming year’s budget. But she said she was happy with this year’s budget “for the most part,” despite new spending in areas like child care, pre-K programs and higher education.

“All of those spending initiatives, which are big ticket items, are all going to produce a good return on investment for taxpayers,” she said.