* Gov. Pritzker was asked how the state would use some of the American Rescue Plan money...
“The debts that we racked up during the COVID year of 2020, we had to do some federal borrowing in order to cover our bills,” Pritzker said. “We also racked up a bunch of bills, a bill backlog, that needs to be paid back. We need to act responsibly with these dollars.”
Among other things, Illinois owes the Federal Reserve about $3.6 billion from last year. The expectation was that the state could use what now looks like $8 billion to pay that off.
* From the US Treasury Department’s “interim final rule” on the state and local use of American Rescue Plan funds…
Question 17: In the Interim Final Rule, paying interest or principal on government debt is not considered provision of a government service. Discuss the advantages and disadvantages of this approach, including circumstances in which paying interest or principal on government debt could be considered provision of a government service. […]
Sections 602(c)(1)(C) and 603(c)(1)(C) of the Act provide recipients with broad latitude to use the Fiscal Recovery Funds for the provision of government services. Government services can include, but are not limited to, maintenance or pay-go funded building of infrastructure, including roads; modernization of cybersecurity, including hardware, software, and protection of critical infrastructure; health services; environmental remediation; school or educational services; and the provision of police, fire, and other public safety services.
However, expenses associated with obligations under instruments evidencing financial indebtedness for borrowed money would not be considered the provision of government services, as these financing expenses do not directly provide services or aid to citizens. Specifically, government services would not include interest or principal on any outstanding debt instrument, including, for example, short-term revenue or tax anticipation notes, or fees or issuance costs associated with the issuance of new debt.
Uh-oh.
* Back to Center Square…
The Illinois Comptroller’s office said they continue to review the interim guidance for what’s allowed and plan to provide comment.
“[Governor’s Office of Management and Budget] and our office will be seeking to clarify with the Treasury that guidance against using these funds to pay debts unrelated to COVID-19 does not prevent their use for paying debts accrued for spending related to COVID expenses,” a spokesperson for Comptroller Susana Mendoza said in a statement.
That’s basically our only hope.
* As House Revenue Committee Chair Mike Zalewski implied, unless the General Assembly decides to push budget passage beyond the scheduled May 31 adjournment (or Mendoza somehow succeeds), this won’t really help the state…
So some caution in folks jumping to conclusion that Treasury guidance barring use of ARP funds to pay off bonds is done deal….this is an "interim final rule" and so chicago and illinois have 60 days to make their case.
— yvette.shields@arizent.com (@Yvette_BB) May 11, 2021
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