CHICAGO (Sept. 24, 2020) – Five months after Illinois Senate President Don Harmon asked Congress for a more than $40 billion COVID-19 bailout, with $10 billion, or nearly a quarter of the total requested intended for the state’s infamously underfunded pensions, new legislation filed in the U.S. House today would protect taxpayers from this kind of fiscal mismanagement if the federal government does offer additional aid beyond the $200 billion already provided in financial relief to state and local governments.
U.S. Rep. Darin LaHood, R-IL, filed legislation modeled after the Illinois Policy Institute’s Taxpayer Protection Program, which places conditions on states receiving federal funds to ensure aid money is used for its intended purpose: To support critical government services and bolster a strong economic recovery.
LaHood’s legislation would structure federal aid as forgivable loans, similar to the Paycheck Protection Program, with forgiveness only available to states that either meet, or enact reforms to meet, the program’s conditions for sound finances. It allows for up to $186 billion in federal and state aid, with $100 billion for states, $75 billion for local governments, $8 billion for tribal governments and $3 billion for territories. Aid must not be allocated to debt or pension spending, and is also limited to each state’s actual, experienced revenue losses.
States such as Illinois, New Jersey and Connecticut have mismanaged finances for decades, causing them to accumulate immense debt burdens, namely due to unfunded pension liabilities. Harmon’s initial bailout request makes it clear that federal aid would bail out legacy debt burdens unless the federal government stipulates strong taxpayer protections be attached to any aid money.