ON THE RECORD: Comptroller Susana Mendoza talks financial status of Illinois, how to rebound from pandemic

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CHICAGO, Ill. (WMBD) — The COVID-19 pandemic has ravaged small businesses in Illinois.

Many have shut down, others are relying on federal funding and the paycheck protection program to just get by and keep workers paid.

Governor J.B. Pritzker announced Friday, Jan. 8 the state is going to withhold federal tax breaks that were aimed to help businesses recover some losses they’ve endured during the pandemic.

The governor said Illinois could suspend those tax breaks in Illinois and still require businesses to pay to the state.

“Unfortunately, COVID also hit our state budget, requiring tough choices about what we can and cannot afford. Right now, we cannot afford to expand tax breaks to businesses that already receive tax breaks.”

GOV. J.B. PRITZKER, (D) ILLINOIS

Todd Maisch, the head of the Illinois Chamber of Commerce, warned that could make it tougher for small businesses to survive.

“This is tax relief for the hardest hit small businesses in the nation that was enacted in Washington on a bipartisan basis,” Maisch said. “So that’s actual money in small businesses’ pockets that allows them to go ahead and compensate for the fact that they don’t have customers right now.”

Comptroller Susana Mendoza joined WMBD/WYZZ’s Matt Sheehan to weigh in on the governor’s decision.

“Gov. Pritzker is trying to put on the table every possible tool. With the lack of the ability to pass the Fair Tax Amendment, we were able to fix the structural deficit that is in our budget every year which is about $3.5 billion. Ideas are on the table right now, not actual movement yet. The governor has put that forth, a lot of people have a sour taste in their mouth about that.”

Susana Mendoza | Comptroller | D-IL

Mendoza added Pritkzer already put forth $700 million worth of cuts.

She called for both Republicans and Democrats to come forward with what cuts they believe the state should make.

“We also have to figure out where we’re going to get additional dollars,” Mendoza said. “Even prior to COVID, the state was working itself out of the fiscal crisis caused by two years of not having a budget under the prior governor. We were on our way. We were getting into better fiscal territory, which was really good for Illinois, then COVID-19 hit. Of course, our budget took a dramatic hit. The reality is we don’t have enough money to meet the obligations the state has.”

Mendoza said COVID-19 didn’t create a hole in the state’s budget, instead she called it a “COVID crater.”

Now, she said she’s focused on making sure healthcare facilities are getting more funding.

“Hospitals are number one right now in getting the money they need during this fiscal crisis,” Mendoza said. “My priorities are very healthcare driven right now. But we don’t have enough money.”

Mendoza said she’s hopeful President-elect Joe Biden will pass a stimulus package once he’s in office, which she believes will help the state’s finances as well.

Illinois has the second-highest property tax rate in the country and the sixth highest sales tax rate. Many people blame the high taxes for the exodus we’ve seen over the years.

Mendoza said she wishes taxes would be lower across the board but said the tax system (and more specifically, property taxes) helps support underfunded programs across the state.

“It’s important to recognize why we have such high property taxes in Illinois. It’s precisely because the state of Illinois underfunds, chronically, education. Then local school boards have to make that money up through property taxes. This is a never-ending nightmare,” Mendoza said. “The State getting back to meeting its financial obligation to become the primary funder of education in Illinois, that would be key in reducing property taxes, but we’re nowhere near that.”

Mendoza said if the Fair Tax amendment would have passed, it would have helped better fund education and have a “less reliance on property taxes.”

“The state of Illinois does not increase your property taxes, those are local school boards that make those decisions. It’s frankly because we don’t put enough money into education in the first place.”

“Even if we cut everything we could, we still wouldn’t get there. We have more of a lack of revenue problem because we still have to meet healthcare bills. I would assume everyone wants us to pay for sick people’s health care. Everyone wants to have their police and fire at the call when needed. Those things all cost money. Everyone wants to know their kids can go to a well-funded educational system. We don’t have that here in Illinois, we don’t have enough revenue coming in. We need a systemic change to the way we tax today. I do think the flat tax is unfair and doesn’t bring enough revenue in, but that’s what voters decided.”

Susana Mendoza | Comptroller | (D-IL)

In 2017, Mendoza announced she helped refinance the state’s debt and cut the state’s backlog of unpaid bills from $16.7 billion to $8 billion.

In doing this, she said she refinanced the debt down from 12% to 3.5% and saved Illinois taxpayers between $4 to $6 billion in avoided late payment interest penalties.

In December 2020, there was another round of borrowing of $2 billion from the federal government. Those funds were used to leverage federal matches.

“We had a bill backlog that got run up to $16.7 billion. We were advocating for a refinancing of that debt. The bond deal allowed us to refinance that $16.7 billion to a much lower, interest rate,” Mendoza said. “Here’s how I’d break it down. If you could refinance your home, your home mortgage that you’re paying a high interest on. Let’s say you’re paying a 12% interest. If you could refinance it down to 3.5%, would you do the deal? Of course you would, because you’d be saving lots of money.”

Mendoza said the decrease in interest allowed her to pay down significant portions of the state’s debt. She said it can be explained as follows; every time you pay a healthcare bill or a Medicaid bill, for every dollar paid, the federal government will match that payment.

“If I can stretch that $1.00 to $1.56, I can make those dollars work better for taxpayers. That’s what we were able to do,” Mendoza said.

She said the borrowing of $2 billion from the federal government at a 3.5% interest rate was extremely important because COVID-19 is causing the state’s revenue to go way down.

“Every penny is being used for Medicaid bills that give us a 56 cent on the dollar back, so that $2 billion turns into more like $3.5 billion when we’re all said and down. I’m going to use that to pay off our healthcare bills, then when we’re done paying all our healthcare bills, we’ll go ahead and put some of that towards bills that are accruing late payment interest penalties to save taxpayers even more money,” Mendoza said.

Starting this year, Mendoza said Illinois will no longer collect fines of unpaid red light tickets.

“When the red light ticket legislation first passed years ago, it was sold on the premise of safety. It was sold to make our streets safer,” Mendoza said. “Study after study says the red light tickets are essentially a scam. The program is a scam.”

Mendoza said the red light tickets fall the hardest on the poorest and minority communities.

“90% of those red light tickets were not actually issued for people blowing through red lights. They went to people who made a legal right turn on a red light,” Mendoza said. “Many of those were the person inched into the intersection, turned right, without making a full three-second stop.”

Mendoza said if you did this in front of a police officer, they wouldn’t even have pulled you over.

She added that the tickets started at $100, then doubled and tripled if you didn’t pay it.

“We saw some connected elected officials had side contracts with those red-light cameras where’d they get a percentage of every ticket issued,” Mendoza said. “There was no good way I could go to sleep at night having any part in collecting on those debts.”

She told the industry that the Comptroller office would not partner with any red light fees any longer.

State Rep. Tim Butler (R-Springfield) will join Matt Sheehan for “On the Record” next week, followed by Treasurer Michael Frerichs in the final week of the month.

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