Illinois Treasurer Michael Frerichs announced Tuesday that the state earned $7.8 million less in investment income during the first quarter of 2016 as a result of the ongoing budget impasse. This translates into projected missed earnings of $31.2 million for the year.
The nearly year-long impasse puts a strain on the treasurer’s office, which typically manages $25 billion in investment dollars each year, presenting challenges for cash management and investment because Frerichs is forced to focus on less lucrative, short-term strategies. Frerichs warned against the financial fallout from the impasse Tuesday.
“A budget is a spending plan. Without a spending plan, it is very difficult to know what money is needed for basic government operations and what money for normal investments,” Frerichs said in a statement. “The law requires us to have money available to pay bills. The inability to adequately plan investments rips money out of the pockets of every person in our state, especially hurting those on the margins such as the poor, senior citizens, and children.”
According to the treasurer, the state lost roughly $2.6 million per month after shifting from higher-yielding, longer term investments.
Short-term, lower-yield assets, like overnight investments and money market funds, ensure that there is cash available for a potential multi-billion fund sweep or additional court-ordered increases for billings.
The state's impasse will likely stretch into its second year after lawmakers were unable to come to an agreement on the budget before the end of the spring legislative session last month.
House Speaker Mike Madigan cancelled Tuesday's House session, claiming lawmakers were continuing to meet in bipartisan working groups to discuss the budget, as well as other issues like workers' compensation and collective bargaining.
Frerichs, a Democrat, encouraged working groups to continue focusing on finding a budget solution during a press conference in Chicago Tuesday.
“There’s, right now, no bill," Frerichs said. “There are working groups working towards that. Those working groups should continue to meet."
Frerichs also encouraged Gov. Bruce Rauner and other legislative leaders to be engaged in those meetings so they can have a sense of what sort of legislation can be passed when the General Assembly reconvenes.