In the early months of the COVID-19 pandemic, governments across the United States found themselves grappling with a public health crisis while simultaneously experiencing sharp declines in revenue collections. For the State of Illinois, this situation was especially challenging as it had little in reserve funds and billions in backlogged bills. Illinois’ fiscal challenges had been building for years, and so the fiscal effects of the pandemic compounded the state’s financial predicament.
In this article, we focus on the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) program, which set aside $350 billion in
flexible federal aid to states, counties, cities, Tribal governments, territories, and the District of Columbia. Under that program, Illinois’ state government was allocated $8.1 billion in federal aid that state lawmakers have a relatively broad level of discretion over how to spend.1 To put that $8.1 billion in context, Illinois’ total appropriations in Fiscal Year (FY) 2019—the last full fiscal year before the pandemic—were about $106 billion, of which $37 billion were General Funds appropriations.
The American Rescue Plan Act’s State and Local Fiscal Recovery Fund program has been a vital fiscal resource for the state of Illinois. Illinois’ allocation of SLFRF funds to revenue replacement and to replenishing its unemployment insurance trust fund reflects the intention of the SLFRF program rules, which were designed to maximize state and local governments’ flexibility to respond to highly variable consequences of COVID-19 and pre-pandemic conditions.