Illinois to expect an 8% revenue drop for FY23That’s something Gov. JB Pritzker told Capitol News Illinois last week that lawmakers planned for in April when they projected the Fiscal Year 2023 revenues at $46.5 billion – an 8 percent decrease from the final FY 2022 numbers. “We wrote that into the budget, that is a decrease in revenue just in this coming year,” Pritzker said in an interview. “So, we understand that there was some temporary nature of revenues that were coming in.” All told, the FY 2022 base revenues reached $50.3 billion without including direct federal aid. The number jumps to $51.1 billion when including a $736 million direct transfer-in of COVID-19 relief dollars. The base revenues were nearly $8 billion beyond the May 2021 projections on which the FY 2022 budget was based. Personal and corporate income tax grew $6.1 billion beyond what was projected in May 2021, while sales tax revenues were about $979 million beyond projections. While the revenue windfalls won’t alleviate longstanding budget pressures such as a $130 billion unfunded pension liability that demands about a quarter of state general revenue funds each year, it’s a level of good financial news that Illinoisans are not accustomed to hearing – and a level of progress Pritzker has hung his hat on as he seeks a second term. “A significant surplus and a zero-day payment cycle mean that our schools are funded, our roads are being rebuilt, and our healthcare providers are paid on time – and Illinois taxpayers are no longer dealing with hundreds of millions of dollars in interest payments because the government didn’t do its job,” Pritzker said in a statement last week. “Illinois’ massive bill backlog – eliminated since I came into office – once contained bills past due for as long as 500 days.”
Illinois COGFA: indirect effects of federal stimulus had a role in unexpected economic growthThe COGFA report noted that even though direct federal aid was not included in the base revenue calculation, the indirect effects of federal stimulus played a major role in the unexpected growth. So major, in fact, that revenue came in beyond initial projections in 49 states in the fiscal year. One driving factor, according to the report, was the “continuation of a pandemic-related shift” in consumer spending from non-taxed service-based sales to taxable goods, which created “strong market conditions” that led to increased tax revenues from corporate profits and capital gains. Republicans have also attributed the revenue spikes at least partially to an “inflation-induced sugar high,” noting that as prices increase so does sales tax revenue. “The influence of these particular factors is expected to wane as the state enters into FY 2023 resulting in reduced revenue expectations for the upcoming fiscal year,” the COGFA report noted. Still, June’s receipts remained strong, growing by $736 million compared to the previous fiscal year. As a result, final FY 2022 revenues were $2.6 billion higher than the April estimate from the Governor’s Office of Management and Budget that was used as the basis of this year’s budget negotiations.
No amendments in queue currently for the FY23 budgetA GOMB spokesperson said in an email Wednesday that the surplus has not led to any discussion of amending the FY 2023 budget in the first week of the new fiscal year. But it’s likely to allow for some flexibility. “FY 2022 revenues continued to outperform expectations through the last quarter of the fiscal year,” GOMB spokesperson Carol Knowles said in an email. “This will allow the state to be better positioned in the coming year as we continue to monitor the national economic outlook.” Knowles noted that the higher-than-expected revenues contributed to the improving fiscal situation which Comptroller Susana Mendoza and Pritzker highlighted in a pair of news releases last week. Those releases noted Illinois has erased its “bill backlog,” ending the fiscal year with a general revenue funds payment cycle of zero days from when vouchers are received by the state comptroller’s office. The $1.8 billion accounts payable balance was a far cry from the height of the state’s two-year budget impasse between Republican Gov. Bruce Rauner and Democrats in the General Assembly, when the bill backlog reached $16.7 billion. Pritzker has also touted – and bond ratings agencies have noted – that Illinois focused much of its spending of surplus dollars on relieving interest-accruing debt. Illinois has seen six credit rating upgrades – two each from each of the three major agencies – in the past year. In a news release last week Pritzker contrasted those upgrades with the eight downgrades the state received during the tenure of Rauner, whom Pritzker unseated in 2018.
Illinois still in bad shape of all 50 statesWhile the upgrades this year mark the first upward break from a downward trend that began in the Blagojevich administration, Illinois remains in the worst shape of all states as judged by the rating agencies. And while Illinois lawmakers dedicated $1 billion to the rainy day fund, Mendoza said in a news release she’d push for laws mandating greater contributions to budget stabilization funds when Illinois has stronger-than-expected revenue performances in the future. “The fact that we’ll have a billion dollars saved in our rainy day fund to help us during adverse downturns certainly helps, but Illinois must save more when we are able to with stronger-than-expected revenue receipts so that we strengthen our ability to weather through these unexpected crises,” she said. Capitol News Illinois is a nonprofit, nonpartisan news service covering state government that is distributed to more than 400 newspapers statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
Jerry Nowicki is the bureau chief of Capitol News Illinois and has been with the organization since its inception in 2019. Prior to joining CNI, Nowicki spent two years as an Illinois Senate staffer, an aide to state Sen. Steve Landek. Previously, he was editor of the LeRoy-Farmer City Press, winner of the 2015 Kramer Memorial Trophy for Illinois' best small weekly newspaper. He has a bachelor’s degree in journalism from Illinois State University and obtained his master’s degree in communication from Purdue University in May 2019.