* Comptroller Susana Mendoza…
Last week in testimony before the House and Senate Appropriations Committees, I was pleased to announce that our April revenues were $1.5 billion higher than expected. However, I also sounded an important note of caution about those revenues. It is important to keep in mind that we still face a $6-to-$8 billion backlog of pending bills with no dedicated revenue stream to pay them. We have aggressively targeted the state’s highest-interest-accruing bills with those receipts, bringing the backlog lower than it would otherwise be, to $6.07 billion as of today.
While we cannot confirm or deny the Dept. of Revenue’s projection of $800 million more than expected for Fiscal Year 2020 at this time, we are hopeful and will continue to research this possibility thoroughly. My office has prioritized pension payments and debt service since I took office and that will be our policy going forward.
She’s right.
* COGFA used the comptroller’s numbers in its April revenue report…
In April, base monthly receipts increased $1.502 billion. The jump in receipts reflected very strong performances of both personal and corporate income taxes, which in turn allowed reimbursable spending to surge, thereby generating a significant gain of federal sources. An extra receipting day assisted in the overall monthly gain.
While a precise component breakdown is not yet available for April’s income tax receipts, preliminary views point to very strong non-wage income tax performance [e.g. the more volatile capital gains and dividends components]. As a result, this significant one month over performance cannot safely be extrapolated into future underlying growth. Other states have begun to anecdotally report similar strong performance, with most urging caution of future expectations. In Illinois, historically the withholding component comprises approximately 80% of personal income tax receipts, with the remainder roughly split between estimated and final payments. Despite their much smaller percentage make-up, those non-wage components [fueled by capital gains, dividends, and sometimes shifts in tax payer behavior] are the most volatile, demonstrating significant swings in gains/losses. As such, they cannot be counted on to follow predictable trends, nor safely be expected to recur. Again, further analysis is required before any definitive conclusions are made.
With those caveats in mind, for the month, gross personal income tax receipts leapt $1.068 billion or $903 million on a net basis. In addition to an extra processing day, some of the increase is due simply to last year’s final payments reflecting a “blended” rate due to the tax year’s split tax rate; whereas this year’s final payments were all at the higher rate. As explained above, data is not yet available to offer other conclusive analysis for the month’s grand performance. Gross corporate income tax also grew impressively, rising $288 million or $237 million net. Sales tax also enjoyed a robust uptick, with gross receipts increasing $53 million, or $85 million on a net basis.
Other sources experiencing monthly improvement include interest income which grew $12 million, inheritance tax was up $6 million, and public utility, cigarette, and corporate franchise taxes each eked out a $1 million gain. Only insurance taxes and other sources experienced declines with both lines falling a modest $3 million.
Overall transfers into the general funds were down $1 million. Federal sources, fueled by reimbursable spending made possible by the influx of income tax receipts, finally reversed what up until now had been a very disappointing fiscal year, by growing $263 million. […]
Despite April’s performance, at an April 30th CGFA meeting held to discuss the State’s Group Insurance program, a representative from the Comptroller’s Office testified that their agency continues to operate in “triage’ mode given the State’s over $6.1 billion bill backlog.
- Grandson of Man - Wednesday, May 8, 19 @ 9:49 am:
We should not count on April’s showing as indicative of not needing a reliable source of revenue. The recent tax cuts are helping wreak havoc on the federal budget, with a previously-reported record deficit and per this article, a whopping 38% deficit increase compared with last year.
https://thehill.com/policy/finance/442573-federal-deficit-increases-by-38-percent-cbo-says?amp
We need the graduated income tax to bring in the money needed to pay our bills and not force the harshest cuts.
- wordslinger - Wednesday, May 8, 19 @ 9:55 am:
Borrowing money from unwilling lenders by not paying bills is easy; paying it back with the juice is hard.
- Chicagonk - Wednesday, May 8, 19 @ 10:44 am:
I’m never going to complain about a positive windfall surprise, but did no one in the state government see this coming? I’m assuming Pritzker didn’t or else why would he share plans for a pension holiday knowing it wouldn’t be necessary. Illinois needs to do a better job forecasting revenue
- Oswego Willy - Wednesday, May 8, 19 @ 10:58 am:
To the post,
Comptroller Mendoza’s response? It’s actually more responsible than I anticipated.
The nuance to governing and budgetary trading and numbers can’t be confirmed or denied, as the end of day balances are the only thing real. They had to respond *exactly* as they did, with a fiduciary thought.
You have a comptroller needing to show independence, and responsibility, without being all the rain and ants at the picnic.
It’s a perfect balance, no pun intended, to good news and fiscal responsibility and reality.
- Anon 88 - Wednesday, May 8, 19 @ 11:16 am:
“@Chicagonk Illinois needs to do a better job forecasting revenue”
I agree, it would obviously be best if they could accurately forecast revenue but I’d rather them underestimate and plan for the worst than overestimate and have to skip pension payments. It’s very hard to forecast non-wage income taxes, but if any of it is related to cashing in on stock market gains, I wonder if an econmoic slowdown is on the horizon.
We need about 10 years of positive windfalls to dig ourselves out of this mess. A economic slowdown would destroy IL.
- Oswego Willy - Wednesday, May 8, 19 @ 11:19 am:
=== A economic slowdown would destroy IL.===
… and yet after the Great Depression, numerous recessions, Illinois is the 5th largest economy of all American states, the 18th largest economy… globally.
But, a “bad quarter” around the corner… Illinois will be destroyed.
- Responsa - Wednesday, May 8, 19 @ 11:49 am:
I am not convinced that the “windfall” was a big surprise to anybody. As others here have pointed out it certainly shouldn’t have been if gov’t people charged with doing forecasting were properly doing their job. It’s more likely that the immediate political fallout from the bad idea to punt once again on pension contributions made it necessary to use “the windfall” for that instead of whatever else they had been planning to use it for. The news gave them an out to back down from a bad idea.
- wordslinger - Wednesday, May 8, 19 @ 11:54 am:
Responsa, that’s quite a conspiracy theory.
Who exactly are you accusing of being the schemers in this plot to cook the projections? Do you have any evidence at all to back it up?
- 44th - Wednesday, May 8, 19 @ 12:03 pm:
Time to catch up on those bills we paying 1% a month late fees to vendors.
- Robert the Bruce - Wednesday, May 8, 19 @ 12:35 pm:
This blog has savvy commenters, and Rich is plugged in. Yet I don’t remember anyone foreseeing this extra revenue.
From that, I think this truly was a surprise. Perhaps someone should have seen it coming, perhaps someone thought it might but wanted to stay with a more conservative forecast in case it didn’t materialize.
- Honeybear - Wednesday, May 8, 19 @ 1:14 pm:
But let’s think about this for a second. COGFA didn’t really catch the big windfall either. They can explain it after the fact but they were projecting the same thing.
My point is
What if they had projected 900million more
and it hadn’t come in.
We’d be hurting pretty bad
Our family friend who’s a tax guy said they really didn’t know how taxes were going to come out this year. I imagine no one knew what was going to happen.
I much rather they underestimate than overestimate.
Let’s take the win, thank our lucky stars and keep preparing for the storm.
Responsa, though
you know
I do love me a good theory.
I don’t think you’re right on this one.
Pritzker caught it in the nads for proposing a pension holiday.
I don’t think he’d do that if he knew.
I just wish he’d paid the legally owed backpay with it.
Throw out a conspiracy on the backpay
I’m all ears.
That he knew all the time.
I don’t think so.
You can’t keep 900 million a secret.
In Springfield
finding an extra 900 million is going to get out fast.
- wordslinger - Wednesday, May 8, 19 @ 1:16 pm:
–This blog has savvy commenters, and Rich is plugged in. Yet I don’t remember anyone foreseeing this extra revenue.–
I don’t recall anyone here ever claiming they had the information or chops to project revenue collections. It’s a wee bit more complex than picking the over/under on a Bears/Packers game.
- Nonbeleiver - Wednesday, May 8, 19 @ 1:50 pm:
“we still face a $6-to-$8 billion backlog of pending bills with no dedicated revenue stream to pay them…”
Yep. I keep saying this is the most immediate priority. We need dedicated funds to freeze and then pay off past debt. Sunseted service tax, sales tax??
Pleased that at least this offical realizes how crucial this issue really is.