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IGPA claims state revenue losses not as bad as expected

Tuesday, Jan 26, 2021


A new report from the University of Illinois System’s Institute of Government and Public Affairs (IGPA) found that Illinois’ state tax revenues have fared much better through the COVID-19 pandemic than originally projected last spring

The report, titled Data Indicate COVID-19 Impact on State Revenue Not as Severe as Feared, comes from IGPA’s Task Force on the Impact of the COVID-19 Pandemic. Report lead author Kenneth Kriz, who is the University Distinguished Professor of Public Administration and the director of the Institute for Illinois Public Finance at the University of Illinois Springfield, analyzed state data on tax receipts through November 2020.

What Kriz found may be good news for the state’s budget. The net loss to the General Funds from major revenue sources during the pandemic was $868 million. That’s less than 2% of total receipts for the General Funds, the state’s main accounts for general spending on things like education, healthcare, operations and more.

Several early projections, including an earlier report from the task force, anticipated much larger revenue losses. Most forecasters were predicting a prolonged recession that would cause revenue losses of up to 20%.

“There was a General Funds revenue loss in fiscal year 2020, but much of that was caused by the delay of the federal tax filing deadline,” said Kriz, who is an IGPA affiliate and a faculty lead for the Economic and Fiscal Impact Group of the task force. “Well over half of that revenue loss has been recouped in fiscal year 2021, and General Funds revenues are actually running above what might have been expected for fiscal year 2021.”

The loss across all state funds was $1.44 billion, which is still less of a loss than even conservative estimates projected in the spring.

Kriz said that the economy recovered more quickly than expected, with help from federal stimulus and recovery programs. The report also considered credit card spending data, and what it showed aligned with the findings on revenue. “There was a steep fall in spending in most categories in April and May, then a recovery toward pre-COVID-19 levels. Spending has not recovered completely, but it is near what it likely would have been in the absence of COVID-19,” Kriz wrote.

Still, Kriz warns that as long as COVID-19 is a threat, tremendous uncertainties remain. “If the virus surges again and the economy must be locked down, there will be another round of revenue losses,” he said.

The report notes that the unequal impact of the pandemic on low-income households was also a potential factor in the lower-than-expected revenue losses. “The labor market effects of the virus and mitigation measures fell more heavily on low-income households. High-income households have maintained their income levels or even seen them rise,” Kriz wrote. “And stimulus programs have buffered low-income household finances. Therefore, aggregate incomes and consumption have continued to grow, leading to stable or increased state revenue.”

OK, but just remember that revenues are only part of this equation. Illinois has borrowed billions that have to be repaid. And there’s still the matter of the structural deficit that was supposed to be addressed by the graduated income tax.

- Posted by Rich Miller        

  1. - Donnie Elgin - Tuesday, Jan 26, 21 @ 3:11 pm:

    =Impact on State Revenue Not as Severe as Feared=

    This report is like equating the current economic situation in Illinois to a swimmer trying to reach the surface. On this try the swimmer got so much closer to the surface, the bad news is we still drowned.

  2. - Chicago Cynic - Tuesday, Jan 26, 21 @ 3:20 pm:

    “OK, but just remember that revenues are only part of this equation. Illinois has borrowed billions that have to be repaid.”

    I hear ya, but hey, it’s good news for a chance and I’ll take it.

  3. - 1st Ward - Tuesday, Jan 26, 21 @ 3:21 pm:

    “OK, but just remember that revenues are only part of this equation. Illinois has borrowed billions that have to be repaid”

    Have other states? If not, then the current issues aren’t pandemic related are they?

  4. - North Park - Tuesday, Jan 26, 21 @ 3:24 pm:

    Thank our lucky stars that we started collecting sales tax from Amazon…

  5. - Candy Dogood - Tuesday, Jan 26, 21 @ 3:42 pm:

    ===And there’s still the matter of the structural deficit that was supposed to be addressed by the graduated income tax. ===

    Let’s just pull an Edgar and write a law that says to pay it later on after the magic growth occurs.

  6. - Ducky LaMoore - Tuesday, Jan 26, 21 @ 4:16 pm:

    “Let’s just pull an Edgar and write a law that says to pay it later on after the magic growth occurs.”

    That’s only a partial truth. The ramp did not work in part because it wasn’t followed.

  7. - RNUG - Tuesday, Jan 26, 21 @ 4:39 pm:

    Good short term news. Long term we will have to see. It will depend on the spending patterns of the more affluent; if they have gotten used to the convenience of the on demand delivery economy with its associated extra fees and continue the pattern, it might be good news for state revenue … as long as they are dealing with local / Illinois vendors. It’s probably too early to know if this on demand economy is a permanent shift of buying patterns.

    Anecdotally, a couple of families I know have gotten used to online purchase and delivery of their groceries. One family is lower income who you might not expect to pay extra for delivery; they claim the lack of impulse buying offsets the fees. So it might be permanent change. Guess we’ll know in a year or two.

  8. - Candy Dogood - Tuesday, Jan 26, 21 @ 4:43 pm:

    ===The ramp did not work in part because it wasn’t followed. ===

    The whole intent of the ramp was to make up for smaller payments at the start with huge payments by the time none of the elected officials involved were anticipating being in office or alive.

    “Not following it” is sort of a moot point because it originally called for an increase of almost no funding of the pension to 15 billion by 2044 and I have a hunch they didn’t really adjust for inflation when they came up with that.

    The only way for that to not be callously irresponsible is to sincerely believe that in that same time span your economy was going increase in size several times over and now we’ve got a generation of Illinoisans waiting in the wings that have to pay for their personal college debt, that have to figure out a way to address climate change without going extinct, while also paying for the public goods and services their grand parents received.

    That was the plan. I don’t see the merit in debating whether or not the bag we’re holding is larger than it was supposed to be.

  9. - Cool Papa Bell - Tuesday, Jan 26, 21 @ 6:44 pm:

    Guess $600 checks and enhanced unemployment actually works to help keep an economy afloat during a massive economic crisis.

  10. - Candy Dogood - Wednesday, Jan 27, 21 @ 12:23 am:

    ===enhanced unemployment actually works ===

    In some parts of the State the COVID-19 related unemployment benefits represents the biggest economic boost they’ve seen in a long, long time.

  11. - Touré's Latte - Thursday, Jan 28, 21 @ 8:28 am:

    “The ramp did not work in part because it wasn’t followed.”


Sorry, comments for this post are now closed.

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