Keeping you caught up with issues impacting our state and our community.
DISASTERS
Tornadoes hit Illinois; five Illinois counties declared disaster areas. A severe storm system hit the central United States on March 31, 2023. In Illinois, this storm system generated high winds, tornadoes, and severe property damage in many regions of the state. At least four deaths and numerous injuries and massive property damage were confirmed. Three of the fatalities came from an EF-3 tornado that hit Crawford County in Southeastern Illinois. A fourth fatality was associated with a tragic structural failure in Boone County.
In addition to Boone and Crawford Counties, DuPage County, Marion County, and Sangamon County are also enumerated in the April 1 disaster proclamation by Gov. Pritzker. The proclamation authorized a coordinated emergency response effort by teams of workers from State and local governments. State of Illinois disaster responses are led by the Illinois Emergency Management Authority.
BUDGET
Revenue numbers show a sharp decline in March 2023. General funds revenues, which cover the ongoing spending programs of State of Illinois operations, dropped sharply in March 2023. The drop of $563 million in March 2023 cash receipts, put next to comparable figures for March 2022 cash inflows, signals the approaching fiscal challenges facing the State. The FY23 budget, which covers State spending through the second quarter of 2023 up until June 30, 2023, is based on an assumption of healthy, booming State tax revenues. The March 2023 revenue numbers reported by the Commission on Government Forecasting and Accountability (CGFA) are a warning that these assumptions may have to be modified or changed in the near future.
As in previous months, the overall State of Illinois revenue trend for March 2023 was driven by changes in income tax payments. The taxes paid in by Illinoisans and their employers as Personal Income Taxes dropped $384 million in March 2023 as compared to March 2022. Even after part of this shortfall was set aside to reflect the participation of the Income Tax Refund Fund in this item of overall cash flow, Illinois personal income tax receipts were down $330 in March 2023. This accounted for more than half of the overall March 2023 net revenue shift of $563 million. Corporate income tax payments to the State of Illinois also declined sharply in March 2023.
Other lines within the State general funds revenue picture were flat to down in March 2023 as compared to the year-earlier month. These included sales and use taxes, public utility taxes, cigarette taxes, taxes on liquor and alcohol, taxes on estates, and taxes on insurance activities. It is not known whether this negative trend will continue in April, May, and June of 2023. Based on worldwide movements toward slowing economic activity based upon higher interest rates and growing risks of international conflict, continued negative movement can be expected.
Three-year budget projection unveiled. The projection, by CGFA, covers FY24 through FY26. This multi-year projection utilizes known information about Illinois’ “structural budget deficit” and other trends affecting the State’s revenues and spending patterns, to come up with a medium-term projection intended to cover the three-year period ending June 30, 2026.
Illinois general funds revenue trends continue to move State revenue towards income tax, sales tax, and federal aid, and away from other sources of general revenue. This includes major revenue sources such as the Illinois State Lottery, excise taxes on public utility services such as electricity and natural gas, and other taxes such as the estate tax charged on estates as they pass through probate. While these other revenue sources generate hundreds of millions of dollars annually, next to the State’s ongoing need for more than $50 billion in general funds annual revenues these once-mammoth revenue sources have become less significant.
In the most recently completed fiscal year, FY22, income taxes on individuals and corporations raised three-fifths of the total of more than $50.3 billion in base general funds notched by Illinois as State revenues. These income taxes were driven by increasing pay rates earned by Illinois workers, together with the movement of income tax revenue towards automatic payment through deduction from paychecks. Individual income taxes accounted for 49% of the total, and corporate income tax for 11% of the total, to make 60% in all.
Sales taxes accounted for another 20% of the total. This number included healthy revenues from the State’s ability to charge sales and use taxes on many items bought by Illinois residents over the Internet for delivery in Illinois. Federal aid covered 9% of the revenue total. Put together, these “Big Three” revenue sources – income taxes, sales taxes, and federal aid – accounted for 89% of Illinois’ FY22 base general funds revenues. All other revenue sources, including the Illinois State Lottery and other gaming taxes funneled to general funds, public utility taxes, and other State taxes such as taxes on alcohol, tobacco, and estates – made up only 11% of the whole. CGFA expects these revenue trends to continue and intensify in future years.
The analysts at CGFA also looked at Illinois spending trends. They found that State spending, particularly with regard to big-ticket items headed by Corrections, Medicaid, pensions, and education, can be expected to continue to grow faster than these tax receipts in future years. This trend should revive Illinois’ temporarily-diminished “structural deficit.”
DOWNSTATE
CNBC study shows that Downstate Illinois has underperformed the rest of the U.S. in terms of housing investments. For many U.S. families, buying a home is one of the biggest investments they will make to raise children and prepare for retirement. The retirement of a working-class or middle-class couple, and their children’s higher education, often depends on the buildup of equity in a home. Ideally, this equity will appreciate well beyond the face value of the mortgage taken out to purchase the home.
However, the CNBC study looked at changes in housing prices during the generation-long period from 1998 through the end of 2022. The study found that housing costs have mushroomed in many parts of the U.S., but have stagnated in other parts. Of the six metropolitan areas with the smallest increases in fair-market housing prices during the past generation of U.S. life and work, five were located in Downstate Illinois (Bloomington-Normal, Decatur, Peoria, Rockford, and Springfield).
The stagnating property values reflected an overall decline in Illinois’ national image as a place to live and raise a family, and a decline in the population of the state. The population of Illinois declined from 2010 to 2020. Illinois joined Mississippi and West Virginia as the only three states to decline in population during this ten-year-long period.
EDUCATION
Illinois claims No. 1 status in college-ready AP scores. The AP course catalog is an array of classes offered in high schools that conclude with a college-level test of the materials taught. A high school student that earns an AP Exam score of 3 or higher, can present this score to a college. Many colleges offer some sort of credit for a qualifying AP score; Illinois’ public colleges and universities have come together to offer 100% credit for the coursework deemed to have been taken through the AP process and high exam scores.
Ongoing cooperation between Illinois’ public and private high schools, and its institutions of higher education, centered on AP coursework and the AP exam, have led to the widespread availability of AP courses in many Illinois high schools. Among members of the Illinois high school Class of 2022, 55,025 Illinois high school graduates took an AP exam, with almost two-thirds (36,240) scoring a place-out score of 3 or higher. This AP exam-taking subset of Illinois high school graduates was an increase of 42% over the less than 40,000 graduates who had taken a comparable exam ten years earlier. This 42% AP exam-taking increase far outpaced the 14% nationwide increase of AP exam-takers over the same 10-year period.
The Illinois State Board of Education (ISBE) believes that this 42% increase in AP exam-takers was the most massive increase in this data point among the high school graduates of all 50 states.