SRP-IMAGE-Logo

ANALYSIS: Report suggests state spending will soon begin outpacing revenues once again

By JERRY NOWICKI
Capitol News Illinois
jnowicki@capitolnewsillinois.com

SPRINGFIELD – While Illinois has recently experienced a prolonged stretch of good financial news, a new state fiscal forecast notes that if spending continues to grow at its recent pace it could lead to future budget deficits.

It would mark the reversal of a recent trend during which the state logged considerable surpluses this fiscal year and the two years prior.

In the highest-spending scenario outlined in the three-year forecast from the Commission on Government Forecasting and Accountability, the state could once again face a bill backlog as high as $18 billion. That estimate assumes spending growth at its five-year average of 7.1 percent.

“This example shows that spending patterns seen in the past few years cannot continue without a comparable increase in revenues which is not seen in the commission’s current estimates,” the report from the legislature’s nonpartisan forecasting commission noted.  

If the state keeps spending growth at 1.8 percent – the most austere scenario outlined by the commission – it could maintain an accounts payable balance of $1.4 billion, the same as it was at the end of Fiscal Year 2022.

Even in that scenario, state spending would outpace revenues in the upcoming Fiscal Year 2024 that begins July 1 – although Gov. JB Pritzker has proposed decreasing state spending in FY 24.

His $49.6 billion proposed spending plan for FY 24 represents a 0.7 percent decrease from the baseline number assumed in the COGFA forecast. Lawmakers, however, are still working on crafting a final budget before their May 19 adjournment.

“We have to pass a balanced budget…Illinois has had a past where, you know, for a few years anyway, that didn’t happen,” Pritzker said at a news conference last week. “… And I think the General Assembly has taken that very seriously.”

While the new report illustrated that lawmakers may have to tighten their belts in the coming years, it remained consistent with previous projections by the commission and other forecasters that have suggested an economic slowdown is on the horizon.

The COGFA report noted that over the past five years, state revenues have grown at a rate of 12 percent on average, compared to the 7.1 percent average expenditure growth.  

Pandemic-era federal stimulus funds have mostly dried up, however, and their effect on the nation’s economy is beginning to wane. Many economic forecasts anticipate a mild recession is on its way.

The slowdown was evidenced in COGFA’s March revenue update that was published this week, showing that revenues declined $563 million from the same month last year. It marked the first year-over-year decline for any month this year, but COGFA noted the drop was expected after a record March 2022.

In other words, revenue growth rates of 18 percent and 12 percent that were seen in fiscal years 2021 and 2022 are not likely to be repeated anytime soon.

COGFA anticipates revenues will shrink by 1.4 percent to $50.4 billion in the upcoming FY 24 and remain under current-year levels until FY 2026, when they jump 2.5 percent to $52.2 billion.

As for spending, one important caveat is that the growth of the past two years been at least partially driven by measures that COGFA described as “fiscal discipline.”  That includes debt retirement, increased pension payments and long-term savings.

It has also included temporary tax relief and other one-time expenditures that won’t carry over from one fiscal year to the next.

But spending across human services, education and other agencies has also grown.

“Current forecasts would allow for more of this kind of spending in the short-term,” COGFA wrote in the report. “However, longer-term, economic and tax revenue forecasts remain murky as the potential for a recession remains.”

The three-year report also analyzed threats to the state’s fiscal position, including the potential recession, a COVID-19 resurgence, population loss and pension debt among others.

Many of the threats, the report noted, “can be directly linked” to “a long-term trend of having expenditures being higher than revenues.” It also noted that “work still remains” for the state to achieve a “budgetary system that is more stable in the long-term.”

“An opportunity exists to improve the state’s financial situation by better aligning the revenues and expenditures of the state. This can be done by raising revenues, cutting spending, or some combination of both,” the report noted.

Illinois could also achieve stability by broadening its sales tax to include more services.

“The Illinois sales tax was originally developed in the 1930s when the economy was much more reliant on goods production,” the report noted. “By taxing services, the tax system would modernize to more accurately reflect the economy of 2023.”

The revenues resulting from a service tax could be used to offset a portion of the sales tax on goods and “allow for the overall tax rate to be lowered,” according to the report.

The state could also save money by reducing statutory interest payments on overdue bills and using current-year surpluses for “paying down debt, investing for future growth, reducing taxes, and/or returning money to taxpayers.”

But on the whole, the report noted, “After the budget stalemate that occurred from 2015-2017, the state’s financial position has been getting better each year.”

That two-year impasse between Republican Gov. Bruce Rauner and Democrats in the General Assembly  drove the state’s bill backlog to nearly $17 billion and caused crippling cuts across state agencies.

The report’s final piece of advice: “The State needs to continue to show fiscal discipline and demonstrate that the results of the past few years are not an anomaly.”

 

Jerry Nowicki is the bureau Chief of Capitol News Illinois, a nonprofit, nonpartisan news service covering state government that is distributed to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.

Leave a Comment





Local News

Award winning Kinzie Elementary School, located at 56th and Mobile in Chicago’s 23rd ward earned high ranking badges despite 52% of students considered to be economically disadvantaged in the 2021-22 school year, according to U.S. News & World Report’s Best Schools data. (Photo by Robin Sluzas)

Aldermen push back on mayor’s school board appointments and budget strategy

A new City Hall dispute emerged on Oct. 7 as Mayor Brandon Johnson’s appointment of six temporary Chicago school board members drew criticism for bypassing City Council involvement. In response to the mayor’s appointments, Aldermen Raymond Lopez (15th), Marty Quinn (13th), and Silvana Tabares (23rd) reacted negatively to the mayor’s plan to fund Chicago’s public…

Chicago FOP President John Catanzara addresses the United Business Association of Midway on Oct. 9. Behind him are Illinois FOP General Counsel Tamara Cummings (at left) and UBAM President Anita Cummings. (Photo by Dermot Connolly)

FOP officials share Chicago policing concerns with UBAM

Two Fraternal Order of Police officials from Clearing shared insights about law enforcement at the state and local level at the Oct. 9 United Business Association of Midway meeting. Tamara Cummings, general counsel for the Illinois FOP, and John Catanzara, president of the Chicago FOP (Lodge 7)—former classmates at St. Rene School—were the guest speakers…

Bedford Park and the Chicago Sky welcome guests to the groundbreaking last week of the team’s new practice facility. (Photos by Carol McGowan)

Chicago Sky, Bedford Park break ground on $38 million practice facility

It was a groundbreaking event on Oct. 9, as more than 200 people gathered at the future site of Phase 2 of the Wintrust Sports Complex at 65th Street and Central Avenue in Bedford Park. The Chicago Sky, in partnership with the Village of Bedford Park, broke ground on a new $38 million state-of-the-art practice…

Sophie Imielski (left) and Jordyn Hoffenberger were busy hemming garments at an earlier Repair Cafe. (File photo)

Final repair cafe of the year Oct. 19 for Lyons Township

The Township of Lyons will host its final repair café of the year from 10 a.m. to 1 p.m. Saturday, Oct. 19, at the township hall, 6404 Joliet Road. You can bring a wide range of household items in for repairs free of charge, Township Clerk Elyse Hoffenberg said during the township board meeting Oct.…

Forest View Village Clerk Laura McGuffey (from left), Stickney Township Trustees Laura Kreil, Diane Viverito, Donna Galeher, Forest View Mayor Nancy Miller and Administrator Mike Dropka at the beginning of the October 8 board meeting. (Photo by Carol McGowan)

Forest View loses 2 officials in sudden resignations, mayor ‘saddened’

On Oct. 8, the Forest View village board meeting took a surprising turn when two key officials resigned during a portion of the meeting that was closed to the public. Forest View Administrator Michael Dropka submitted his resignation to trustees who met behind closed doors to discuss an “employee personnel matter,” according to the meeting…

Ald. Silvana Tabares (23rd) addresses the community rally on Saturday urging the city to split the 8th Police District in half. Behind her are fellow council members Ray Lopez (15th) and Marty Quinn (13th). (Supplied photo)

Community, officials rally for new Southwest Side police district

Neighborhood residents and local officials supporting the division of the Chicago Lawn (8th) District came out in force for a rally Saturday outside the former National Guard Armory at Midway Airport, which they hope will house a new police station. Police directed traffic as large crowds crossed 63rd Street to attend the 11 a.m. gathering…

Marko Franco ran for two touchdowns in Back of the Yards' win against Gage Park on Oct. 10.

Football notebook: Marko Franco gives Back of the Yards a boost

Mark Morgan had a plan when he took over as Back of the Yards football coach in the fall of 2021. The Bobcats hadn’t fielded a team in two years, skipping the spring 2021 pandemic season. Getting the program back on its feet took some heavy lifting. Back of the Yards went 1-7 and 2-7…

Nazareth's boys golf team won the third sectional title in program history and heads to state Oct. 18-19. Nazareth photo

Postseason roundup: Nazareth boys, girls both advance to state golf

Nazareth boys golf coach Dave Reed didn’t see this coming. A sectional championship? That happened only twice in school history, in 2009 and 2013. Plus, the Roadrunners had not qualified for state as a team since 2019. Heading into this season, there were no sectional expectations. During regional play, the Roadrunners grabbed the last sectional…

Red Star Ludmila, left, and Gotham's Nealy Martin tangle on Oct. 12 at SeatGeek Stadium. Photo by Jeff Vorva

Pro soccer report: Red Stars clinch playoff spot; Fire names new coach

If the Red Stars had their choice, they would rather have beaten Gotham on Sept. 12 to secure a spot in the National Women’s Soccer League playoffs. Instead, the Red Stars suffered a 2-0 loss to the defending NWSL champions at SeatGeek Stadium, and 24 hours later clinched a spot in the playoffs when Washington…

Saquan Commings returned an interception 90 yards for a touchdown in Curie’s 30-0 win against Mather in Week 7. Photo by Mike Clark

Saquan Commings’ pick-six highlights Curie shutout of Mather

Slowly but surely, Curie is learning how to win again. The Condors were one of the Public League’s top football programs earlier this century, advancing to the IHSA playoffs 11 times from 2005-19 and winning 41 games between 2014-17. But before first-year coach Jarve Lewis-Bey arrived this fall, Curie had only four victories in the…

Neighbors

Award winning Kinzie Elementary School, located at 56th and Mobile in Chicago’s 23rd ward earned high ranking badges despite 52% of students considered to be economically disadvantaged in the 2021-22 school year, according to U.S. News & World Report’s Best Schools data. (Photo by Robin Sluzas)

Aldermen push back on mayor’s school board appointments and budget strategy

A new City Hall dispute emerged on Oct. 7 as Mayor Brandon Johnson’s appointment of six temporary Chicago school board members drew criticism for bypassing City Council involvement. In response to the mayor’s appointments, Aldermen Raymond Lopez (15th), Marty Quinn (13th), and Silvana Tabares (23rd) reacted negatively to the mayor’s plan to fund Chicago’s public…

Chicago FOP President John Catanzara addresses the United Business Association of Midway on Oct. 9. Behind him are Illinois FOP General Counsel Tamara Cummings (at left) and UBAM President Anita Cummings. (Photo by Dermot Connolly)

FOP officials share Chicago policing concerns with UBAM

Two Fraternal Order of Police officials from Clearing shared insights about law enforcement at the state and local level at the Oct. 9 United Business Association of Midway meeting. Tamara Cummings, general counsel for the Illinois FOP, and John Catanzara, president of the Chicago FOP (Lodge 7)—former classmates at St. Rene School—were the guest speakers…

Bedford Park and the Chicago Sky welcome guests to the groundbreaking last week of the team’s new practice facility. (Photos by Carol McGowan)

Chicago Sky, Bedford Park break ground on $38 million practice facility

It was a groundbreaking event on Oct. 9, as more than 200 people gathered at the future site of Phase 2 of the Wintrust Sports Complex at 65th Street and Central Avenue in Bedford Park. The Chicago Sky, in partnership with the Village of Bedford Park, broke ground on a new $38 million state-of-the-art practice…

Sophie Imielski (left) and Jordyn Hoffenberger were busy hemming garments at an earlier Repair Cafe. (File photo)

Final repair cafe of the year Oct. 19 for Lyons Township

The Township of Lyons will host its final repair café of the year from 10 a.m. to 1 p.m. Saturday, Oct. 19, at the township hall, 6404 Joliet Road. You can bring a wide range of household items in for repairs free of charge, Township Clerk Elyse Hoffenberg said during the township board meeting Oct.…

Forest View Village Clerk Laura McGuffey (from left), Stickney Township Trustees Laura Kreil, Diane Viverito, Donna Galeher, Forest View Mayor Nancy Miller and Administrator Mike Dropka at the beginning of the October 8 board meeting. (Photo by Carol McGowan)

Forest View loses 2 officials in sudden resignations, mayor ‘saddened’

On Oct. 8, the Forest View village board meeting took a surprising turn when two key officials resigned during a portion of the meeting that was closed to the public. Forest View Administrator Michael Dropka submitted his resignation to trustees who met behind closed doors to discuss an “employee personnel matter,” according to the meeting…

Ald. Silvana Tabares (23rd) addresses the community rally on Saturday urging the city to split the 8th Police District in half. Behind her are fellow council members Ray Lopez (15th) and Marty Quinn (13th). (Supplied photo)

Community, officials rally for new Southwest Side police district

Neighborhood residents and local officials supporting the division of the Chicago Lawn (8th) District came out in force for a rally Saturday outside the former National Guard Armory at Midway Airport, which they hope will house a new police station. Police directed traffic as large crowds crossed 63rd Street to attend the 11 a.m. gathering…

Marko Franco ran for two touchdowns in Back of the Yards' win against Gage Park on Oct. 10.

Football notebook: Marko Franco gives Back of the Yards a boost

Mark Morgan had a plan when he took over as Back of the Yards football coach in the fall of 2021. The Bobcats hadn’t fielded a team in two years, skipping the spring 2021 pandemic season. Getting the program back on its feet took some heavy lifting. Back of the Yards went 1-7 and 2-7…

Nazareth's boys golf team won the third sectional title in program history and heads to state Oct. 18-19. Nazareth photo

Postseason roundup: Nazareth boys, girls both advance to state golf

Nazareth boys golf coach Dave Reed didn’t see this coming. A sectional championship? That happened only twice in school history, in 2009 and 2013. Plus, the Roadrunners had not qualified for state as a team since 2019. Heading into this season, there were no sectional expectations. During regional play, the Roadrunners grabbed the last sectional…

Red Star Ludmila, left, and Gotham's Nealy Martin tangle on Oct. 12 at SeatGeek Stadium. Photo by Jeff Vorva

Pro soccer report: Red Stars clinch playoff spot; Fire names new coach

If the Red Stars had their choice, they would rather have beaten Gotham on Sept. 12 to secure a spot in the National Women’s Soccer League playoffs. Instead, the Red Stars suffered a 2-0 loss to the defending NWSL champions at SeatGeek Stadium, and 24 hours later clinched a spot in the playoffs when Washington…

Saquan Commings returned an interception 90 yards for a touchdown in Curie’s 30-0 win against Mather in Week 7. Photo by Mike Clark

Saquan Commings’ pick-six highlights Curie shutout of Mather

Slowly but surely, Curie is learning how to win again. The Condors were one of the Public League’s top football programs earlier this century, advancing to the IHSA playoffs 11 times from 2005-19 and winning 41 games between 2014-17. But before first-year coach Jarve Lewis-Bey arrived this fall, Curie had only four victories in the…