Report: State revenue will stay flat this year
SPRINGFIELD — A faltering national economy will mean virtually no revenue growth in Illinois this year, even as the state tries to dig out of a backlog of about $8 billion in unpaid bills.
An updated revenue forecast, performed by the Legislature's Commission on Government Forecasting and Accountability, projects $33.88 billion in base general funds revenue for the fiscal year that began July 1.
That's only $83 million greater than the $33.79 billion collected in fiscal year 2012, which ended on June 30.
By contrast, last year's $33.79 billion was $2.3 billion, or 7.4 percent, more than base revenues in fiscal year 2011.
"After exceeding expectations in FY 2012, the largely economically related sources are forecast to slow significantly as the recovery appears to be stalling out," wrote Jim Muschinske, COGFA's revenue manager. "With most econometric prognosticators anticipating little growth, coupled with the continuing disappointing jobs picture, there is little reason to believe underlying revenue growth will be able to match last fiscal year's pace."
State Sen. Mike Frerichs, D-Champaign, who is one of 11 legislative members of COGFA, said the new report will put greater pressure on lawmakers to cut spending again next year.
"I think a lot of my colleagues looked at the cuts we made this year and said, 'We did it. We're done,'" Frerichs said. "But I think this shows that there's going to be a lot more pain in the next few years."
Frerichs said that "next year could potentially be as bad or worse in terms of cuts to important services. It just means we're going to have to work extra hard to protect the important parts of state government, and make sure our priorities downstate are protected."
The updated revenue outlook is a slight improvement from a projection the Legislature had adopted in March when setting its fiscal year 2013 budget parameters. That projection placed revenue at $33.72 billion "but represents less than one-half of 1 percent difference," Muschinske noted.
In an interview, Muschinske said "the national and state economies, and this is evidenced by the employment picture, is still just plodding along very slowly. And there doesn't seem to be much out there that would indicate that things are going to accelerate over this forecast horizon.
"But we're not anything different than what is happening nationally."
Personal income tax collections are projected by COGFA to increase 2.2 percent this year, but because of timing issues and refunds, net personal income tax revenues will drop by about $17 million. Fiscal year 2012 numbers were artificially high because some fiscal year 2011 revenue wasn't counted until the following year. Muschinske said.
Base corporate income tax revenue will be flat, and sales tax revenue — after growing almost 6 percent last year — are projected to increase by 1.6 percent this year.
The report comes a month after state Comptroller Judy Baar Topinka said that even with strong revenue growth last year the state made only a small dent in its billions of dollars in obligations. Topinka said the obligations dropped from $8.5 billion last year to between $7.5 billion and $8 billion this year.
"The state's massive backlog has remained despite a fiscal year increase of $2.331 billion in base revenues," Topinka reported. "A large portion of those dollars are tied to the decision to fund state contributions to the pension systems from current revenues instead of issuing bonds. That change increased immediate spending by $2 billion but alleviated the need for further borrowing for pension payments."
Gov. Pat Quinn has called the Legislature into special session next week to address what he says is the need for pension reforms.
"The time for excuses, alibis is over. The people of Illinois want action," Quinn said earlier this week.
The governor, however, has not proposed a specific pension reform plan, and different factions in the Legislature are opposed to the various plans suggested, meaning there is little likelihood of a major agreement next week.