If circumstances turn sour in 2020 — as some economists predict — state government could be in deep financial trouble.
Those are among the conclusions contained in a February report by the state's Commission on Government Forecasting and Accountability.
"Illinois' economy is having its share of ups and downs, but overall, 2018 was better than the year before. The state has moved beyond full employment into late-cycle expansion, which is characterized by labor supply constraints and increasing wages and cost pressures," the commission report states.
Despite that generally good news, the commission once again cited problems Illinois is experiencing with declining population, serious financial woes and a poor business climate that has "some firms questioning whether they want to expand in the state or elsewhere."
"Illinois has what it needs to remain a top business center, as long as it can solve the fiscal problems that are eroding its edge in the competition for talent, jobs and capital," the commission states.
The report comes as the General Assembly is beginning its review of Gov. J.B. Pritzker's proposed $39 billion budget that is scheduled to take effect July 1.
The commission's reference to solving the state's fiscal problem is ironic considering Pritzker's stated intention to do so by proposing and passing a state constitutional amendment that would permit a progressive income tax.
A progressive income tax allows rising rates of taxation on rising levels of income. The Illinois Constitution currently mandates a flat income tax rate, now at 4.95 percent.
But the soonest a vote can be held on the amendment is November 2020, which means Pritzker's attempts to address Illinois' fiscal woes are on hold.
In the meantime, a booming national economy has lifted Illinois out of the economic doldrums, although "Illinois still trails the rest of the country in most gauges of economic performance."
The best news comes on the jobs front, where the state "added about 70,000 positions on net" in 2018, "two-thirds more than in 2017."
Manufacturing accounted for "one of every four net job additions" in 2018. The jobless rate fell to 4.1 percent last fall, "an all-time low."
The Chicago area is benefiting from that boom more than the rest of the state.
The report states the "national economy is in great shape" but showing signs of entering the later stages of the business cycle." The commission predicts the economic expansion will "draw to a close in 2020 as the Fed raises interest rates and increased uncertainty takes hold."
If so, that's especially bad news for Illinois because it trails its Midwestern neighbors and the nation as a whole in a variety of economic measures.
The commission outlines some of the state's strengths, including business access to customers and a strong transportation network. But economic growth will be limited by financial instability in state government and "weak demographic trends."
"The vibrant national economy is enticing more of the state's residents to seek opportunities elsewhere," the report states, noting "the largest number of the state's out-migrants headed to Indiana."
"More concerning is the decline in the working-age population, which is more severe in Illinois than in most other parts of the country. Over the next decade, Illinois will lose a larger share of working-age residents than almost any other states," the report states.
The more people who work, the more who pay taxes to all levels of government.
The current low unemployment rate has resulted in dramatic increases in state income and sales tax revenues. Nonetheless, the current state budget is deeply in deficit — an estimated $2 billion — while Pritzker balances his proposed 2019-20 budget with revenue estimates generated from nonexistent programs (legalized marijuana and sports gambling) and a series of tax increases.
Pritzker's projections may prove accurate if legislators move swiftly to approve his recommendations. But if he does succeed in actually balancing the budget, as the Illinois Constitution requires, it would be the first time that has happened in more than 15 years.
The commission states that the "biggest threats" to the state's financial health are "fiscal problems and weak demographic profile," neither of which can be expected to improve in the near to intermediate future.
Pritzker, a Democrat, won an overwhelming election victory in November over former Republican Gov. Bruce Rauner, who made no headway in his attempts to alleviate the state's financial problems.
Pritzker promised to do better, balancing budgets and restoring the state to prosperity. But he's stuck with the same fiscal and policy realities that doomed Rauner's optimistic rhetoric and, as the commission's report states, will continue to remain in place.
Jim Dey, a member of The News-Gazette staff, can be reached at email@example.com or 217-351-5369.