Ten months ago, economists were projecting enormous COVID-19-related revenue losses for the state of Illinois. Surprise.
Among all the things we’ve had to worry about over the last year — a global pandemic, disruption of the education system, an increase in joblessness, racial unrest, divisive election campaigns — one concern in general has not materialized.
The economy has stayed remarkably strong, even in Illinois.
A recent report by the University of Illinois’ Institute of Government and Public Affairs concluded that the state’s net tax revenue loss is much lower than had been projected a year ago because of COVID-19.
“The state did lose a sizable amount of revenue during the early months, but much of that loss was recovered,” the authors concluded.
While forecasters were anticipating losses of 15 to 20 percent from an extended recession, the report said that so far the losses had been around 2 percent.
More recently, the Legislature’s Commission on Government Forecasting and Accountability said that January tax revenue was strong, up overall about 12 percent from last (pre-COVID-19 January. Year to date it’s up about 10 percent although that figure is affected by late income tax collections in 2020.
Perhaps the best indicator is sales tax receipts. They were up 3.7 percent in January and about 2 percent for the fiscal year so far. That’s despite the fact that the hospitality industry, including hotels, restaurants and bars, generally has been ravaged by COVID-19.
The authors of the UI report note that last spring’s federal stimulus program pumped billions of dollars into the Illinois economy and acted as a catalyst for increased spending. Even spending at restaurants bounced back during the second quarter, the time of loosened regulations and federal stimulus checks.
So what does this tell us about 2021? Primarily that the faster we can reopen the economy safely, the better. That means continued COVID-19 mitigations and a more efficient and aggressive delivery of vaccines. It also means another shot of federal stimulus checks will be needed, one particularly aimed at unemployed individuals and distressed industries.
The fact that Illinois’ economy seems to have done reasonably well during COVID-19 isn’t the same as saying the state government is doing well. It isn’t, the experts note, with the same huge structural deficit and billions in outstanding bills that existed before COVID-19. It will take much more than federal stimulus and a resilient economy to fix that long-term mess.