Two new economic reports serve as reminders of how far Illinois still must go to get its financial house in order.
Some state officials are touting recent drops in the state’s historically high unemployment rate as a sign that an improving national economy may finally be boosting Illinois’ fiscal outlook. However, our state’s unemployment rate dropped primarily because people quit looking for jobs, not because there were a lot of new permanent jobs.
A report from the General Assembly’s bipartisan fiscal forecasting agency shows a drop in state tax revenues during the first two months of the new fiscal year and a report from Moody’s Investor Services highlights just how deeply in debt state and local pension systems are in Illinois, when compared to other states.
Also during the week, the nation’s largest organization of small businesses announced that I had received a 100% rating and a “Guardian of Small Business” award from the Illinois chapter of the National Federation of Independent Business (NFIB). The honor is based on a review of key votes affecting small business and their employees. Just 54 of 177 Illinois lawmakers earned the award during the 2013-14 legislative session.
Tax receipts fall
Two months into the state’s new fiscal year, Illinois state government base revenues have dropped by $279 million from the previous year, according to the latest report from the General Assembly’s Commission on Government Forecasting and Accountability (CoGFA).
The drop in revenues was not unexpected, according to CoGFA, because revenues last fiscal year benefitted from a one-time boost related to the state’s tax Refund Fund.
Still, the state’s tax receipts for the beginning of the fiscal year could raise concerns. Although state sales taxes grew by $48 million the first months of the fiscal year, there were drops in other taxes.
Gross personal income taxes declined $14 million, corporate income taxes were down $17 million, public utility taxes were off by $16 million and corporate franchise taxes were down $1 million.
The lower income tax collections raise concerns that job gains are occurring in fields where employees are likely to earn less money.
At the same time, strong sales tax receipts show consumer spending is up. But, while rising sales tax receipts can indicate that consumers are spending more due to increased confidence in the economy, it can also be an indicator of higher prices due to inflation.
Moody’s report: Illinois has worst pension debt
If Illinoisans needed a reminder that the state’s public pension systems are deeply in debt, they got it when Moody’s Investor Services released a special report showing the state’s ratio of pension debt to revenues is far and away the worst in the nation.
The Moody’s study shows Illinois pension debt at 250% of its revenues. Only one other state comes remotely close: Connecticut with around 200 percent. The U.S. median is 51.2% and neighboring Wisconsin is at less than 25%, as are New York and Ohio.
Illinois and Connecticut are the only states with ratios above 180%. California, which once tied with Illinois for the worst credit rating in the nation, is well below 80%.
The report was not a downgrade of Illinois’ credit rating, which remains at A3 from Moody’s – still the lowest rating of any state.
The report came as pension reform legislation adopted last year works its way through the courts. The Moody’s study ranks Illinois’ legal framework for altering pension obligations as “very inflexible.” Illinois is one of only seven states that has specific constitutional protections for pension benefits of public employees.
The largest of the state pension systems is the Teacher’s Retirement System, which covers downstate and suburban teachers and administrators and accounts for around 40% of the Adjusted Net Pension Liability. That number does not include Chicago Public Schools. That one school district accounts for around five percent of all Illinois adjusted net pension liabilities.
Moody’s also points out that large local governments like the city of Chicago have historically made contributions below the amounts actuaries recommend.
Illinois history conference set
The 16th annual conference on the History of Illinois is set to take place September 25-26 at the Prairie Capitol Convention Center and the Abraham Lincoln Presidential Museum in Springfield.
A wide range of topics and multiple sessions about Illinois’ history will be available throughout each day, with topics ranging from prehistoric cultures to Abraham Lincoln’s speeches to the bustling streets of modern, downtown Chicago.
The conference will also feature eight sessions designed specifically for teachers interested in learning new ways to explore history in the classroom. For a schedule of events or for more information, click here.