State Revenue Picture Not as Rosy as Projected
The Illinois Statehouse in Springfield.
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After the bipartisan, bicameral Commission on Government Forecasting and Accountability (COGFA) last week released final revenue numbers for the fiscal year that concluded June 30th, many headlines focused on record revenues brought in to state coffers.
But a deep dive into the data shows potentially troubling trends heading into the new fiscal year, which began July 1.
COGFA reported June 2023 income and sales tax receipts were $110 million lower than June 2022. Personal Income Tax receipts were down $183 million from May to June.
But COGFA was optimistic.
“Preliminary indications are that this monthly drop is mainly the result of the timing of receipts rather than a declining trend in taxable income as employment and wage levels continue to show year-over-year improvement,” wrote COGFA revenue manager Eric Noggle.
Corporate income taxes were down in June and sales taxes were stagnant.
Meanwhile, COGFA reported revenue, in total, was up because of federal dollars.
Again, the State’s overall monthly revenue total was greatly enhanced by a couple one-time transfers into the State’s General Funds in June. As shown at the bottom of the accompanying tables, an additional $300 million in ARPA Reimbursement for Essential Government Services federal funding was transferred to the General Revenue Fund (GRF) during this month, which is $2 million higher than the $298 million that was received during June of FY 2022. (Note: This brings the ARPA reimbursement total to $1.064 billion in FY 2023 for an expected final reimbursement total of $1.8 billion when including the $736 million from FY 2022).
A Republican lawmaker we spoke to Monday said Democrats were in for a “rude awakening” in the new fiscal year.
“Revenues are going to fall off a cliff and these [Democrats] are not at all prepared for it,” said the lawmaker, who asked to remain anonymous. “What are they going to do if we have a real recession? Who will be the grown up and starts cutting this bloated budget?”
The FY23 budget ended with over $50.7 billion in revenue. But, COGFA’s Noggle said the whole fiscal year was filled with volatility.
The record levels of revenues are despite the volatility of General Funds receipts throughout much of FY 2023. Through the first two-thirds of the fiscal year, General Funds base revenues were $2.2 billion above last year’s pace (or $2.5 billion higher when including the ARPA reimbursements).
However, a significant falloff in final income tax payments and base federal source dollars in March and April wiped away these gains, resulting in a year-over-year decline of $193 million with two months remaining (or a slight year-over year increase of $132 million when including ARPA reimbursements). A strong month of revenues in May recouped much of the comparative declines in recent months, helping the State to arrive at its final General Funds base growth of $373 million.
The volatility is expected to continue well into FY25.