The Illinois Commission on Government Forecasting and Accountability (COGFA) reports that August Revenues were down $457 million over the same month last year.  Overall Fiscal Year revenues are down $305 over last year.

CTBA analysis finds that at this point in the fiscal year, if revenues grew with inflation the state would find itself UP $185 million.  Unfortunately it seems revenues will miss the inflation mark again for FY 2009. (See the FY 2008 analysis here).  That makes it almost impossible to increase appropriations, even as actual costs for funding programs continue to rise with inflation. (Read more about the Illinois' revenue system and how to fix it here).

COGFA places the blame on the slowing of reimbursable spending and weak transfers.  Federal reimbursable spending was down $338 million.

AUGUST DECREASES:
 

• Public utility taxes fell $30 million
• Gross personal income tax declined by $18 million, or $17 million net of refunds
• Interest earnings and other sources each fell $9 million
• Inheritance tax decreased by $6 million
• Corporate franchise taxes dipped $2 million
• vehicle use tax down by $1 million
• Overall transfers were down $63 million
• Riverboat transfers dropped $45 million
• Lottery transfers dropped $12 million
• Other transfers were down by $6 million
• Federal sources were down $338 million, reflecting a slowing in reimbursable spending.
   

AUGUST GAINS:
 

• Gross corporate income taxes grew $19 million, or $12 million net of refunds
• Sales tax revenues increase a mere $4 million
• Insurance taxes showed a $2 million gain
   

FISCAL YEAR TO DATE:
COGFA reports that through August, overall base revenues were down $305 million for the fiscal year, mostly due to a $204 million decline in federal sources. That's because, according to COGFA, "spending on reimbursable programs such as Medicaid has been erratic over the first two months."

Aside from a slow economy, several things, including a new increase in the refund percentage for the personal and corporate income tax will limit revenue growth in FY 2009 (view the list on page 6 here),
 

Department of Revenue Warns Revenues May be Down
$200 Million for the Fiscal Year
Due to revenue reports, like that issued by COGFA, showing revenues down for the first two months of the fiscal year, the Department of Revenue warns the state revenue forecast could be overestimated by as much as $200 million for the fiscal year.  Sales and income tax revenues are the main concern.

From the Department of Revenue (as reported on thecapitolfaxblog.com)
As a poor national economy weighs heavily on state revenues across the country, Illinois is experiencing a triple threat of lower-than-projected revenue for the first two months of the fiscal year. Sluggish income tax collections, along with weak sales tax on an annual basis, would result in as much as $200 million short of the state's already conservative projections.

The Illinois Department of Revenue (IDOR) reports that revenue from individual income tax is growing at a rate just over 1.2 percent, which is below OMB's projected 3.3 percent growth anticipated in the FY09 budget. Income tax makes up the largest portion of Illinois' revenue, and thus has the most influence on a balanced budget. A high statewide unemployment rate at 7.3 percent and stagnant wages suggest this trend could only get worse.

Sales tax revenue for the same period of FY09 was .5 percentage points below the level projected for the FY09 budget, the result of a decline in consumer spending due to rising unemployment, declining home equity, and stagnant wages. IDOR suggests that the ongoing financial market crisis will likely exacerbate already weak credit conditions, meaning further constraining consumer spending. Higher food prices mean people will spend less on other goods.

Finally, the corporate income tax makes the department wary. Since about 10 percent of the corporate income tax comes from the financial services sector, IDOR is concerned that September's volatile stock market will further hurt FY09 revenue.

For other revenue sources, IDOR also noted that revenue from the real estate transfer tax, cigarette tax, and motor fuel tax is down.

Read more about the revenue situation here.


 

General Assembly Passes Fund Sweeps Bill Last Week,
Senate Has Yet to Send Bill to Gov

Last week, the Senate followed the House and passed SB 790 to transfer $221,250,000 from special state funds to the General Revenue Fund (also known as fund sweeps).  The fund sweeps will be used to restore some of the $1.4 billion in cuts the Governor made to the fiscal year 2009 budget. 

Once Governor Blagojevich receives the legislation, he has 60 days to sign it into law, veto it completely or send it back to the legislature with an amendatory veto. The Governor has not stated if he will consider the recent revenue reports in his decision.

In the meantime, state parks and historic sites are scheduled to close in October and November.

Which funds were swept?  How much will be transferred from the fund?  Read SB 790 here.

BACKGROUND
Special State Funds are various, smaller funds identified and held in the State Treasury as "special funds" under in Section 5 of the Illinois Finance Act restricted in use to the specific purpose for which they were created.

There are over 300 of these special state funds that support activities as diverse as medical assistance and environmental cleanup. They are, for the most part, designed as segregated accounts, restricted in use and funded from specifically earmarked revenue or fee sources. Examples include the Illinois Affordable Housing Trust Fund, the Youth Drug Abuse Prevention Fund and the Brownfields Redevelopment Fund. 

Since FY 2003, the state has transferred almost $1 billion from these Special State Funds to the General Revenue Fund.  However, this is not new revenue, it is simply a transfer of revenue from Special State Funds into the General Fund.  This revenue swap would not be available next year without legislative approval.

Read more about how the state transfers revenue from special use state funds to the General Fund on page 25 of the CTBA report, Citizens Guide to the Illinois State Budget and Tax System. The report contains a wealth of information on all of these budget issues.


Background
Governor Blagojevich announced that 450 state workers will be laid off along with the closure of 12 historic sites and 11state parks as a result of the $1.4 billion in cuts he made to the fiscal year 2009 budget. 

Four departments will be hit with the lay offs, including 300 positions at the Department of Children and Family Services, 75 at the Department of Human Services, and another 75 from the Department of Natural Resources and the Historic Preservation Agency.

According to the State Journal Register (SJ-R), the lay offs will be effective December 1st.  The historic sites will close Oct. 1st and state parks Nov. 1st.

The union that represents the laid off workers, the American Federation of State, County and Municipal Employees (AFSCME) along with state lawmakers told SJ-R the layoffs and closings were unnecessarily heavy just a couple of months into the new budget year that began July 1.

"Every time I think he can't do something worse, he does," Sen. Larry Bomke, R-Springfield, said of the governor.

AFSCME warned that the cuts will put abused children and needy families at risk and further hurt parks and historic sites. It urged lawmakers to return to the Capitol soon to try to reverse them.

"These cuts are irresponsible, and they are deep," AFSCME executive director Henry Bayer said.

Department of Natural Resources spokesman Chris McCloud told the SJ-R, "This is a tough day for DNR and Illinois."  Jonathan Goldman, executive director of the Illinois Environmental Council, said state parks had about 45 million visitors last year, and the resulting loss in economic activity probably will outweigh any savings.