The decline in tax
revenue from $32 billion to $29.8 billion is on par with a pattern
that has emerged during the past several years. Areas that measure a
state's economic health -- income, sales and property taxes -- all
Illinois isn't alone in watching tax revenue drop off. The 50 states
saw a decrease of $14 billion in tax money between 2009 and 2010,
according to census numbers.
While income dropped for Illinois, general fund spending increased
from $27.9 billion to $29.7 billion between 2009 and 2010. The total
state budget is a combination of general fund spending and other
dedicated and federal dollars.
Experts in government and economics say the driving factor behind
the numbers was the most recent economic recession.
"We were not expecting, like no one was really expecting back in
2008, that revenues would fall that much," said Kelly Kraft,
spokeswoman for Gov. Pat Quinn's Office of Budget and Management.
What made Illinois government's problem more dire than others, even
more than cities within the state, was its increased spending during the
past decade, according to J. Fred Giertz, an economics professor at
the University of Illinois at Urbana-Champaign.
The trend of spending more while taking in less exacerbated an
already disintegrating financial situation.
Municipalities have made layoffs, encouraged early retirement and
reduced services to cope with leaner financial times. The state has
yet to take such drastic measures, said Giertz.
"Local governments don't have as many ways of delaying the problem.
It's actually good. It forces them to make adjustments right away,
while the state has been able to make some probably not very good
delaying tactics and made the problems worse in the long run," he
Less money coming in coupled with poor financial decisions in the
past were two major reasons Quinn gave when pushing for a temporary
income tax increase earlier this year. The personal and corporate
income tax hike, which passed without a single Republican vote,
should bring in more than $6 billion annually.
"When you see general tax increases, even in an environment where
the Republicans made big gains in the midterm elections -- despite
that, you still see some tax increases -- it just shows how severe the
fiscal problems were," said David Merriman, head of the Department
of Economics at the University of Illinois at Chicago.
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The worst of the worst is probably behind the state. The
unemployment rate has been declining in the state, and projections
by Quinn's office and the Legislature's Commission on Government
Forecasting and Accountability show income tax collections for this
year above last year, even before factoring in the recent tax hike.
Illinois' fiscal environment might be off its deathbed, but like
anyone recovering from a near-death experience, there are hurdles to
overcome. One of those is fast approaching.
By the end of June, most of the federal stimulus money that served
as lifeline for states, including Illinois, will run out. Quinn
recently has proposed a new borrowing plan to squeeze as much money
from Washington, D.C., as the state can before being cut off.
Experts agree that to avoid winding up in the same situation a few
years down the road, the state and municipalities have to look at
running leaner operations.
"State and local governments have to look at both the revenue and
expenditure sides of their budgets and determine how they go about
balancing these budgets, because the local and state governments
cannot print money as is done by the federal government," said James
Nowlan, research fellow at the University of Illinois Institute of
Government and Public Affairs.
Statehouse News; By ANDREW THOMASON]