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According to Pew Charitable Trusts, for November, the consumer
price index rose nearly 7% in Illinois over the past year.
Nationally, increases ranged from a high of more than 8.3% in
Colorado, Florida, Utah and Nevada to less than 6.1% in
Minnesota and the Dakotas.
Justin Theal, state fiscal health officer at Pew, said if
inflation continues, a lack of spending by Illinoisans will
affect the state’s budget.
“If inflation persists, and if high prices stick around for
quite some time, that does tend to lead to decreased consumer
demand and then therefore decreased sales taxes for states over
time,” Theal said.
The report notes that a temporary spike in inflation can boost
sales tax revenue, but continued high inflation has historically
led to decreased consumer and business spending and, as a
result, weaker collections.
Inflation has eased in the past few months, but it has proved to
be more persistent than the Federal Reserve initially forecast
and is not expected to return to close to normal levels for some
time.
As federal COVID-19 relief dollars poured in, many states loaded
up their rainy day funds to help manage budget uncertainties in
the short term. Illinois lawmakers passed legislation sending
$850 million of surplus revenue to the state’s rainy day fund,
which was practically empty for years. From fiscal 2018-2023,
the average monetary balance for Illinois’ rainy day fund ranked
44th in the nation.
The report said elevated inflation is driving up state
government costs, from goods to contracts with service
providers. Annual state expenditures grew by over 18% by the end
of fiscal year 2022 compared with a year earlier.
Theal said if inflation continues, it could affect a state’s
bottom line, leaving taxpayers to pick up the tab.
"Rising prices are leading to increased state spending on some
pretty big ticket items like payroll and infrastructure and
other major areas of the budget,” Theal said.
He
notes another risk related to inflation is that the Federal
Reserve’s actions to tame high prices could possibly trigger an
economic downturn, which would open up budget deficits.
Kevin Bessler reports on statewide issues in
Illinois for the Center Square. He has over 30 years of
experience in radio news reporting throughout the Midwest.
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