General state revenue tops $50 billion for the first time, but pandemic-driven surge not expected to last long

State tax revenue rose $5.5 billion in the fiscal year that ended June 30, topping $50 billion for the first time in Illinois history, according to a new report from a state budget agency.

The 12% growth in base revenues has given lawmakers nearly unprecedented flexibility in the current budget year.

This allowed the General Assembly to approve $1.8 billion in tax breaks, pay $500 million more to state pensions than required by law, reimburse hundreds earlier millions of dollars in interest-bearing debt and pushing the state’s “rainy day” fund to its highest level. balance of over $1 billion.

It also helped the state achieve a zero-day accounts payable cycle — meaning it was caught up in its bills — for the first time in decades.

But the report from the Commission on Forecasting and Government Accountability also noted that the drivers of growth related to the pandemic, which have resulted in windfall revenues nationwide for nearly all state governments, are expected to fade. In the coming months.

It’s something Gov. JB Pritzker told Capitol News Illinois that lawmakers had expected in April when they projected revenue this fiscal year at $46.5 billion, down 8% from This year.

“We wrote that in the budget, it’s a decrease in revenue just for the year ahead,” Pritzker said. “So we understand that there was some temporary nature of the income that was coming in.”

In total, base revenues reached $50.3 billion, not counting direct federal assistance. The number jumps to $51.1 billion when including a direct transfer of $736 million in COVID-19 relief dollars.

Base revenues were nearly $8 billion above the May 2021 projections on which the budget was based. Personal and corporate income taxes were up $6.1 billion from the May 2021 forecast, while sales tax revenue was about $979 million from the projection.

While the revenue windfall won’t ease longstanding fiscal pressures, such as a $130 billion unfunded pension liability that demands about a quarter of the state’s general revenue funds each year, it is a level of good financial news Illinois isn’t used to hearing — and a level of progress Pritzker has hung up his hat as he seeks a second term.

“A large surplus and a zero-day payment cycle means our schools are being funded, our roads are being rebuilt, and our healthcare providers are being paid on time – and Illinois taxpayers are no longer facing hundreds of millions dollars in interest payments because government didn’t do its job,” Pritzker said. “Illinois’ massive bill backlog … once contained bills 500 days past due.”

The report notes that while direct federal aid was not included in the calculation of base incomes, the indirect effects of federal stimulus measures played a major role in the unexpected growth.

So significant, in fact, that revenues exceeded original forecasts in 49 states during the fiscal year.

One of the driving factors, according to the report, was the “continued pandemic-related shift” in consumer spending from sales of untaxed services to taxable goods, which created “market conditions strong” which have led to an increase in corporate tax revenues. profits and capital gains.

Republicans also attributed the revenue spikes at least in part to “inflation-induced high sugar,” noting that as prices rise, so do sales tax revenues.

“The influence of these particular factors should fade as the state comes into [this fiscal year]resulting in lower revenue expectations for the coming fiscal year,” the report noted.

Nonetheless, June revenue remained strong, increasing $736 million from the prior year.

As a result, final revenue was $2.6 billion higher than the April estimate from the Governor’s Office of Management and Budget that served as the basis for this year’s budget negotiations.

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