Illinois revenue freefall: Fiscal year-to-date -8.1% and worsening

By Mike “Mish” Shedlock

Illinois’ fiscal condition is in bad shape and worsening.  Jim Muschinske, Revenue Manager, notes a “February Freefall“.

Compared to last year, February income taxes are down 12.1%; Sales taxes are down 7.5%, and public utility taxes are down 34.3%.

For fiscal 2017, general revenues are down a whopping 8.1%, and the state is two-thirds through the fiscal year.

Overall base revenues fell $423 million in February. Like a broken record, monthly declines reflected weaker income taxes along with poor federal sources. Unfortunately, February’s lackluster performance was widespread with only a couple sources managing to show gains. One less receipting day likely contributed to the decline, though certainly not the primary culprit.

Through the first two-thirds of the fiscal year, base receipts are off $1.453 billion, or 7.5%. Weakness is widespread, and has resulted in year over year losses in key areas such as income taxes and federal sources. With renewed uncertainty of sales tax performance, and with only four months left in FY 2017, it will be very difficult to alter the trajectory of what has turned into a dismal year for revenues.

February 2017 vs February 2016

Fiscal Year 2017 vs Fiscal Year 2016

Unfunded Stabilization Fund

It’s fitting that Illinois has an “unfunded budget stabilization fund”.

Politicians After Your Pocketbook Again

The state of Illinois, as well as Chicago and Cook County, have passed big tax hikes in recent years. The politicians are after your pocketbook again.

In addition to raising the state’s personal and corporate income taxes back near their all-time highs, the Illinois Policy Institute notes senators propose taxing businesses on the “privilege” of doing business in Illinois.

The Chicago Tribune Commentary says Senate tax hike is a raw deal for Illinoisans.

Tax Hikes Don’t Work

If tax hikes worked, Illinois revenue would be up, not down. But Illinoisans are voting with their feet. On March 25, 2017, I noted Cook County Illinois Suffers Largest Population Drop In Entire US.

On May 18, 2016, I noted Illinois State Workers, Highest Paid in Nation, Demand 11.5 to 29% Hikes.

And on March 14, 2017, I noted Illinois General Assembly Retirement System Only 13.52% Funded: Overall, Illinois Pension Debt Interest Hits $9.1 Billion Per Year.

Explaining Dysfunctional Illinois

Tax hikes cannot and will not fix this mess. On January 9, 2017, I explained Dysfunctional Illinois in One Word, One Idea, One Person.

  • One Word: Corruption
  • One Idea: Public Unions
  • One Person: House Speaker Mike Madigan

The only rational solution is bankruptcy, not higher taxes.  Unfortunately, we cannot expect Madigan to do a damn thing other than demand more tax hikes.

Illinois and other states hamstrung by public unions, pension woes, and high costs need three things at the national level because Illinois is too corrupt and too in bed with unions to fix any problems here.

Three National Level Priorities

  1. National right-to-work legislation that supersedes state legislation
  2. Scrap Davis-Bacon and all prevailing wage laws that drive up costs
  3. Bankruptcy legislation that allows municipalities to file when they want to, not when dictators like Madigan allow them.

The Illinois Chamber of Commerce and the Chamber of Commerce of each Illinois city need to make their representatives aware of what needs to be done.

It would also behoove the Illinois Chambers of Commerce to reach out to cities in other states so their respective chambers preach the same message to their legislative representatives.

 

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. He also writes a column at Townhall.com/finance. Article appeared at his blog.

 

 

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