CHICAGO — Illinois’ tax revenues are on the rise, fueled by a recovering economy and an income-tax increase. But the state is still grappling with high unemployment even as exports rise and the non-manufacturing sector expands, according to a nonpartisan legislative commission’s new revenue and economic forecast.
Corporate income-tax collections are up from last year by 40%, personal income taxes are up 8.6%, and sales taxes have risen 9.3% for fiscal 2011 through February. Overall, base revenues have risen by $997 million, although that figure includes one-time revenues, such as $354 million of interfund borrowing and $419 million from a tax amnesty, according to the Illinois Commission on Government Forecasting and Accountability.
“Through February, and fueled by the recent tax change, gross personal income tax is up $511 million, or $525 million net of refunds. Sales tax receipts are up $387 million … and gross corporate income tax is up $296 million, or $217 million net of refunds,” the report said.
The commission projects that Illinois’ fiscal 2011 general fund will total $30.48 billion, down about $122 million from the Office of Budget and Management’s $30.6 billion estimate used in the 2011 budget.
The panel is projecting that the general fund in fiscal 2012 will total $34.9 billion, about $950 million more than the $34 billion figure Gov. Pat Quinn’s finance team used to craft the proposed fiscal 2012 budget. The income-tax hike will generate about $6.6 billion in fiscal 2012, according to the commission. The figure is close to Quinn’s estimate.
The commission attributes the difference in large part to the timing of collections tied to the income tax increase that took effect in January, raising the personal rate temporarily to 5% from 3%. Because the increase did not hit paychecks until February, the state expects more will owe taxes in April 2012. “The result will be a positive impact on fiscal year 2012,” the report reads
The commission’s numbers will be added to the pool of figures used to craft a final budget. The House Revenue and Finance Committee recently voted to limit expenditures to $33.2 billion.
Quinn has proposed a $52 billion budget proposal for fiscal 2012 that relies on a controversial plan to borrow $8.75 billion to pay off a backlog of bills that make up part of a looming $15 billion deficit. The governor’s $34 billion general fund is up by 10.8% from fiscal 2011 with about 20% of the increase coming from the tax increase and modest economic growth anticipated from various taxes. Federal funds will fall by $662 million.
In economic news presented by the commission, the state’s non-manufacturing sector continued to rise and it represents a growing share of the state’s economy and exports are up by 23% over last year. In January, both the national and state unemployment rate dropped to 9%. Illinois’ rate had exceeded the national rate until late last year. The state’s rate hit a high of 10.1% in October 2009.
In other state budget news Thursday, the Senate Republican minority caucus held a news conference to warn that even with the tax hike the government will face annual deficits of $8 billion over the next five years without deep spending cuts.
“Illinois is on a path that is not only designed to make the 67% temporary income tax permanent, but which will force even larger tax increases in the future,” warned Senate Minority Leader Christine Radogno. “We believe the only long-term solution is to address spending and bring it into line with available revenues.”
Republicans want Quinn and the General Assembly’s Democratic leaders to agree to between $4 billion and $6 billion in cuts. The group said it would identify areas to cut at a later date.
