U of Ideas of General Interest -- February 2000
University of Illinois at Urbana-Champaign
Contact: Mark Reutter, Business & Law Editor (217) 333-0568; [email protected]
ECONOMICS
Revenues expected to help keep Illinois economy in the black
CHAMPAIGN, Ill. -- Buoyed by a stable economy and increased receipts from tobacco, liquor and gambling, the state of Illinois will enjoy another year of fiscal plentitude.
"Year 2000 will be a good one from a revenue standpoint," J. Fred Giertz, a University of Illinois economist, said. Giertz predicted that the state will end fiscal year 2000 on June 30 with a general fund balance very close to last year's historic high of $1.35 billion.
"Midway through fiscal 2000, actual revenues are above projection, with sales tax especially strong," he said in an interview. Sales-tax receipts were up 7.6 percent in the second half of calendar 1999 compared to the figure a year earlier.
Individual income taxes also rose 3.3 percent despite a phase-in that raises the personal exemption level for residents from $1,000 to $2,000 over three years. The exemption for last year was $1,650 and will increase to the full $2,000 in 2000.
A new single-apportionment tax formula for corporations doing business in more than one state resulted, at least temporarily, in a fall-off in corporate receipts. While the measure was tagged as revenue neutral by its supporters, corporate income taxes in Illinois dropped 15.8 percent in the first half of fiscal 2000. Although there is likely to be some pick-up, corporate income taxes will probably lag throughout the year, Giertz said.
Several other revenue streams will favorably affect the state budget.
Illinois has received $140 million from the national tobacco settlement, the first installment of a projected $9 billion to be paid by tobacco companies over the next 25 years. How the state will use the money -- and the options are many, including improving Medicaid benefits, establishing a "rainy day" reserve fund or undertaking a state anti-smoking campaign -- will become a major issue facing the legislature.
Otherwise, the coming year "promises to be a quiet one" in Springfield, Giertz predicted. Faced with a bumper crop of revenues and little constituent pressure to enact general property-tax relief as in past years, legislative leaders are discussing an April adjournment, one month earlier than usual.
Gov. George Ryan's big initiative -- a five-year infrastructure development program called Illinois FIRST -- raised taxes on alcoholic beverages and increased vehicle registration and transfer fees. These taxes are expected to generate $70 million in new revenues for infrastructure in fiscal 2000.
The extension of riverboat gambling into Cook County -- so long as it withstands a court challenge -- is expected to "have a strong positive impact" on future revenues. Last year, riverboat gaming produced $191 million in fees and taxes, up $46 million from fiscal 1999. The tax boost from a boat near Chicago will be offset somewhat by additional state subsidies to the ailing horse-racing industry.
The state lottery, meanwhile, yielded $207 million in tax revenues and fees, down 5.5 percent from the previous reporting year.
-mr-
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