A report from the state government’s forecasting group said determining the impact of the COVID-19 pandemic on the state’s tax revenues was “virtually impossible” for now, but the commission said it could result in a loss of more than $8 billion over several fiscal years.
The new report from the Commission on Government Forecasting and Accountability included a projection of state revenues and expenditures for the next three years under different scenarios. One scenario assumes the state pays down its $8 billion worth of unpaid bills, another assumes flat spending and a third assumes spending growth of 2 percent.
The report also highlighted threats to the state’s budget forecast, including it’s outstanding bill backlog of more than $8 billion as of March 25, the state’s unfunded pension liabilities of more than $137 billion, and the uncertainty around what it called the “COVID-19 Recession.”
“While the certainty of the country, and world, plunging into recession seems to grow each day, attempting to value the impact of COVID-19 on state revenues is virtually impossible,” according to the report. “With that caveat, it seems reasonable to offer a scenario with more devastating impacts on revenues in the near-term than even the Great Recession. As a result, should revenues experience a peak-trough decline of 20%, a revenue reduction of over $8 billion would be experienced, although likely spread over multiple fiscal years.”
Earlier this month state lawmakers heard from COGFA and from the Governor’s Office of Management and Budget about expected revenues for the coming fiscal year. COGFA put the estimate at $40.6 billion for fiscal 2021, down slightly from the current fiscal year. The Governor’s Office of Management and Budget put the estimate at $42.1 billion, which included revenue from a progressive income tax proposal that voters haven’t voted on yet.
Governor J.B. Pritzker says any previous estimates of state revenue can be thrown out. “There’s no doubt that any estimates that were made even two months ago would be not useful at this point,” Pritzker said. “I don’t think anybody expected that’s where we would be today.” The governor said his administration and others were looking at how severe the economic downturn could be and what that would mean for the state.
Several aspects of the state government’s actions in response to COVID-19 will affect tax receipts. Those steps included suspending dine-in service at restaurants, closing casinos and video gambling machines across the state, and temporarily shutting down the state’s nonessential businesses.
State Representative Mark Batinick of Plainview said the path forward could include a review of any money the state can transfer from the hundreds of special funds outside of the General Revenue Fund. “I know we can’t sweep the road fund because that is constitutionally not allowed anymore,” Batinick said, referencing the Lockbox Amendment voters approved in 2016. “I’m sure that everybody is going to be looking under every couch cushion and in every purse and every cranny for dollars to get us through this.” Batinick also said lawmakers could look at short-term budgeting.
The next budget year begins on July 1.