Illinois officials annually ask credit rating agency Moody’s Investors Service to look down the road and evaluate the state’s fortunes.
The most recent report said that while the Land of Lincoln’s situation appears optimistic, the agency predicted a slowdown that the state’s government isn’t prepared to handle.
The nonpartisan Commission on Government Forecasting and Accountability-sponsored report “State of Illinois Forecast Report” by Moody’s Investors Service was released in late February and discussed this week in Springfield. The theme of the report was that Illinois has been in the “late-cycle expansion” phase of the economic cycle.
“Weak demographic trends and deep-rooted fiscal problems such as mounting pension obligations and a shrinking tax base represent the biggest hurdles to the longer-term outlook,” the report said. “The forecast anticipates that the state will grow a step behind the Midwest average and a few steps behind the nation over the extended forecast horizon.”
COGFA members met Wednesday to discuss the agency’s assessment of the state’s outlook.
“Our state’s fiscal crisis impacts decisions by businesses on whether they want to relocate or stay in Illinois,” COGFA Chief Clayton Klenke said. “Manufacturing has been a bright spot but long-term trends forecast that it will be difficult to maintain the state’s manufacturing base. The college-age population in Illinois and the midwest is declining…Illinois has seen lower personal income growth than the nation. This has led to underperformance in areas such as retail and hospitality.
Klenke went on to highlight Illinois’ five consecutive years of population losses.
Broken down by industry, the Moody’s report showed growth in business and financial sectors centered mainly in Chicago while other parts of the state’s economic pie, such as manufacturing, would see tepid growth.
“Illinois’ manufacturers will face daunting competition in the global marketplace in the long term. They have been forced to shift operations to lower-cost regions of the world to remain competitive, and although this trend has slowed as labor has become more expensive overseas, it does not reduce the cost advantage sufficiently to reverse this process,” it said.
Manufacturing growth accounted for one of every four new jobs in Illinois over the last fiscal year.
Members of the governor’s Department of Revenue touted Illinois’ gains in recent years at a House Revenue and Finance Committee hearing Thursday, stressing future growth will be small but still existent in the coming year.
“While Illinois, by some measures, underperformed the U.S. by some measures during the current economic expansion, we appear to be benefiting here…from the tight labor market that we’re witnessing,” said Marty Johnson, chief economist with IDOR.
Pritzker’s office is counting on a growing economy, proposing a $42 billion spending plan that projects $691 million in natural state income revenue growth from economic improvements compared to this year.