Progress Illinois

Illinois' budget news just keeps getting worse. After briefing legislative leaders on the state's finances, budget director David Vaugh told the AP yesterday that an $850 million drop in income tax revenues, coupled with a $50 million hit to gaming revenues, means the state already has $900 million less than it anticipated. "Basically, what happened is unemployment is worse than what the economists were projecting," Vaugh said. "We're in the same boat as the rest of the economy."

Indeed, economists have been saying for sometime now that job creation is likely to lag behind other key economic indicators. And the expectation that Illinois' personal income tax revenues would hold steady at last year's level ($10.2 billion) defies state income data that's been collected by various think tanks.  Long before Illinois' unemployment rate hit 10 percent, personal income taxes had tumbled -- from $10.3 billion in '07 to $9.2 billion in '08 -- for two consecutive years, according to the Rockefeller Institute's latest analysis (PDF). Between April and June of this year, Illinois' personal income tax revenues fell by nearly 24 percent.

More troubling, however, is that the trend is sure to continue in the near term. Based on preliminary data from the third quarter (July through September), Illinois is among the 41 state economies still considered "extremely weak" by Rockefeller. The report explains:

Unfortunately for states, an emerging economic recovery does not spell instant budget relief. As we have noted previously, some elements of the economy that are very important to state finances — particularly employment and wages — are likely to recover more slowly than gross domestic product.

While lawmakers continue to ignore how unstable the budget situation is growing, more Illinoisans are feeling the cost of inaction. Without new revenue, the toll will only grow.