Overview of the economic and fiscal situation in Illinois

February 18, 2014

Overview of the economic and fiscal situation in Illinois

Despite enormous recent challenges, Illinois’ economy remains relatively healthy compared to other states. In recent recessions, Illinois has a pattern of doing worse than the national average and recovers slowly. Unfortunately, the recession that began in December 2007 and ended in June 2009 hit both the nation and Illinois exceptionally hard, and Illinois’ recovery has lagged the nation’s recovery in profound and disturbing ways.

Recent economic woes in Illinois have intensified, but did not cause, its fiscal difficulties. Illinois’ fiscal woes go back to at least the early 1990s. Despite significant steps by the legislature, analysis by The Fiscal Futures Project shows a continued significant structural fiscal imbalance. The 2011 tax increase and spending caps reduced but did not eliminate the budget gap. The phase-out of the tax increase scheduled to begin January 1, 2015 will leave Illinois with a major structural budget gap that will be painful to eliminate. The December 2013 changes in Illinois’ public pension programs are expected to have only a modest impact on pension spending and will not greatly reduce Illinois’ fiscal stress.

Failure to act to reduce the fiscal gap has already had severe negative effects on Illinois including painful budget cuts, a large backlog of unpaid bills and a greatly tarnished credit rating. Further inaction is likely to lead to even more serious consequences.


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Research Area: Fiscal and Economic Policy

Policy Initiative: none