April 2023 Illinois state income tax collections came in $1.8 billion lower than April 2022, leading state forecasters to make massive cuts in expected 2023 revenue.
State revenue projections were cut by more than $800 million in new fiscal year 2023 estimates from the state legislature’s Commission on Government Forecasting and Accountability.
Illinois saw a massive $1.76 billion drop in actual personal income tax collections during April 2023 compared to April 2022. Lower year-over-year revenues were expected as the effects of federal stimulus activity dissipated. State forecasters built that drop into their projections, but they were still way off – by $986 million.
Revenue from corporate income, corporate franchise taxes and fees, sales, liquor, inheritance, and cannabis taxes were also down in April 2023 compared to April 2022.
While the most recent tax collection data has substantially altered projections for FY 2023 revenues, the state projections for fiscal year 2024 remain virtually unchanged because of tax disbursement changes made by the Illinois Department of Revenue for the upcoming fiscal year. Should revenues continue to falter, FY 2024 revenues could come in lower than expected even with these changes.
Just as the projections were off, so is rhetoric from Gov. J.B. Pritzker about the state’s improved financial condition: the state’s fiscal future remains in jeopardy. In March 2023, Pritzker suggested the state’s strong revenue growth was stable, saying “…as we feel comfortable with these new revenues coming in and their stability; and I think we’re seeing a few years in a row now of the stability of that revenue – that we should be talking about whether there are tax cuts that we can implement.”
Just a month later, year over year revenues posted a massive decline. The April 2023 revenues offer a clear warning about the state’s fiscal future. Experts had been warning Illinois could potentially be among the states facing a fiscal cliff once federal pandemic relief funding ran out. Now, it should be clear the state should not simply expect revenues to keep climbing while avoiding any reforms to the budgeting process, pension costs, or the general financial management of the state.
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Reason for the substantial drop in tax collections in April, 2023?