Third Reading Consulting Group
COGFA FY 2024 Updated Projection
The Commission on Government Forecasting and Accountability (COGFA) increased their FY 2024 Illinois revenue estimate by $1.979B, from $50.611B at the time the budget was enacted to $52.590B today. Nearly half, or $881M, of the revenue increase comes from one-time revenue sources. The state received $633M from Medicaid matching reimbursement in FY 2023 and $248M from a transfer of unused state tax incentive funds in FY 2022.
The other half of the revenue increase is the result of state tax revenue collections thus far into FY 2024 exceeding the projected amounts when the budget was passed. COGFA increased projected corporate income tax by $267M, sales tax by $72M, all other state sources by $575M, and transfers in by $392M. Interest on state funds and investments make up $350M of the $575M increase to all other state sources. On the flip side, COGFA decreased projected federal revenues by $208M and did not amend their projection for personal income tax revenues, despite being up 5.3% over budget assumptions thus far into the fiscal year. COGFA conservatively projects that personal income tax could decline in the final few months of the fiscal year, given weakening employment and wage growth trends in recent months and historic volatility in income tax collections over the final few months of each fiscal year. If revenues continue at their current pace for the remainder of the fiscal year, the state will exceed COGFA’s personal income tax revenue projections.
The Governor’s Office of Management and Budget (GOMB) also updated their FY 2024 revenue projection last month. COGFA’s March revenue projection is $374M higher than GOMB’s February projection. Most of the differences between the two projections are because GOMB’s projection did not factor in February revenues, whereas COGFA’s did. Neither COGFA nor GOMB revised their personal income tax projections from the original budget assumption. COGFA’s corporate income tax projection is $214M higher than GOMB’s, largely because GOMB’s projection did not factor in February revenue amounts, which saw 19% year-over-year growth. Conversely, COGFA’s updated sales tax projection is $44M lower than GOMB’s, reflecting the continued impacts of high interest rates, inflation, and weaker sales tax performance in February. COGFA projects $58M more from all other state sources and $48M more from transfers in than GOMB. Finally, COGFA projects $100M more than GOMB from unused tax incentive funds being transferred back to the General Revenue Fund, which occurred in January and was not factored into GOMB’s projection.
COGFA FY 2025 Projection
COGFA also released an FY 2025 revenue projection. The agency projects $52.077B in general funds revenues in FY 2025, $513M below its March FY 2024 projection. When factoring out the $881M in one-time revenues received in FY 2024, COGFA is projecting a base revenue increase of $368M in FY 2025. COGFA projects that FY 2025 personal income tax revenue will be $847M greater, corporate income tax will be $545M less, and sales tax will be $25M greater than FY 2024. All other state sources are projected to be $70M less than FY 2024 as interest rates are expected to decrease from their high point in FY 2023 and FY 2024. The large increase to personal income tax revenue is the result of the Department of Revenue’s continued true-up process, despite expected weaker taxable income growth relative to the previous few years. The projected decrease in corporate income tax revenue can be explained by slowing corporate profits and the return of the Net Operating Loss deduction without a cap. Additionally, lower corporate income tax revenues are to be expected as a part of the true-up process. Sales tax revenues could increase as interest rates decrease, despite slower income growth.
Gov. Pritzker’s Proposed FY 2025 Revenue Changes
Gov. Pritzker’s proposed FY 2025 budget included a variety of changes to increase state revenues by a projected $1.098B in FY 2025. COGFA did not release an FY 2025 projection that factors in the governor’s proposed revenue changes, as they could be changed in the final enacted FY 2025 budget. The proposed revenue changes are listed below.
$81M net increase to personal income tax by decreasing the standard deduction amount and creating a new refundable child tax credit.
$526M increase in corporate income tax by increasing the corporate net operating loss deduction threshold from $100,000 to $500,000.
$276M increase in sales tax revenues by a $175M Road Fund offset and $101M from creating a $1,000 per month cap on the retailer’s discount.
-$10M by raising the corporate franchise tax exemption to $10,000.
$25M one-time increase by distributing a portion of Real Estate Transfer Tax revenues to the General Revenue Fund instead of the Open Space Lands Acquisition and Development Fund.
$200M increase to transfers in by increasing the Sports Wagering Tax rate from 15% to 35%.
Important Upcoming Dates – Statewide
April 5 – House Committee Deadline
April 12 – Senate Third Reading Deadline
April 19 – House Third Reading Deadline
May 3 – Opposite Chamber Committee Deadline
May 17 – Opposite Chamber Third Reading Deadline
May 24 – Adjournment
May 25-31 – Contingent Session Days for Budget
November 5 – 2024 General Election
