U.S. Markets

Illinois' FY 2017 tax revenue forecast cut by $657 million

CHICAGO (Reuters) - Illinois could be $657 million short on revenue for the current fiscal year due to falling tax collections, according to a revised forecast released on Tuesday by a legislative commission.

The Commission on Government Forecasting and Accountability (COGFA) reported that revenue from personal and corporate income taxes and sales taxes was down 5 percent in the first eight months of fiscal 2017, compared with the same period in fiscal 2016.

“That rate of decline was last seen during the previous recession,” the commission’s report said, noting that federal funding has also dropped.

Jim Muschinske, COGFA’s revenue manager, said the revenue drop, centered in income tax collections, was due in part to residual effects of January 2015 rate hike expiration, as well as possible underlying economic weakness and Illinois’ ongoing budget battle.

Illinois is limping through a second straight fiscal year without a complete budget due to an ongoing impasse between Republican Governor Bruce Rauner and Democrats who control the legislature.

The state is operating on court-ordered spending for healthcare, social services and payroll, as well as ongoing appropriations covering pensions and debt service on bonds. A massive bill package to end the stalemate is on hold in the state Senate.

Meanwhile, Illinois’ finances are deteriorating with the state ending fiscal 2016 with a $9.6 billion deficit, according to its annual audit released on Tuesday.

For fiscal 2018, which begins on July 1, the commission projected general funds revenue to total $31.14 billion, an increase of $938 million from the revised fiscal 2017 forecast.

Reporting by Karen Pierog; Editing by Matthew Lewis