Illinois’ economy continues to fall behind other states, according to fiscal forecast
The worst years of the Great Recession are in the rear view. But if the latest gloomy fiscal forecast is any indication, Illinois' persistent policy mistakes will drag down its economic performance well into the future.
A new report prepared for the Illinois Commission on Government Forecasting and Accountability offers a grey portrait of Illinois’ current economic condition, and a bleak forecast of its future.
The February report by Moody’s Analytics finds that despite some recent positive strides, the Land of Lincoln’s post-recession economy remains stuck trailing its neighbors and much of the rest of the country.
Passage of a two-years-past-due budget, income and employment growth, and a robust apartment market are some areas the report highlights as relative bright spots for Illinois’ economy. But gradual gains in employment and income that have carried Illinois out of the recession have failed to keep pace with that of the state’s peers, according to the report.
Illinois’ 4.7 percent employment increase over the last five years lags the average increase of its Great Lakes neighbors and falls behind the national average.
The Prairie State’s unemployment rate has diminished, having fallen to 4.8 percent in 2017 after being stuck at just under 6 percent for nearly two years. However, the report cautions that “a large contraction in the labor force rather than employment gains explains the apparent tightening.” Indeed, people were dropping out of Illinois’ labor force by the tens of thousands in 2017.
In the long term, Illinois’ four-year trend of population loss, as well as the state’s deep-rooted budgetary instability, will foreseeably continue to weigh on the economy. Over the next five years, Moody’s estimates, the state’s employment will grow at a rate below the national average and below the Midwest overall.
Despite resources such as access to transportation and an enviable talent pool, Illinois’ fiscal instability risks discouraging businesses from scouting opportunities in the Land of Lincoln, the report warns. While lawmakers have attempted to resolve this with generous tax incentives, the Moody’s report advises Springfield instead to “focus on more broad-based income tax reforms and provide firms more certainty as to what their future tax burdens might be.”
But it bears repeating that it isn’t just the private sector that suffers during periods of hindered economic growth. The growing cost of state-worker retirement benefits is projected to tighten employment in the public sector, according to the report. Despite funding increases for public works, “mounting pension obligations will crimp state payrolls” and dampen government employment.
Despite the severity of Illinois’ fiscal troubles, there exists a number of sound, pro-growth reforms at lawmakers’ disposal should they wish to reverse this trajectory. State officials’ failure to respond to forecasts like Moody’s has meant continuing down the same path of sluggish growth.