Coronavirus wreaks havoc on Illinois' state revenues, but pot is a bright spot

On paper, Illinois' fiscal year that began last month looks to be off to a terrific start, taking in more than $5.5 billion.

However, a closer look reveals just how much damage the global COVID-19 pandemic and associated economic crisis is having on the state's finances.

Much of the tax gains last month are due to a three-month delay in the filing deadline for income tax returns from April 15 to July 15.

The state received $2.9 billion in personal income tax revenue last month, according to Illinois Department of Revenue reports. But the legislature's Commission on Government Forecasting and Accountability analysis of tax revenues shows that a little more than $1 billion of that is due to the tax filing delay.

"Those gains were entirely related to timing and serve to temporarily mask the underpinning negative effects that COVID-19 is having on the economy," the analysts wrote in the report released this week.

State officials covered the loss of tax revenue in April with transfers from other funds that will now be replenished using the late income tax revenue.

The only tax revenue categories that experienced gains over July 2019 were those with tax rates that had increased since last year.

The motor fuel tax doubled since July 2019, but revenues from the tax in July 2020 were only 61.7% higher, according to revenue department figures.

Taxes from cigarettes, private vehicle sales and corporate income were the only other categories to see increases above July 2019. Cigarette and private vehicle sales tax rates were both increased in the last year. Corporate income tax filings were also delayed three months.

Sales tax revenues were down almost $100 million from the previous July, usually one of the state's stronger months.

Liquor taxes had their worst July in at least the past five years, according IDOR reports. Liquor tax revenue was reported at $29.6 million last month. That's down $3.4 million from the previous July.

Because casinos and race tracks had been shuttered since the pandemic began, gambling revenue has been essentially nonexistent for months outside of the lottery. Gambling reopened July 1, but the revenues from last month won't be known until September.

Commission on Government Forecasting and Accountability analysts also lamented the lack of federal funding in July.

"Federal sources began the new fiscal year in an unimpressive fashion, falling $49 million," analysts reported.

Gov. J.B. Pritzker noted in Wednesday's news conference about the state's ongoing battle against the spread of COVID-19 that deep cuts to state and local government operations were inevitable without federal financial assistance.

"None of us want to have to lay off public safety officials, people who keep us safe, and no one wants to lay off the people who provide services that so many across the state need, human services," Pritzker said. "But sure, if the Republicans continue to take the stand they've taken, including Republicans in the Illinois delegation, against local and state government, then we're going to have to make drastic cuts."

Congressional leaders are currently locked in a stalemate over the next round of relief funding.

The one bright spot in the state's budget continues to be recreational marijuana tax and associated sales tax revenues. June marijuana tax and marijuana sales tax revenues - which are reported for July - were a combined $14 million from $47.6 million in sales that month. The marijuana taxes were reported at $9.3 million for June's sales and the associated sales taxes were $4.7 million.

Marijuana-related taxes are expected to balloon again next month after the state reported record recreational pot sales of nearly $61 million in July.

The state taxes marijuana based on its potency, ranging from 10% to 25%. Money generated from the state's marijuana tax will go into multiple coffers.

The state's general fund gets 35%, a community development revitalization program for areas affected by the criminalization of marijuana gets 25%, while 20% goes to substance abuse and mental health programs and 10% goes toward the state's bill backlog.

Local government law enforcement agencies receive 8%, and 2% goes to public education and analysis of marijuana legalization.

The additional sales tax revenue from marijuana sales goes into the state's general revenue fund.