February 15, 2013
Budget outlooks from the Governor's Office and the Legislature's own bipartisan financial forecasting agency were on the agenda Friday, Feb. 15, when members of the Illinois Senate's two budget writing committees held a joint hearing in Chicago, according to State Sen. Kirk Dillard (R-Hinsdale).
The hearings capped a short but busy week in the state Senate. On Feb. 14, a controversial same sex marriage proposal passed the Senate; Senate lawmakers also pushed back the date of the Governor's annual budget message and advanced a major increase in licensing fees for the state's doctors.
However, the state economy took center stage when the two Senate Appropriations Committees met Feb. 15 to receive economic assessments from the governor's budget office, the legislature's own financial forecasting agency and the state's Revenue Department.
An extensive analysis from Moody's Analytics<http://www.ilga.gov/commission/cgfa2006/Upload/2013MoodysEconomyILforecast.pdf> was grim, declaring Illinois "is one of just a handful nationally in danger of falling back into recession" and adding "Illinois has been among the Midwest's weakest and is underperforming the nation in most economic gauges." Earlier in the month, the legislature's Commission on Government Forecasting and Accountability presented a similar assessment<http://ilga.gov/commission/cgfa2006/Upload/02052013HouseRevCommittee.pdf> to the Illinois House revealing that the economic recovery from the 2007-2009 recession has seen the weakest growth since the World War II era.
In almost every economic indicator, the reports show Illinois lags behind the rest of the nation and faces significant hurdles to job growth. Senator Dillard has long advocated for amplifying state support of Illinois’ business community as a way to increase the number of well-paying jobs and spur economic growth. Moody's Analytics warned that as the rest of the nation recovers, Illinois will "trail the region and nation by an even larger margin in 2013."
However, there were some bright spots in the analysis, notably in manufacturing and in tech- and science-based industries. Dillard said he was not surprised, pointing out that for many years Illinois has made an effort to invest and excel in the growing industries of science and technological research and development.
In manufacturing, Illinois is recovering jobs more rapidly than the rest of the country and the state's percentage of manufacturing jobs is actually slightly higher than the nation's. Slightly more than 10% of the state's workforce is in manufacturing and outside Chicago, manufacturing accounts for 13.1% of the state's jobs. Yet, even in that sector, Moody's cautioned that most of the 305,000 manufacturing jobs lost since 1997 will not return.
Other key findings:
* Income in Illinois fell by more during the recession and has risen by less during the recovery;
* The national unemployment rate in January 2013 was 7.8%. Illinois’ rate was 8.7%;
* One of Illinois' greatest strengths is its skilled and educated workforce. About 31% of Illinois residents have college degrees and 12% have post-graduate degrees. Both figures are above the national average;
* The 2011 tax hike sent Illinois into the bottom half of the nation in terms of tax climate with the major increase in business taxes being "the single biggest reason for the recent slippage in the state's tax climate." Illinois now has the fourth highest corporate tax rate in the nation;
* Illinois is suffering from weak population growth and in 2012, a net 44,000 residents left the state. Even in the Midwest, Illinois is trailing its neighbors meaning "the state is losing out to its closest competitors to attracting and maintaining residents;"
* The state's largest number of out-migrants aren't moving to a sunbelt state, but rather to Indiana;
* Despite strong competition from South America and Asia, the outlook for Illinois agriculture is good, in part led by increasing demand for ethanol;
* Lake County and Rockford account for more than 90% of the state's foreclosed properties. The state's foreclosure rate is twice the Midwest average and second highest after Florida;
* Illinois' extensive transportation network is a key factor for economic growth. Illinois is the nation's top rail hub with more than 7,300 miles of track and 42 different railroads.
Though the state’s budget concerns are widely considered to be the most pressing issue facing state leaders, this week Senate lawmakers consideration of same sex marriage legislation drew the most public and media attention. Senate Bill 10 was approved after extensive debate both in committee and on the Senate floor.
A number of lawmakers raised concerns that that the broad language of the measure could have unintended consequences for churches and religious institutions that view same sex marriage as contrary to their tenets. Others questioned the priorities of the Senate President, who expedited consideration of the same sex marriage proposal while pension and workers' compensation reforms, which are critical to the state's economy, languish.
In other legislative action this week, a bill increasing licensing fees for doctors (SB 622) was also sent to the Illinois House for their consideration. The state's Medical Disciplinary Fund does not have enough money to cover the cost of licensing doctors in Illinois. The bill more than doubles physician licensing fees and loans the Medical Disciplinary Fund $6.6 million to be repaid from the higher fees.
Dillard pointed out the doctor's licensing fund is broke because more than $12 million has been "swept" from the fund over the past decade to pay for other state services. Ironically, another special purpose fund, the Local Government Tax Fund, was swept to provide the $6.6 million loan. Dillard and his Senate Republican colleagues have long argued that increasing fees will not solve the underlying problem as long as special purpose funds can be raided to finance unrelated spending.
Only HB 156, which moves the Governor's budget message back to March 6, has been approved by both the Senate and the House. The same sex marriage proposal and licensing fee increase for doctors must still be considered by House lawmakers.