(The Center Square) – A strong labor market is helping to boost Illinois tax revenues, but an economics professor says states with budget difficulties should be prepared in case unemployment rises.
The Commission on Government Forecasting and Accountability said Illinois sales tax revenues grew $175 million, or 17.1% in October and corporate income tax receipts increased $100 million, or 43%.
David Yaskewich, professor of economics and chair of accounting, economics and finance at Southeast Missouri State University in Cape Girardeau, said income tax and sales taxes are the primary generators of revenue at the state level.
“If we have a healthy labor market where people are working, that would be something that would tend to generate revenue. So in a low unemployment period, if a state were having difficulties with its budget, that would be potentially worrisome, because if unemployment were to rise, it could only really get worse from that standpoint,” Yaskewich told The Center Square.
The Illinois state budget is $55.9 billion for fiscal year 2027, up from $39 billion in 2019.
The Illinois Flash Index increased from 101.5 in September to 101.7 in October, reflecting continued strength in state revenues and an improving labor market.
Yaskewich said it was taken as good news that the U.S. added 165,000 jobs in October, even though real wages have not kept up with inflation.
“That really could suggest consumers might be somewhat cautious about spending during the holiday season if that’s the case,” Yaskewich said.
Yaskewich said inflation is at the top of the radar for the Federal Reserve.
“Both the jobs numbers and the inflation numbers from the past week are likely going to suggest that a quarter point interest rate hike at their next meeting in December is probably going to happen. It’s probably all but certain at this point,” Yaskewich said.
Yaskewich said he would recommend that policy makers think long term when it comes to employment and revenue numbers.
