Quarterly Revenue Report: Fiscal Year 2015-Q4 · Regulator Relief Act of 2006.3 The Fed will likely...

QuarterlyRevenueReport:FiscalYear2015‐Q4

TaxRevenueResearch,UpdatesbyQuarterIncludingMonthlyRevenue

TableIllinoisDepartmentofRevenue

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TableofContents

EconomicReports Page

NationalEconomy .............3

IllinoisEconomy .............7

IncomeTaxReports

IndividualIncomeTax(IIT) .............8

CorporateIncomeTax(CIT) .............11

Sales&ExciseTaxReports

Sales&UseTax .............13

PublicUtilitiesTaxes .............14

LiquorTax .............15

MotorFuelTaxes .............16

CigaretteandCigaretteUseTaxes .............17

OtherTobaccoProductsTax .............17

HotelOperators’OccupationTax(HOOT) ............. 18

EstateTax .............20

RealEstateTransferTax(RETT) .............21

Appendix

ComparisonwithLastFiscalYearandIDORForecasts ............. 23

US&IllinoisEmployment ............. 24

Acknowledgements .............25

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NationalEconomy

BankingandCreditMarketsTheFederalOpenMarketsCommittee(FOMC)reaffirmeditsFederalFundsInterestratetargetrangeofbetweenzeropercentand¼percentattheJune16‐17meeting.Meetingminutesindicatethatthecommitteewillnotadoptapolicyofahighertargetrateuntilitis“reasonablyconfident”thatinflationwillapproachtwopercentinthemediumtermandlabormarketconditionswillimprove.EvenifeconomicconditionsproceedinthedirectiontheFOMCdesires,thismaynotleadtosubstantiallyhigherinterestrates.TheFOMCfinallystatedthatit“currentlyanticipatesthat,evenafteremploymentandinflationarenearmandate‐consistentlevels,economicconditionsmay,forsometime,warrantkeepingthetargetfederalfundsratebelowlevelstheCommitteeviewsasnormalinthelongerrun.”1Excessreservesofdepositoryinstitutionsarenearly$2.5trillionandaremotivatedbyacombinationofinterestpaidofonexcessreservesbytheFederalReserveBank(Fed)andageneralperceptionamongloanofficersinthebankingindustryofcounterpartyrisk.2TheFedbeganpayinginterestonexcessreservesbackinOctober2008aspartoftheFederalServicesRegulatorReliefActof2006.3TheFedwilllikelyincreasetheInterestonExcessReserves(IOER)rate,currently¼percent,inordertopressuptheFederalFundsRate.4IftheFedincreasestheIOERrate,itreducestheincentiveforbankstoloanexcessreserves,evenifriskperceptiondeclines.BanksareexpectedtocontinueholdinglargeexcessreservesuntiltheperceivedriskislowenoughrelativetotheIOERratetomakelendingtheexcessreservespreferredtomaintainingthereserves.Chart1

                                                            1 Meeting Minutes of the Federal Open Markets Committee, June 16th and 17th, 2015 http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20150617.pdf 2 FRED Economic Data, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/EXCSRESNS/ 3 Regulation D: Reserve Requirements for Depository Institutions, Final Rule, By order of the Board of Governors of the Federal Reserve System, June 17, 2015. 4 Ibid

0

500000

1000000

1500000

2000000

2500000

3000000

Excess Reserves of Depository Institutions ($ in Millions)

Excess Reserves of Depository Institutions

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Source:FederalReserveBankofSt.Louis

TheAprilSeniorLoanOfficer’sOpinionSurveyonBankLendingPracticessuggestsbanksremainriskaverseandunwillingtobroadlylowercommerciallendingstandards.Forexample,commercialandindustriallending(C&I)haschangedverylittleinrecentmonths.Afewbanksreportedeasingofstandardswhileotherbanksreportedtighterstandards.TheoverallchangeinthesupplyofC&Iloansisnotmeaningful.Meanwhile,demandforC&Iloanshasbeenmixed.WhilethemajorityofbanksexperiencednoincreaseindemandforC&Iloans,afewdidhavemoredemandforloansrelatedtoplantsandequipment,financingreceivables,andinventoryaccumulationwhilesomeexperienceddemanddecreasedformergersandacquisition(M&A)financingandcustomerborrowingduetomovingborrowingactivitytoanotherbankornon‐banksource.Commercialrealestatelendingstandardshaveloosenedsomewhat.Lendingstandardsfornon‐farmnon‐residentialpropertieshaveeased.Afewlargebankshaveeasedlendingstandardsforconstructionandlanddevelopmentloans,aswellasmultifamilyproperties.Anincreasingnetfractionofbanksarereportingstrongerdemandforconstructionandlanddevelopmentloans.5Residentialrealestatelendingstandardsremaingenerallytight,withtheexceptionofloanseligibleforpurchasebygovernmentsponsoredenterprisesandqualifiedmortgagejumboloans.Demandforresidentialrealestateloanshasincreasedmodestlyduringthesurveyperiod.Lendingstandardsforautoloansandconsumerloans,otherthancreditcards,easedatafewlargebanks.GDPAggregates,Employment,andtheNationalDebtEconomicactivitydeclinedinsomesectorsofthenationaleconomybutincreasedinothersduringthefirstquarterof2015.RealGrossDomesticProduct(RGDP),decreasedatanannualrateof0.2percentinthefirstquarterof2015.6Importantly,themajorityofeconomicsectorsperformedquitewell.Fairlylargedeclineswereexperiencedinsomesectorsoftheeconomybutnotsufficienttoraiseconcernsofageneralslowdownintheeconomy.Infact,consumereconomicactivityincreasedbroadlyacrosstheeconomy,asdidcertainkindsofinvestment.TheU.S.BureauofEconomicAnalysisestimatesrealpersonalconsumptionexpendituresincreased2.1percent.Theservicesectorexperiencedthestrongestgrowthat2.7percent,whiledurablegoodsandnondurablegoodsincreased1.3percentand0.8percent,respectively.7Mostmeasuresofinvestmentimprovedduringthefirstquarter.Investmentinequipment,intellectualpropertyandresidentialfixedinvestmentallincreasedby2.6percent,4.9percentand6.5percentrespectively.Notwithstandinggrowthintheaboveinvestmentsectors,nonresidentialfixedinvestmentintotaldeclined2.0percentasacategorybecauseofthe18.8percentdecreaseinnonresidentialstructureinvestment.Thedeclineinnonresidentialinvestmentisnotexpectedtopersist.AscitedearlierfromtheFederalReserveBank’sSeniorLoanOfficer’sOpinionSurvey,morebanksarenowexperiencingincreaseddemandforcommercialconstructionandlanddevelopmentloans.Furtherevidencefromstrongindustrial

                                                            5 The April 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices, http://www.federalreserve.gov/boarddocs/snloansurvey/201505/default.htm 6 U.S. Bureau of Economic Analysis, National Income and Product Accounts, Gross Domestic Product: First Quarter 2015 (Third Estimate) http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm 7 Ibid

5 

capacityutilization–discussedindetailbelow–suggestlittlelikelihoodofaprolongednonresidentialstructureinvestmentslump.ThetwoothersourcesoftherecentdeclineinrealGDPareexchangerates/internationaltradeandstateandlocalgovernmentspending.ThestrongU.S.dollarvis‐à‐vistheEuroandothercurrenciescausedrealexportstodecline5.9percentandrealimportstoincrease7.1percent.Whiletotalgovernmentspendingremainedflat,thestateandlocalshareofgovernmentspendingdeclined1.0percent.8Federaldebtasashareoftheeconomyhasstabilizedatahistoricallyhighlevelsincethefirstquarterof2013fluctuatinginarangebetween100percentofGrossDomesticProduct(GDP)to102percentofGDP.ThemostrecentdebttoGDPfigures(firstquarterof2015)remainedelevated,slightlyinexcessof102percentGDP.9TheEurozone,bycomparison,ended2014withadebttoGDPratioofjustunder92percent.Greece,Italy,Portugal,Ireland,Cyprus,andBelgiumaretheonlyEurozonenationswithdebttoGDPratiosexceedingtheUnitedStates.BycomparisontheOfficeforBudgetResponsibility,expectsBritaintohaveadebttoGDPratioofjustover80percentbytheendofthefiscalyear.10,11Chart2

Source:FederalReserveBankofSt.Louis

Totalnonfarmpayrollemploymentincreasedby223,000inJuneandtheunemploymentratefellto5.3percent.Householdsurveydatasaysunemploymentratesremainhigherthanthenationalaveragefornon‐Asianminoritiesandteenagers.Thenumberoflong‐termunemployed

                                                            8 Ibid 9 FRED Economic Data, Federal Reserve Bank of St. Louis and U.S. Office of Management and Budget https://research.stlouisfed.org/fred2/series/GFDEGDQ188S/ 10 http://www.telegraph.co.uk/finance/economics/11552293/Europes-debt-mountain-just-got-bigger.html 11 http://www.telegraph.co.uk/finance/budget/11480283/Budget-2015-Government-will-use-borrowing-windfall-to-pay-down-Britains-debt-mountain.html

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Federal Debt ‐ Percent of GDP Seasonally Adjusted

Total Public Debt as Percent of GDP

6 

fellby381,000.Thesurveydatashouldbeobservedagainstthebackdropofacivilianlaborforcethatdeclinedby432,000inJunefollowingasimilarmagnitudeinMay.12Whenfewerpeopleparticipateinthelaborforcefewmustbeemployedtokeeptheunemploymentratelow.Laborforceparticipationdeclinedby0.3percentinJune.Someeconomistsprefertheemploymenttopopulationratioasasuperiormeasureofunemploymenttotheunemploymentrate.InJune,theemploymenttopopulationratioisjust59.3percent.Inthe25yearsfrom1984to2008theemploymenttopopulationratioaveraged62.5percent.Theratiohasnotexceeded60percentsinceFebruary2009.13

PricesandProductionTheConsumerPriceIndexforallitems(CPI‐U)experiencedzeroincreaseinthetwelvemonthsendingMay2015.Oncefoodandenergypricesarebackedoutoftheindex,pricesincreased1.7percentoverthesameperiod.Whilemanyitemshavebecomemoreexpensiveoverthelastyear,energypriceshavedeclinedsubstantiallyoffsettinginflationelsewhere.Gasolineandfueloilfell25percentand27.6percent,respectively,overthelastyear,butpriceshaverecentlystartedsurgingbackup.InMay,gaspricesincreased9.6percent,andfueloilincreased10.4percent,comparedwithApril.14TheProducerPriceindex(PPI)forfinaldemandincreased0.5percentinMaycomparedtoAprilbutdeclinedby1.1percentcomparedwiththesamemonthoneyearago.Thisisthefourthconsecutivemonthofyear‐over‐yeardeclinesinproducerprices.Aswasthecaseinconsumerprices,theproducerpriceindexforgasolineincreased17percentinMay.Pricesfordieselfuel,chickeneggs,jetfuel,pharmaceuticalpreparations,andmotorfuelalsoincreased.Pricesfornaturalgas,hay,hayseeds,oilseeds,andbasicorganicchemicalsalldecreased.ThepriceofintermediategoodsalsoincreasedinMay,comparedwithApril.Theindexwasdrivenupprimarilybya5.8‐percentriseinthepriceforprocessedenergygoods.15Industrialproductiondecreased0.2percentinMaybecauseofdeclinesinmanufacturingandminingoutput.Miningproductionwasparticularlyaffectedbydeclinesinoilandgaswelldrillingactivity.Industrialproductionofmotorvehiclesandpartsleadincreasedproductionwitha1.7percentgain.Capacityutilizationfortheindustrialsectordecreased0.2percentinMayto78.1percent,aratethatis2.0percentagepointsbelowitslong‐run(1972–2014)average.16

                                                            12 U.S. Department of Labor, Bureau of Labor Statistics, Employment Situation New Release, July 2, 2015. http://www.bls.gov/news.release/archives/empsit_07022015.htm 13 Ibid 14 U.S. Bureau of Labor Statistics, Consumer Price Index News Release May 2015, http://www.bls.gov/news.release/cpi.nr0.htm 15 U.S. Bureau of Labor Statistics, Producer Price Index News Release May 2015 http://www.bls.gov/news.release/ppi.nr0.htm 16 Industrial Production and Capacity Utilization – G.17 Release Date June 15, 2015 http://www.federalreserve.gov/releases/g17/Current/default.htm

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IllinoisEconomyUncertaintycontinuestoweighupontheIllinoiseconomy.TheSupremeCourtdecisiononIllinoisworkerpensionswillmakeachievingsavingsthroughreductionsinthe$100billionunfundedactuarialaccruedliabilitymoredifficultandaddslong‐termuncertaintyabouttaxesandthestatebudget.Furthermore,theinabilityofpolicymakerstoachieveabudgetdealaddsadditionalshort‐rununcertaintyforhouseholdsandentrepreneursregardinghowtheStatemightgoaboutclosingabudgetgapofmorethan$4billion.WhenentrepreneursweightheeconomicupsideofIllinois—awell‐educatedworkforce,excellenttransportationinfrastructure,andindustrialdiversity—againsttheuncertaintyofhigherstateincometaxesorcostsbeingpasseddowntolocalgovernments(creatingpropertytaxuncertainty)inboththeshortandlongterm,theirinvestmentcalculuswillnodoubtbeinfluencedvis‐à‐visotherstateswithmorestablefiscalconditionsandsimilareconomicpositives.Ameasureofnear‐termeconomicgrowthexpectationsisthePhiladelphiaFederalReserveBankIndexofLeadingEconomicIndicators.Theindexmeasuresthesix‐monthgrowthinthestate’scoincidentindex.Thecoincidentindextakesintoaccountfourstate‐levelvariables,includingnonfarmpayrollemployment,averagehoursworkedinmanufacturing,theunemploymentrate,andwageandsalarydisbursementsdeflatedbytheconsumerpriceindex(U.S.cityaverage).Thetrendforeachstate’sindexissettothetrendofitsgrossdomesticproduct(GDP),solong‐termgrowthinthestate’sindexmatcheslong‐termgrowthinitsGDP.17Illinoiscoincidentindexisexpectedtogrowjust1.07percentinthenextsixmonths,comparedwithanationalaverageof1.64percent.18 InspiteofIllinois’growingpopulation,thelaborforceissmallerandfewerpeopleareworking.TheIllinoislaborforcehasbeeninsteadydeclinesince2007.19Thelaborforcehasdeclinedbymorethan224thousandworkersoverthatperiodandhasdemonstratednosignofrecoverysincetheendofthegreatrecession.Andeventhoughtheunemploymentrateis5.9percent,thereare237thousandfeweremployedworkersinIllinoisthantherewereatthe2007peak.Itisestimatedthatbetween2007and2014theIllinoispopulationovertheageof16grewbetween2007and2014bymorethan309thousandpeople,butparticipationinthelaborforceshrankby3.5percentfrom68.4percentto64.9percentfromthe2007peaklevels.20Theemploymenttopopulationration,belowinTable3,hasbeenindeclinesince1999,fromahighof66.5percenttoitscurrentlevelof60.3percent.Illinoislevelofemploymentincreasedby9,200jobsinMay,buttheprivatesectorgrewbyjust6,900afterbackingoutnewgovernmentjobs.Amongthetopperformingsectorswerebusinessandprofessionalservicesadding6,900jobstothepayroll,whileleisureandhospitalityadded

                                                            17 Federal Reserve Bank of Philadelphia, State Coincident Index, https://www.philadelphiafed.org/research-and-data/regional-economy/indexes/coincident 18 Federal Reserve Bank of Philadelphia, Leading Index Revised Data, downloaded from: https://www.philadelphiafed.org/ on July 15, 2015 19 Population is growing because of immigration. Net domestic migration is negative in Illinois. U.S. Department of Commerce, U.S. Census Bureau, State-to-State migration flows, Table 1. http://www.census.gov/hhes/migration/data/acs/state-to-state.html 20 United States Bureau of Labor Statistics, Employment status of the civilian non-institutional population 16 years of age and over by region, division, and state and Local Area Employment Statistics. http://www.bls.gov/news.release/srgune.t01.htm

8 

another3,300jobs.Mostjoblosseswereinthreesectors:Manufacturing(2,500jobs),TradeTransportationandUtilities(2,300jobs),andFinancialActivities(1,200jobs).21AveragehourlywagesforallindustriesonaverageremainedrelativelyflatinMay–up16centsperhour—comparedwithApril.Hourlywageratesformostindustrieschangedlessthan$1perhourcomparedwithoneyearago.Industrieswithaveragehourlywagegreaterthan$1perhourinclude:Construction($2.66),PrintingandRelated($1.52),andWholesaleElectronicMarkets($4.20).AveragehoursworkedforallindustriesremainedunchangedinMay,comparedwithApril.Threeindustriesexperiencedachangeinaveragehoursofworkofonehourormore.TheFoodManufacturingindustryincreasedtheaverageworkweekbyonehourwhileMotorVehicleandPartsDealersreducedtheaverageworkweekonehour.WholesaleElectronicMarketsreducedtheaverageworkweekthefurthest,withadeclineof1.2hours.22Table3

                                                            21 Illinois Department of Employment Security, Current Employment Statistics, Monthly Statewide Data (2000-Present) Seasonally Adjusted Report, downloaded from: http://www.ides.illinois.gov/LMI/Pages/CES.aspx on July 15, 2015 22 Illinois Department of Employment Security, Current Employment Statistics, Ave Hrs Worked, Hourly Earnings, Hrs Worked – Hourly Earnings (Monthly 2003 – Current) Downloaded from http://www.ides.illinois.gov/LMI/Pages/CES.aspx on July 15, 2015

52

54

56

58

60

62

64

66

68

Illinois Employment to Population Ratio

Employment as a Percent of Civilian Noninstituional Population (over 16)

Poly. (Employment as a Percent of Civilian Noninstituional Population (over 16))

9 

IndividualIncomeTax(IIT)

IITrevenueendedthefiscalyearat$17,682million,3.8percent($705.7million)belowFY2014but4.1percent($688.9million)aboveIDORfiscalyear2015forecast.TheratedecreaseineffectsinceJanuaryof2015pushedIITrevenuedowninthesecondpartofthefiscalyearcomparedwiththeyearbefore.Ontheotherhand,however,bothwithholdingsandnon‐withholdingsperformedbetterthanexpected,resultinginabetterthanforecastresultfortheyear.IITreceiptswere4.4percentabovetheHR389estimate.

Chart4

Withholdingreceipts(WIT)WITreceiptsendedthefiscalyear7.5percent($1,093.9million)belowfiscalyear2014becausetheindividualincometaxratedecrease,from5.0%to3.75%effectivesinceJanuary1,2015.

Withholdingreceiptsperformedconsiderablybetterthanforecastendingthefiscalyear3.4percent($443.3million)aboveestimate.TheDepartmentofRevenueestimatesthatapproximately52percent($230million)ofthewithholdingsinexcessofforecastareduetoslowadjustmentstothechangeinthetaxrate.Inotherwords,someemployerscontinuetowithholdatthe5percentrateinsteadofthelowerrateafterJanuary1,2015.Thatover‐withholdingamountwillbereflectedinlowerfinalpaymentsand/orhigherrefundsduringtheJanuary2016toApril2016taxfilingseason.Excludingtheover‐withheldamount,the“true”revenueaboveforecastisabout$213.3million.

Non‐withholdingreceipts(non‐WIT)Non‐WITreceiptsendedthefiscalyearat$4,204.5million,10.2percent($388.2million)abovelastfiscalyearanda6.2percent($245.6millions)aboveourforecast.

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$Millions

Fiscalyearandquarter

IITRevenue

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Weexpectedthatthiscomponentwouldnotdeclineproportionatelytotheratedecreasebecausetaxpayerstendtobaseestimatedpaymentsontheprioryearliabilitytomitigatepenaltyrisk.Theunexpectedincreaseislikelyrelatedtocapitalgainsrealizations.Abouthalfofthegrowthofnon‐WITcameviaextensionpayments;therestofthegrowthisalmostevenlysplitbetweenfinalandestimatedpayments.Asinthecaseoftheover‐withholdingamountmentionedabove,thehighFY2015estimatedpaymentsamountwilllikelyhavesomedetrimentalimpactonrevenuenexttaxseason,bydecreasingfinalpaymentsorincreasingrefunddemands.

Payment totals match the Comptroller’s receipts. Withholding and estimated and final payments are derived from IDOR collection data and in-transit fund data. Totals may not equal individual components due to rounding.

Components Year‐to‐Date ($ millions)                                                                                                                                

  Actual  Forecast  $ Difference  % Difference Withholding   $13,477.4  $13,034.2  $443.3  3.4%  Non‐Withholding   $4,204.5  $3,958.9  $245.6  6.2% Total  $17,682.0  $16,993.1  $688.9  4.1%          

  FY2014  FY2015  $ Difference  % Difference Withholding   $14,571.4  $13,477.4  ‐$1,093.9  ‐7.5%  Non‐Withholding   $3,816.3  $4,204.5  $388.2  10.2% Total  $18,387.7  $17,682.0  ‐$705.7  ‐3.8% 

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CorporateIncomeTax(CIT) 

CorporateIncomeTaxreceiptsfinishedfiscalyear2015at$3,129.1billion,adeclineof14.0percentcomparedtofiscalyear2014.Receiptswere0.9percent($29.1million)abovetherevisedforecast.Therearethreereasonsfordecliningcorporateincometaxreceipts:(1) Thecorporateincometaxratefellfrom7.00percentto5.25percentstartingJanuary1,

2015.ThiseffectwasseeninestimatedpaymentsreceivedinAprilandJuneoffiscalyear2015.Thosepaymentscameinslightlyhigherthanexpected,suggestingthatbusinesseshaveadjustedtothelowerrateinapredictablefashionandthatthereisnoneedforarevisionatthistime.

(2) Theexpirationofthe$100,000caponIllinoisNetOperatingLossdeductions(NOLs)hurtreceiptsaswell.ThecapwasliftedfortaxyearsendingonorafterDecember31,2014.

(3) Corporateprofitshavefallentwoconsecutiveyears.Changesincurrentyeartaxreceiptsaregenerallypredictedbychangesinprioryearprofits.

Chart5illustratestheexpecteddeclineingrosstaxreceiptsnextfiscalyear.Chart6belowplotsthechangeinprioryearprofitsnexttothechangeintaxreceiptssince2001.Lastly,Chart7providesagraphicofthedeclineingrosscorporatetaxreceiptseachquarterofFiscalYear2015withthepriorfiscalyear.Chart5

2,800.0 

‐

500.0 

1,000.0 

1,500.0 

2,000.0 

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3,000.0 

3,500.0 

4,000.0 

2000

2001

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2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Gross Receipts, $

 in M

illions

Fiscal Year

Gross (before refunds) Corporate Income Tax Receipts, net of Amnesty FY 2000 ‐ FY 2016

Actual

Forecast

12 

Chart6

Chart7

‐30.0%

‐20.0%

‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Relationship between Corporate Income Tax and Prior Year Profits

CIT Change Profits t‐1

(300.00)

(200.00)

(100.00)

‐

100.00 

200.00 

300.00 

400.00 

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

CIT Receipts ($ in

 millions)

Fiscal Year Quarter

Change in Gross CIT Receipts Year over Year 

13 

Sales&UseTaxFinalstatesalesandusetaxreceiptsforfiscalyear2015were4.6percentabovefiscalyear2014’sreceiptsandjust1.0percentaboveIDOR’sforecast.

Thestoryforstatesalesandusetaxinfiscalyear2015wasoneofstable,reliablegrowth.Indeed,foreveryquarter,thestoryhasbeenthesame—broad‐basedgrowthintaxableconsumption,especiallymotorvehiclesales.Salesandusetaxreceiptsfrommotorfuelsalesdeclinebecauseoflowerprices,buttheassociatedsavingsmakeapositive,offsettingcontributiontoconsumersentimentandspending.Thetableaboveshowsthefinalnumbersforfiscalyear2015.

Thegrowthinstatesalesandusetaxreceiptsforfiscalyear2015isparticularlyimpressivewhenviewedinlightofassociatedpriceinflationofonly0.4percent,whichisthepercentagechangeintheseasonallyadjusted,all‐items‐less‐food,ConsumerPriceIndexforAllUrbanConsumersduringfiscalyear2015.Thismeansthatverylittleoffiscalyear2015’sgrowthwasduetohigherprices.Instead,thegrowthwasdueprimarilytoconsumersbuyingmoretaxableitems.Thisso‐calledrealgrowthisanindicatorofimprovingeconomicconditionsoverthelastfiscalyear,includinggrowthinemploymentandpersonalincome,andastrongerIllinoisrealestatemarket.

ThefactorsbehindIllinois’strongmotorvehiclesaleshavebeendiscussedinpastreports,butitisworthmentioningagainherebecausenotonlydidfinalreceiptsfrommotorvehiclesalesendfiscalyear2015atanall‐timehigh,butfiscalyear2015wasthefifthconsecutiveyearofverystronggrowth.Theaverageannualgrowthinreceiptsfrommotorvehiclesalesfromfiscalyear2011to2015was8.9percent.ThegraphbelowshowsreceiptsfromsalesinIllinoisbyIllinoismotorvehicledealersbacktofiscalyear2000.

Motorvehiclesalesarebeingdrivenprimarilybyconsumers’needtoreplaceagingvehicles(theaveragelightvehicletodayisover11yearsold)andbyrecord‐lowinterestrates,whichlowerthecostofautofinancing.Thefinancerateonconsumerinstallmentloansatcommercialbanks(48‐monthloanforanewautomobile)hashoveredbetween4percentand5percentforthelastfewyears.Theseareamongthelowestratesofthelastfortyyears,duringwhichtimetheaverageratewasnearlydoubleatapproximately9.7percent.

Year‐to‐DateComparisonbyComponent($millions) FY2014 FY2015 $Difference %DifferenceVehicles $1,158.8 $1,271.2 $112.4 9.7% Motorfuel* $782.9 $643.4 -$139.5 -17.8% Allelse $5,733.7 $6,115.7 $382.0 6.7%

$7,675.4 $8,030.2 $354.8 4.6% *Estimated.IDORdoesnothaveactualdataonsales&usetaxfrommotorfuel.

14 

Chart8

PublicUtilitiesTaxes

PublicUtilitiesTaxreceiptsfinishedfiscalyear2015at$1,005million,0.8percentbelowlastyearand0.9percentbelowourrevisedforecastof$1,015million.ElectricityExciseTaxfinishedtheyearlowerthanexpected,TelecommunicationExciseTaxbouncedbackfromartificiallowsoffiscalyear2014butnotashighasexpected,andtheNaturalGasTaxfinishedtheyearhigherthanexpected.TelecommunicationsTelecommunicationExciseTaxreceiptswere$434.2millioninfiscalyear2015,2.8percentabovefiscalyear2014.Telecomtaxwasexpectedtogrowinfiscalyear2015,comparedtofiscalyear2014,duetotheuseof$60millionincreditcarryforwardsin2014.However,thegrowthinfiscal2015waslowerthanexpected.ThebaseforTelecommunicationsExciseTaxhaserodedfasterthanexpected,asconsumersabandonlandlineservicesandgravitatetosmartdevicesandservicesnottaxableundertheTelecomExciseTax.AccordingtotheCentersforDiseaseControl,40.8percentofIllinoisadultslivedinahouseholdthatdidnothavealandlinein2013,anincreasefrom38.0percentin2012.ElectricityTheElectricityExciseTaxcameinat$393.1millioninfiscalyear2015,belowthe$402.5

15 

millionreceivedinthepriorfiscalyear.Themodestdeclineinrevenuesisinlinewiththemodestdeclineinelectricityusestatewide.AccordingtotheEnergyInformationAdministration(EIA),correspondingquarterlyretailsalesofelectricityinIllinoisweredown3.0percentyearoveryearforthemonthsofJanuarythroughMarch.ThiscorrespondstotheoverallElectricitytaxreceiptstotalforfiscalyear2015.ElectricityExciseTaxfellshortofexpectations,comingin$9.4million(2.3percent)belowforecast.

NaturalGasNaturalGasreceiptsfinishedtheyearat$178.2million,downfromthe$188.4millionreceivedinfiscalyear2014.HeatingdegreedaydatafromtheNOAAshoweda3.5‐percentdropyearoveryearforthemonthscorrespondingtofourthquarterreceipts.Thisdecreasetrackswithoverallreceiptperformance.

LiquorTax

LiquortaxreceiptstotheGeneralRevenueFundinfiscalyear2015were1.4percentabovethelastfiscalyearand0.5percentaboveIDOR’sforecast.Year‐to‐dateperformanceisinthetablebelow.Statisticsforfiscalyear2014showthatthetaxableconsumptionofbeerincreased1.2percentcomparedtofiscalyear2013,whilethetaxableconsumptionofwineandspiritswerebasicallyflatat‐0.1percentand0.1percent,respectively.Spiritsmadeupthelargestshareoffiscalyear2014liquortaxreceiptstotheGeneralRevenueFund(54.7percent),followedbybeer(29.9percent)andwine(15.4percent).Apreliminaryconsumptionbreakdownforfiscalyear2015willbeavailableinournextwrittenreport,whichwillbepublishedinOctober2015.

Year‐to‐Date($millions)*IncludesGeneralRevenueFund

Actual IDORForecast

$Difference

%Difference

AllFunds* $283.2 $282.1 $1.1 0.4%

GeneralRevenueFund $166.8 $166.0 $0.8 0.5%

Actual HR389

Forecast$Difference

%Difference

GeneralRevenueFund $166.8 $165.0 $1.8 1.1%

FY2014 FY2015 $Difference %DifferenceAllFunds* $279.6 $283.2 $3.6 1.3%

GeneralRevenueFund $164.5 $166.8 $2.3 1.4%

16 

MotorFuelTaxesCombinedmotorfueltaxreceiptsinfiscalyear2015were0.1percent($0.7million)belowfiscalyear2014and1.5percent($20.0million)belowIDOR’sforecast.Mostofthisforecastdeviation,aswellasthenegativeresultversuslastfiscalyear,wasrelatedtocashflowvolatilityinpaymentsmadeundertheInternationalFuelTaxAgreement(IFTA),whichisanagreementbetweenthelower48statesoftheUnitedStatesandtheCanadianprovincestosimplifythereportingoffuelusebymotorcarriersthatoperateinmorethanonejurisdiction.IFTApaymentsarehandledviaaclearinghousesystemwherebyeachjurisdictionreceivesapaymentreflectingthedifferencebetweenwhatitscarriersowetoallotherjurisdictionsandwhatcarriersfromallotherjurisdictionowetoit.Inotherwords,IFTAreceiptsarethenetpaymentsduetoIllinoisafterbalancingIllinois’saccountwithallothermemberaccounts.ThisapproachcanresultinsignificantannualchangesinIFTAreceiptsascarrierdistributionpatternsormembertaxrateschange.Forexample,Illinois’IFTAreceiptsforfiscalyear2015weredown22.5percentcomparedtofiscalyear2014.Clearly,thislargeofachangeisfargreaterthanwhatonewouldseeifIFTAreceiptsreflectedonlyfueldemandbycarriersoperatingacrossIllinois,asfueldemandchangesverygraduallyovertime.IfweremoveIFTAreceiptsandlookseparatelyatreceiptsfortheregularmotorfueltaxandfortheadditionalleviesoftheUndergroundStorageTankFund,weseeresultsthatmorecloselyreflectactualfueldemandinIllinois.Regularmotorfueltaxreceiptsincreased1.2percentoverfiscalyear2014andwerejust0.3percentbelowIDOR’sforecast.ThetaxesfortheUndergroundStorageTankFundincreased0.3percentinfiscalyear2015andwere1.2percentbelowIDOR’sforecast.TheregularmotorfueltaxappliestofuelusedinmotorvehiclesorwatercraftoperatingonIllinois’publichighwaysorwaterways.ThetaxesfortheUndergroundStorageTankFundhaveaslightlybroaderbase,whichincludesallgasoline,diesel,aviationfuel(unlesssoldatO’HareorMidwayAirports),kerosene,andhomeheatingoilsoldorusedinIllinois.

17 

CigaretteandCigaretteUseTax

Attheendoffiscalyear2015,CigaretteTaxreceiptsfinishednearlyonforecast.Year‐to‐dateCigaretteTaxreceiptsexceededestimatesby0.8percent($6.2million).Comparedtolastyear,receiptsarealmostflatcominginat0.2percent($1.4million)abovethepreviousyear.Mayreceiptsdrovemuchofthemuchoftheunexpectedgrowthinthefourthquarter.Mayreceiptscamein17.0percent($10.0million)overforecast.

Year‐to‐Date ($ millions)                        *Includes the General Revenue Fund   

    Actual 

 Estimate 

 $ Difference 

 % Difference 

All Funds*  $825.2  $819.0  $6.2  0.8% 

General Revenue Fund  $353.4  $355.0  ‐$1.6  ‐0.5% 

   FY 2014  FY 2015  $ Difference  % Difference 

All Funds*  $823.8  $825.2  $1.4  0.2% 

General Revenue Fund  $353.5  $353.4  ‐$0.1  0.0% 

OtherTobaccoProductsTax(OTP)

Attheendoffiscalyear2015,OtherTobaccoProductsTaxreceiptsfinishedtheyearbelowexpectation.Totalyear‐to‐datereceiptsare8.0percent($3.2million)belowforecast.Comparedtofiscalyear2014receiptsshowagrowthof2.2percent($0.8million).Atthispoint,lowerthanexpectedannualgrowthlikelyindicatesthattheIllinoistobaccoproductsmarkethasreturnedtothelong‐termtrendfollowingthetaxchangesthatoccurredin2012and2013.LowerthanexpectedreceiptsinthemonthsofAprilandJuneexplaintheexpansionofthegapbetweenactualreceiptsandforecast.BothJuneandAprilreceiptswereeach14.0percent($0.5million)shortofforecast.

18 

HotelOperator’sOccupationTax(HOOT)

TheHotelOperator’sOccupationTaxendedthefiscalyearwithreceiptsfinishingaboveexpectation.Attheendoftheyear,receiptswere7.0percent($16.7million)aboveforecastfor2015.Comparedwithlastyear,thisquarter’sreceiptsgrew13.0percent($29.5million)yearoveryear.Juneaccountedforaportionofthegrowthaboveforecast.Themonth’stotalcameinat38.2percent($7.6million)aboveforecast.

Thefollowingtwotablesshowaveragedailyroomrate(ADR)andtheoccupancyrate(Occ)statisticsfortheChicagohotelmarket.Bothtablesshowdatabymonthcomparedwithlastyear’slevel.Thisgrowth,particularlyinADR,issignificantandhelpsexplainperformance.Basedonavailableinformation,thiskindofyear‐over‐yeargrowthintheseindicators,andthereforestatereceipts,islikelytocontinueintothefirstquarterof2016withthecontinuedincreaseinactivityrelatingtoconventions,events,andthesummertourismseason.However,giventhatMaypostedADRbelowlastyear’slevelandOccjustaboutheldflatcomparedtolastyear,annualgrowthmaybegintoplateauduring2016.

Chart9

Source:ChooseChicago.MonthlyOccupancyandADRStatistics.23

                                                            23 http://www.choosechicago.com/articles/view/monthly-occupancy-and-adr-statistics/72/

$170.61 

$200.47 

$254.88 

$158.35 

$174.62 

$277.59 

$‐

$50.00 

$100.00 

$150.00 

$200.00 

$250.00 

$300.00 

March April May

ADR by Fiscal Year

FY 2015 FY 2014

19 

Chart10

Source:ChooseChicago.MonthlyOccupancyandADRStatistics.24

Year‐to‐Date ($ millions)                        *Includes the General Revenue Fund   

    Actual 

 Estimate 

 $ Difference 

 % Difference 

All Funds*  $256.7  $240.0  $16.7  7.0% 

General Revenue Fund  $46.1  $39.9  $6.2  15.5% 

   FY 2014  FY 2015  $ Difference  % Difference 

All Funds*  $227.2  $256.7  $29.5  13.0% 

General Revenue Fund  $37.5  $46.1  $8.6  22.9% 

                                                            24 http://www.choosechicago.com/articles/view/monthly-occupancy-and-adr-statistics/72/

71.2%

79.3%

86.0%

68.2%

76.6%

85.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

March April May

Occ by Fiscal Year

FY 2015 FY 2014

20 

EstateTax

EstateTaxGeneralRevenueFunds(GRF)receiptsendedfiscalyear201528.9percent($74.8million)aboveforecast.Whencomparedwithlastyear,GRFreceiptsfinishedyear‐to‐dateup20.5percent($56.8million).ThereceiptsfromMayandJunesignificantlyaddedtotheyear‐endtotal.Maysawreceipts106.2percent($22.9million)aboveforecastwhileJunereceiptstotaled56.0percent($12.0million)aboveforecast.

Year‐to‐Date ($ millions)                        *Includes the General Revenue Fund   

    Actual 

 Estimate 

 $ Difference 

 % Difference 

All Funds*  $354.6  $275.0  $79.6  28.9% 

General Revenue Fund  $333.3  $258.5  $74.8  28.9% 

   FY 2014  FY 2015  $ Difference  % Difference 

All Funds*  $294.1  $354.6  $60.5  20.6% 

General Revenue Fund  $276.5  $333.3  $56.8  20.5% 

21 

RealEstateTransferTax(RETT)

Yeartodatefiscalyear2015fourthquarterRETTreceiptstotaled$66.1million,whichwas10.1percent($6.1million)higherthantheforecastof$60.0million.ThemonthofJunedrovereceiptswithatotalthatwas43.5percent($2.4million)overforecast.ThiswasoffsetsomewhatbyperformanceinMaywhichwas25.2below($1.5million)forecast.MarketFactorsImpactonRETTReceiptsIllinoisHomePrices:AccordingtodatareleasedbytheIllinoisAssociationofRealtors,IllinoisMay2015medianhomepriceshadanincreaseof8.7percentoverMayof2014.HomessoldinMayincreasedby5.6percentwhencomparedwithMay2014.AsRETTreceiptsareafunctionofbothpricesandnumberofsales,anincreaseinpriceandvolumeofsalesoverlastyearhelpsexplainthelevelofreceiptsforthesourceattheendofthequarter.ForeclosureInventory:Corelogic,aprominentindustrydataandanalyticsfirm,definesforeclosureinventoryastheshareofmortgagehomesthathavebeenplacedintheprocessofforeclosurebythelender.TheanalyticsfirmreleasesamonthlyNationalForeclosureReportwhichtracksforeclosureinventoryatthenationalandstatelevel.ThelatestMay2015reportshowsadecreaseintheforeclosureinventoryratesbothatthenationallevelandinIllinois.TheIllinoisratedroppedto1.6percent,andnationally,theratedroppedto1.3percent.25Thisisthefirstdropinthelevelofforeclosedinventoryforboththestateandthenationinfivemonths.Highforeclosureinventoryratescanhaveanegativeimpacton“puremarket”salesespeciallythoseincloseproximitytoaforeclosuresale.Generally,areductionintheforeclosureinventorycanhaveapositiveeffectonmediansaleprice. Chart 11  

                                                            25 National Foreclosure Report. Rep. May 2015. Corelogic, 2015. Web. 16 July. 2015. http://www.corelogic.com/research/foreclosure-report/national-foreclosure-report-february-2015.pdf

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

Aug‐11

Oct‐11

Dec‐11

Feb‐12

Apr‐12

Jun‐12

Aug‐12

Oct‐12

Dec‐12

Feb‐13

Apr‐13

Jun‐13

Aug‐13

Oct‐13

Dec‐13

Feb‐14

Apr‐14

Jun‐14

Aug‐14

Oct‐14

Dec‐14

Feb‐15

Apr‐15

Source: CoreLogic

Foreclosure Inventory

National Illinois

22 

 NegativeEquityShare:Corelogic,inits2015firstquarterequityreport,showedthatIllinois’negativeequityrateincreasedto16.8percent,6.6percentagepointshigherthanthenationalrateof10.2percent.26Illinoisremainsoneofthirteenstateswithahighernegativeequitysharethanthenationalaverage.Thisrelativelyhighratecontinuestobeacontributingfactorinthecurrenttightinventoryofhomesavailableonthemarket.Chart12

                                                            26 Equity Report. Rep. First Quarter 2015. CoreLogic, 2015. Web. 16 July. 2015. http://www.corelogic.com/about-us/researchtrends/equity-report.aspx#

10.0%

15.0%

20.0%

25.0%

30.0%

Source: CoreLogic

Negative Equity Share

National Illinois

23 

ComparisonwithLastFiscalYearandIDORForecast

24 

U.S.andIllinoisEmployment

25 

IllinoisDepartmentofRevenueResearchDepartment

HansZigmund,M.A.DirectorofResearch

AndyChupick,M.P.A.

TaxEconomist

MichaelPijan,M.P.A.TaxEconomist

HectorVielma,Ph.D.Macroeconomist