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

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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

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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

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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))

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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

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$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 

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2000

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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

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Chart6

Chart7

‐30.0%

‐20.0%

‐10.0%

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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)

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(100.00)

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200.00 

300.00 

400.00 

Q1 2013

Q2 2013

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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.

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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