November 19, 2008 Meeting Notice
Date: Wednesday, November 19, 2008
Time: 2:00 p.m. or immediately following session
Place: CDB Conference Room, 349 Stratton Building
Purpose: Economic update & FY 2009 Revenue Estimate
October 2008 Monthly Revenue Briefing
ECONOMY: RECESSION
Edward H. Boss, Jr., Chief Economist
There can be little doubt that the U.S. economy is in recession.
Most economists suggest the recession began either at the end of last year or early in 2008. At the same time, it seems likely that given the severity of the financial crises, the recession will be more on the order of that seen in 1973 and 1981, which lasted 16 months, rather than the past two that were brief 8 month declines. Moreover even when a trough, or bottom, of the recession is reached, no rapid rebound is anticipated.
REVENUE: OCTOBER REVENUES FALL DUE TO FEDERAL SOURCES AND TRANSFERS, WEAKNESS GROWS
Jim Muschinske, Revenue Manager
October revenues fell $369 million as lower reimbursable spending caused federal sources to drop $239 million. A lower month for transfers also contributed to the monthly retreat. October had the same number of receipting days as last year.
Through the first third of FY 2009, overall base revenues are down $406 million. The majority of the decline is attributed to $296 million less from federal sources, as well as $99 million less from transfers. Again, and to reiterate previous monthly briefings, a number of items will serve to restrict revenue growth in FY 2009 [i.e. increased refund percentage, lower miscellaneous transfers, reduced Cook County IGT, less from riverboat transfers, returns from interest income, no expected growth from federal sources]. Those items, when combined with an economy now in recession, will cause already difficult budgetary pressures to build.
The most closely related economic sources continue their subdued performance. As shown in the following table, rates of growth are very close to those forecast at the end of the spring session. Unfortunately, worsening economic conditions suggest that even these modest rates of growth will be unable to be maintained over the remainder of the fiscal year.