Date: August 4, 2010
Time: 11:00 a.m.
Place: Room 16-503 James R. Thompson Center, Chicago, IL
Topic: Northeastern IL University $6.5 million in Certificates of Participation

AUDIO is available under Meeting Information / Meeting Agenda and Audio

ECONOMY: Losing Steam
Edward H. Boss, Jr., Chief Economist

The regular annual revisions to the national income and product accounts released every July reveal not only that the past recession was more severe than originally reported, but also that the recovery in the past year has been weaker than expected following such a severe recession and losing steam.

After a relatively healthy growth rate of 5.0% in the second quarter of FY 2010, growth slowed an annual rate of 3.7% in the third quarter, and only a meager 1.6% rate in the final quarter. Moreover, the latest estimate of GDP last quarter was lowered from a preliminary estimate of 2.4%. As monthly economic data become available for the current quarter, evidence suggests this weakening trend has continued.

While chances still favor that a double-digit recession can be avoided, the odds of avoiding one are decreasing. More likely is that the current recovery will continue, but be weak and well below that which normally occurred following severe recessions. This would lead to a prolonged period of high unemployment, which in turn will limit revenue flows into government, particularly at the state and local level.

REVENUE: August Revenues Mixed – Decline in Federal Sources Erase Other Gains
Jim Muschinske, Revenue Manager

August revenues finished down $38 million as a comparatively weak month for federal sources more than offset modest gains from State tax sources and revenues from interfund borrowing. August had one more receipting day compared to the same month last year.

Excluding short-term borrowing, base general funds revenues are up $67 million through August. Absent the interfund borrowing that took place in August, revenues would be virtually flat over the same period last year.