What Policymakers Should Know About the Fiscal Impact of COVID-19 on Illinois

The COVID-19 pandemic has caused upheaval in the U.S. economy but there is great uncertainty about the depth and duration of the disruption. This report forecasts that tax revenue will plummet. The size of the revenue loss depends on the severity and length of the pandemic and economic disruptions. The COVID-19 pandemic will increase the need for state expenditures to protect vulnerable populations from the health and economic consequences. The biggest impact will likely be in Medicaid expenditures. Illinois’ five state pension systems’ finances are likely to significantly deteriorate, based on Illinois’ experience in the 2007-09 recession. Municipal governments will also be hit hard by the COVID-19 pandemic and are likely to experience shortfalls in both local tax collections and unrestricted state aid. To date, federal legislative efforts in response to the COVID-19 pandemic have been massive but are unlikely to fully insulate Illinois from the fiscal damage.