Fewer Illinois Taxpayers Expected to Stress State’s Finances

Illinois’ shrinking population could eventually lead to weakened economic prospects, a new study suggests. 

According to Pew Charitable Trusts, a third of all states lost population in 2021. Among the 17 states where population declined over the year, losses were greatest in New York (-1.58%) and Illinois (-0.89%).  

The pace of population growth nationally was five times slower in 2021 than over the preceding 10-year period. Population in 17 states declined last year, including Illinois, Mississippi, and West Virginia, the same three states that lost residents during the 2010-20 decade.

Pew researcher Joanna Biernacka-Lievestro said a shrinking or slow-growing populace can be both a cause and effect of weakened economic prospects.

The report noted the states with long-term population declines, like Illinois, all fell near the bottom of economic growth over the 12-year recovery from the Great Recession.

“More residents usually means more workers and consumers adding to economic activity as they take jobs and buy goods and services, which in turn, generates more tax revenue. The reverse is usually true for states with shrinking populaces,” according to the report.

In Illinois, most of the people leaving the state have been downstate residents. But while Chicago and the suburbs have seen smaller population declines, it still ranks 46th out of the country’s 50 largest metropolitan areas for growth.

Last year, Gov. J.B. Pritzker blamed the population loss on unaffordable college tuition.

“I looked very closely at the numbers of people, who they are, where they come from, why they’re leaving, and what you see when you look at the out-migration is, actually, the largest portion of the population that was moving out were young people who were choosing to go to college out of state because they couldn’t afford to go to college in Illinois,” said Pritzker.

Even with fewer people, Illinois’ annual budget that begins July 1 spends the most in state history and increases higher education spending to $2.2 billion from $1.9 billion in the current fiscal year. 

Biernacka-Lievestro adds that once federal pandemic dollars dry up, Illinois could be facing fiscal challenges.

“Fewer people can generally lead to less economic activity and shrinking tax bases and that can, in turn, limit state revenue collections,” said Biernacka-Lievestro. 

The report adds that state government plays a pivotal role on whether a state’s finances can go south.

“Population is just one factor underpinning the state’s finances, which also are shaped by policy decisions on tax collections and spending as well as factors outside a state’s borders and lawmakers’ control, such as commodity prices,” the report said.

The South and West were home to the fastest growing states. In 2021 alone, Idaho grew by barely 3%, adding 53,000 people, and Utah’s population increased by 1.72%.  

***Report Courtesy of the Illinois Radio Network***

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