A new report says Illinois state government is at “elevated risk” in the event of an economic downturn.
Ten years after the global financial meltdown that would become known as the Great Recession, S&P Global has performed a “ stress test” ($) on all 50 state governments.
Three factors were analyzed:
1) How sensitive are tax collections to a recession?
2) How high are fixed costs, like pensions, health care for retirees, and debt service?
3) How much money has the state budgeted for reserves?
S&P’s Gabriel Petek says Illinois is in the middle of the road when it comes to tax sensitivity, primarily because of its flat income tax.
Other states are more susceptible to economic forces like the stock market and energy prices. California's Silicon Valley millionaires keep the state comfortably in the black during bull markets, but can lead to significant deficits during recessions. In Alaska, the price of oil makes or breaks the state budget.
But on the other two factors, S&P says Illinois is at higher risk.