Every month, the University of Illinois Flash Index analyzes Illinois tax receipts to provide a quick measurement of the Illinois economy. But the disruption caused by the coronavirus outbreak is making that impossible for now.
Professor emeritus in economics Fred Giertz produces the Flash Index for the University of Illinois Institute of Government and Public Affairs. He says because of the business slowdown under coronavirus stay-at-home orders, Illinois officials are giving many businesses six extra weeks to turn in sales taxes. And the deadline for filing state income taxes has been put off until mid-July. Giertz says that leaves a big gap in the tax data he needs for the March Flash Index.
“Everyone knows it was a tremendous downturn,” said Giertz. “The downtown’s going to continue into April. But it was just impossible to calculate using the methodology of the Flash Index.”
Giertz says he hopes to resume Flash Index reports at the end of May, but predicts the report will still be based on incomplete information. That’s because the extra final payment many taxpayers usually make on their income taxes in April will be delayed this year until July.
Giertz plans go back later and complete the March and April Flash Index reports retroactively. But he says that will require him to pass judgment on which tax revenue that comes to the state later in the year can be assigned to earlier months when they might have originally been collected.
“So it’s a very, very subjective kind of process,” said Giertz, “but at least it will give us a way to continue the index into the future.”
Even with full information, Giertz expects Illinois’ tax receipts from March onward to show a sharp economic downtown, compared to the growing economy reported in the February Flash Index.
The February Flash Index measured the state’s economy at 105.7, the highest number since the November 2015 ranking of 106.1. Any Flash Index number above 100 represents economic growth, while numbers below 100 indicate economic contraction. The Flash Index has been above 100 since March of 2012. But Giertz says he expects that when he’s able to analyze the data again, it will show the Flash Index falling well below 100.
“We have this suggestion, which is probably a correct impression, that the economy really has come to a, not a grinding halt, but a great slowdown,” said Giertz.
The economic impact of the coronavirus pandemic is unprecedented, in Giertz’ opinion. He says previous flu pandemics in 1918 and 1957 caused millions of deaths, but the economy “hardly even noticed.” But Giertz says the coronavirus outbreak is having a more serious impact on the economy, because of the efforts governments around the world are taking to keep people at home to prevent the virus’ spread.
“This is going to be quite different because of the kind of proactive kinds of responses taken by the government, to actually shutting things down,” said Giertz. “So it’s going to probably have a strong positive factor in reducing the number of people who succumbed to the flu, but it’s going to have a very detrimental effect on the economy.”
Overall, Giertz is optimistic that, once the pandemic has passed, the economy will recover — although he says he can’t predict how quickly, due to undetermined factors like how quickly governments allow businesses to resume their activities, and what sort of buying decisions are made by consumers, once a return to work restores income streams.
“We’re going to have lots of lost activity that will never be recovered,” said Giertz. “But once they start up again, I think the economy will pick up fairly well.”