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Illinois Has Extra Money?!
Today, Gov. Pat Quinn announced the state has extra money--$1.3 billion extra, to be exact. Quinn estimates the state will have a one-time bump in tax revenue for fiscal year 2013.
This sizable bump in state income tax will come from what boils down to strategy. Investors and businesses shifted around assets and bonuses to avoid higher federal tax rates that took effect in 2013.
Quinn said the extra money will go towards paying the state's multibillion-dollar debt, but officials will not be raising projected tax revenues based on this recent tax growth. Financial experts said this quick boost could lead to less tax revenue in the coming months.
"I'm suspecting there will be somewhat less capital
gains--and that's a significant source of this--over the next three quarters
over what we normally do," Craig Schermerhorn with Benjamin F. Edwards
& Co said. "We'll probably end up ahead, but not $1.3 billion
ahead would be my guess."
Schermerhorn estimated the state’s debt sits at $5 billion to $6 billion not counting Medicaid, and about $9 billion including Medicaid expenses. That means a $1.3 billion payment would cut that $9 billion debt by about 14.5 percent.
Quinn said even though this looks like good news for Illinois, the state still needs to focus on pension reform.