Declining Fuel Tax and Gambling Revenues Could Threaten Illinois Infrastructure Projects
La Grange: By causing significant reductions to commuter travel and the closure of gaming operations, the COVID-19 pandemic has created significant new challenges for state and local governments—and especially for the six-year, $45 billion infrastructure modernization plan Illinois passed last year, according to a new report from the Illinois Economic Policy Institute (ILEPI).
Read the Report: COVID-19 and Transportation Funding in Illinois
“The downstream effects of the COVID-19 economic disruption will extend far beyond the immediate hardships for businesses who have closed their doors and employees who have been laid off,” said ILEPI Policy Director and study co-author Frank Manzo IV. “Vital public services and planned infrastructure investments by both states and municipalities are being threatened by the loss of income, corporate, sales, fuel, and other tax revenues on which they rely.”
Researchers at the University of Illinois have already predicted that COVID-19 related tax revenue losses could cost the state $4.3 billion between 2020 and 2021 and as much as $28 billion by 2023.
One program reviewed by ILEPI researchers that could be especially hard hit is Rebuild Illinois—a historic, bipartisan infrastructure plan that was signed into law in June of 2019. The six-year, $45 billion program was developed to address decades-long maintenance and modernization backlogs to the state’s roads, bridges, transit systems, schools, water, and broadband systems. Revenues from motor fuel taxes (MFT) and an expansion of gaming operations represented the single largest new revenue sources for the program. Yet since the state’s efforts to contain the spread of COVID-19 went into effect, road travel is down as much as 46%, gaming businesses have been shut down since mid-March, and reported ridership on public transit systems has declined as much as 90% since January.
“As part of the Rebuild Illinois plan, annual revenues from the state’s motor fuel tax (MFT) were expected to increase from $1.3 billion to nearly $2.6 billion,” said study-co-author and ILEPI transportation analyst Mary Tyler. “After applying the Chicago Metropolitan Agency for Planning’s (CMAP) estimates on pandemic related travel disruptions to three scenarios, with travel disruptions lasting from 6 to 10 months, we found that the state could under-perform expectations on MFT revenue by $300 million to $560 million in 2020 alone.”
While Congress is expected to consider measures to provide additional support to first responders and others impacted by strained state and local budgets, researchers note that, in Illinois, there are both public safety and economic factors that should inform an infrastructure component to these discussions.
For example, recent research has found that Chicago’s “state of good repair” transit backlog was nearing $20 billion, 20% of IDOT roadways were considered to be in “poor condition,” and more than one-third of the state’s bridges were either structurally deficient or had exceeded their design life. Years-long unsustainable funding sources led to these issues, resulting in a $4.6 billion annual shortfall in transportation funding prior to Rebuild Illinois, contributing to even more extensive maintenance, roadway safety, and congestion-addressing needs.
ILEPI researchers found that emergency federal support to state transportation agencies could offer an especially high return on investment, generating $1.57 for every dollar spent nationally, and anywhere from $1.74 to $3.52 for every dollar invested in the State of Illinois.
“The historic infrastructure investment—which was planned for Illinois before COVID-19—was vital to the safety of the traveling public, but also to the economic future of our state,” added study co-author Jill Gigstad. “The data shows that, after COVID-19, it will be even more important because these investments will not only generate tens of thousands of jobs, but billions of dollars in consumer spending—a game-changing economic multiplier we will need to drive an expeditious recovery across all sectors.”
The Illinois Economic Policy Institute (ILEPI) is a nonprofit organization which uses advanced statistics and the latest forecasting models to promote thoughtful economic growth for businesses and working families in Illinois, the Midwest, and the United States.