Executive Summary Fiscal Year 2002 First Quarter

              Executive Summary
Fiscal Year 2002
First Quarter
Economic Outlook
The U.S. economy grew 2.7 percent in state fiscal year 2001, completing a ten-year
expansion, the longest in U.S. history. In January 2001, forecasters were calling for real
growth in U.S. Gross Domestic Product of 3.0 percent in fiscal year 2002, but by summer
the GDP forecast had fallen to 1.6 percent. Following the destructive terrorist acts of
September 11, 2001, the U.S. economic landscape was dramatically altered, and DRI-WEFA
now projects the economy to grow at an anemic 0.4 percent in fiscal year 2002.
National unemployment rates were near historic lows of 4.1 percent in fiscal year 2000 and
4.2 percent in fiscal year 2001. DRI-WEFA estimates this rate to rise significantly to
5.5 percent in fiscal year 2002.
The Illinois economy is also struggling to grow. Gross state product increased 2.0 percent
in fiscal year 2001, and DRI-WEFA estimates gross state product will grow only 0.2
percent this fiscal year. Illinois experienced unemployment of 4.8 percent in fiscal year
2001. Unemployment is projected by DRI-WEFA to increase to 6.1 percent in fiscal year
2002.
Financial Performance
In July, the Bureau of the Budget estimated fiscal year 2002 revenues would total $25,000
million and expenditures would total $25,126 million, leaving a general funds balance of
$1,000 million on June 30, 2002. In addition, the state would have a $230 million budget
stabilization balance. Together, the general funds and budget stabilization balances were
expected to total $1,230 million on June 30, 2002.
Actual revenues in the first quarter of fiscal year 2002 were $416 million less than
estimated in July. About $175 million of this revenue shortfall can be attributed to timing
variances of federal revenues and other state tax revenues. Nonetheless, improved
economic conditions are not expected soon, and revenues for fiscal year 2002 have been
revised downward $350 million. State source revenues are expected to be $450 million
less than previously estimated, while federal aid is expected to be $100 million higher than
estimated in July.
The revised revenue forecast has created a modest imbalance in the state’s financial plan. In
order to address the imbalance, the Governor issued an Administrative Order in September
that limited and restricted hiring, equipment and data processing purchases, and intra-agency
fund transfers. These actions are expected to reduce general funds spending by $50