Commission on Government Forecasting and Accountability
HOUSE
Jil Tracy, Co-Chair
SENATE
Michael Frerichs, Co-Chair
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Meeting Notice
DATE: Wednesday, November 19, 2014
TIME: 11:00 a.m.
LOCATION: Room 212, Illinois State Capitol, Springfield, IL
TOPIC: To review and vote on a Certificates of Participation request from the University of Illinois
October 2014 Monthly Briefing
ECONOMY: HOUSING RESTRAINS GROWTH
Edward H. Boss Jr., Chief Economist

The economy grew at a 3.5% annual rate for the third quarter, down from the previous quarter's 4.6% rate and a contraction of 2.1% in the first quarter. For the year, the economy has been rising at a 2.0% rate, continuing in the 2% to 2.5% range of the previous four years. Somewhat surprising was that within the spending categories, the gains in consumer spending and residential construction slowed while government spending rose sharply.

A turnaround in housing has been a major contributor to the recovery. By mid-2013 median home prices had fully recovered from the sharp declines during the housing collapse, exceeding the previous high. Even so, the perception that housing prices always rise and, therefore, was a sure bet as a good investment has been shattered.

Even as the rise in home prices have stabilized while mortgage interest rates remain at historic lows, stagnant incomes and high unemployment have reduced housing affordability.
While home ownership had been considered part of the American Dream, changing attitudes as to its role as an investment, increased mobility of people, and demographic and economic changes seem to have altered its role.

With the removal of the Federal Reserve's program of Quantitative Easing and its purchases of mortgage-backed securities, some stability in home prices, and slow household formation, the increase in the housing sector, while continuing to rise, is likely to be restrained. It will take faster economic growth on a sustained basis and gains in income to improve significantly.

REVENUE: MONTHLY REVENUES MIXED AGAIN AS WEAKER FEDERAL SOURCES OFFSET GAINS ELSEWHERE
Jim Muschinske, Revenue Manager

Overall base revenues declined $24 million in October. Despite another good month for personal income and sales taxes, continued weakness in federal sources as well as corporate income taxes more than offset the positives.
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Through the first one-third of the fiscal year, overall base revenues were down $398 million. However, much of that decline was expected and was due to the much lower Refund Fund transfer into GRF. In addition, weaker federal sources to begin the year have significantly contributed to the fall off. The economically related sources were mixed as both personal income taxes and sales performed well while corporate income taxes weakened.
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