Downstate Illinois Municipalities
Finally Catch the 1991 Recession

By JOHN B. CRIHFIELD and KYEONG-SOO JEONG

Through 1990 the national recession had not yet been seen in downstate Illinois. We have now analyzed 1991 retail sales tax data, which were released in April by the Illinois Department of Revenue. These data are available for 1290 Illinois towns and cities and provide a detailed picture of local economies throughout the state. These data are among the most recent available for describing economic conditions in municipalities in Illinois.

Compared to 1990 levels, local economies worsened everywhere in the state in 1991. Table 1 shows that "real" retail expenditures fell 6.4 percent in the state overall, following a real decline of 2.2 percent the previous year. ("Real" dollars are dollar figures adjusted for inflation. All values in this report are in constant 1991dollars.) The largest decline was in central Illinois (-7.8 percent), closely followed by northern Illinois (-6.4 percent). Real sales fell 3.9 percent in southern Illinois. For the earlier period (1989-1990) real sales rose in central and southern Illinois (1.0 percent and .3 percent), and fell by -3.0 percent in northern Illinois.

Table 1. Retail Expenditures by Region of the State
Region of state	Number of towns	Total retail expenditures in 1990 (millions of 1991 $)	Total retail expenditures in 1991 (millions of 1991 $)	Percent change, 1990-1991
Illinois	1,290	82,977.0	77,689.2	-6.4
North	555	64,356.2	60,225.2	-6.4
Central	373	11,151.2	10,286.2	-7.8
South	362	7,469.6	7,177.7	-3.9

Note: Regions of the state are based on Illinois Cooperative Extension Service (CES) regions. "North" is defined as CES regions 1, 2, and 3, and ranges from Jo Daviess and Lake counties (north) to Henderson and Kankakee counties (south). "Central" is defined as CES regions 4 and 5, and ranges from Hancock and Iroquois counties (north) to Pike and dark counties (south). "South" is defined as CES regions 6 and 7, and ranges from Calhoun and Crawtord counties (north) to Alexander and Massac counties (south).

Table 2. Retail Expenditures by County Type or Economic Base
County type or economic base	Number of towns	Total retail expenditures in 1990 (millions of 1991 $)	Total retail expenditures in 1991 (millions of 1991 $)	Percent change, 1990-1991
Cook	128	34,744.9	37,658.5	-7.7
Collar	173	18,259.6	19,090.0	-4.3
Downstate metropolitan	259	14,291.6	15,364.2	-7.0
Rural manufacturing	225	5,339.3	5,601.4	-4.7
Rural agricultural	240	1,585.0	1,689.1	-6.2
Rural diversified	265	3,468.9	3,573.9	-2.9

Note: "Collar counties" include DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will counties. "Downstate metropolitan" counties include all other metropolitan counties in Illinois as defined by the federal government (18 counties). "Rural agricultural" counties include all rural counties in which employment in farming and agricultural services represents 15 percent or more of total county employment in 1986 (29 counties). "Rural manufacturing" counties include all rural counties in which manufacturing employment represents 15 percent or more of total county employment in 1986 (21 counties). "Rural diversified" counties include all other counties, several of which have employment shares of 15 percent or more in both agriculture and manufacturing (26 counties).

Figures in Table 2 show more clearly the uneven effects of the recession across the state. Hardest hit were Cook County (-7.7 percent) and downstate metropolitan counties (-7.0 percent). Rural diversified counties experienced the smallest decline (-2.9 percent). In comparison, for the earlier period (1989-1990) the collar counties around Chicago felt the recession more sharply than elsewhere, and it appears that the worst of the recession is now behind them. Although they also feel the recession, rural diversified counties continue to outperform other areas. Their relatively small decline of -2.9 percent this period, following positive growth of 1.8 percent the previous period, led all county groups for the past two periods.

Table 3 indicates that the largest declines were in small towns (5000 people or fewer) and in large towns and cities (20,000 people or more). Relatively small declines are seen for large towns and small cities with

July 1992 / Illinois Municipal Review / Page 9

Table 3. Retail Expenditures by Town Size
Town size	Number of towns	Total retail expenditures in 1990 (milions of 1991 $)	Total retail expenditures in 1991 (millions of 1991$)	Percent change, 1990-1991	Median percent change 1990-1991
0-250	119	25.5	22.0	-13.9	-2.7
251-500	217	207.6	186.1	-10.3	-9.2
501-2,500	513	4,193.2	3,904.3	-6.9	-5.5
2,501-5,000	125	3,786.9	3,608.7	-4.7	-4.3
5,001-10,000	105	8,106.7	7,876.0	-2.8	-4.6
10,001-15,000	54	7,217.7	7,179.1	-0.5	-2.9
15,001-20,000	41	6,186.3	5,955.3	-3.7	-3.4
20,001-25,000	23	4,885.3	4,532.1	-7.2	-4.6
25,001-50,000	51	16,969.8	15,505.9	-8.6	-5.3
50,001-100,000	21	12,632.6	11,935.7	-5.5	-5.7
100,001+	4	18,361.8	16,578.7	-9.7	-8.4

Note: "Median percent change" refers to the 50th percentile growth rate for each size category. Fifty percent of the towns have growth rates lower than this, and fifty percent have higher growth rates.

populations between 5000 and 20,000, continuing a trend from the previous period.

Inflation-adjusted sales declined in all seven of the commodity categories that we track. Sales of nondurable items (e.g., groceries, restaurant meals, and general merchandise) fell less than durable items (e.g., automobiles, construction material, and household furniture). It is noteworthy that except for sales associated with big-ticket items (e.g., automobiles and construction materials for new homes and businesses), sales in large towns and small cities (roughly, 2500 to 20,000 people) actually grew despite the recession, suggesting that these places are taking market share from very small towns and large cities. There was evidence of this as well in the earlier period (1989-1990).

Conclusions

Several conclusions are apparent from these recent sales data:

(1) The national recession, which began in the third quarter of 1990 and afflicted first Chicago and its collar counties, has spread throughout the state. During calendar year 1991, the recession's impacts were largest in Chicago and in downstate metropolitan areas, while its grip on the collar counties is loosening. Southern Illinois and rural diversified counties continue to experience smaller declines than other parts of the state.

(2) Inflation-adjusted sales have now declined for three consecutive years in Illinois (-.9 percent from 1988-89, -2.2 percent from 1989-90, and -6.4 percent from 1990-91). The most recent forecast (Spring 1992) of the Illinois Econometric Model maintained at the University of Illinois is for mild growth in real personal income in 1992 (3.8 percent) and real gross state product (2.5 percent), and vigorous growth in real retail sales (7.1 percent). If this turnabout occurs, we expect the most rapid gains to occur in Chicago, its collar counties, and in downstate metropolitan areas — places hit the hardest by the recession, but also likely to rebound the most in a recovery. Rural areas, which were last to feel the recession, may rebound the least in the current expansion, which seems to be underway.

(3) Local governments throughout Illinois should see modest improvement in their sales tax base and a firming in their property tax base as the recovery proceeds. Stability in property tax revenue is particularly important to counties and townships, which receive, on average, about 30 and 65 percent, respectively, of their revenues from this source. Municipalities have a more diversified revenue base and will benefit directly from improvements in both real estate and retail sales. All local jurisdictions also gain indirectly as the state's economy prospers, since the state will have more resources to transfer to local governments. A growing economy will be good news to local governments for another reason. The Governor has proposed eliminating the Income Tax Surcharge Local Government Distributive Fund (monies from state income taxes) one year earlier than the current expiration date of June 1993. Stronger local economies can help make up for this current source of local revenue. •

Page 10 / Illinois Municipal Review / July 1992