Out-migration is breaking Illinois budgets

Twenty years of flight have wreaked havoc on state and local budgets, causing an estimated $7.6 billion in tax-revenue losses annually. Any long-term fix to Illinois’ budget crisis must address the state’s out-migration crisis.

Illinois has lost nearly 1.4 million residents on net over the last 20 years. This out-migration crisis comes with an estimated cost to government of nearly $8 billion annually.

Two data sets paint a picture of how this out-migration crisis is breaking state and local budgets.

The first comes from the Internal Revenue Service, which compiles taxpayer filings that show when taxpayers move from one state to another, and how much income they take with them when they leave. The IRS data put a firm number on the net loss of wealth and talent from Illinois.

In every year from 1995-2010, Illinois lost more taxpayers and adjusted gross income, or AGI, than it gained. In addition, the average taxpayer who left Illinois earned about $8,700 more per year than the average taxpayer who entered Illinois.

Illinois’ net loss of $35.3 billion in annual adjusted gross income from 1995-2010 resulted in a budget-busting loss of $5.9 billion in annual tax revenue for state and local governments. Over the 16 years from 1995-2010, the cumulative loss of tax revenue was nearly $52 billion dollars. This tax revenue loss is divided approximately equally between the state and local levels.

The IRS has since delayed releasing additional data in a move that smells like politics. In general, the migratory data show red states as destination states and blue states, such as Illinois, New York and California, as major exporters of wealth and talent.

However, using a second set of relevant data, which comes from the U.S. Census Bureau and is largely based on IRS data, one can estimate how out-migration since 2010 has affected Illinois budgets. Census data use IRS migration information as an input, and also include broader measures that capture migrants who don’t pay taxes, such as students.

On average, IRS out-migration numbers are 81 percent of the broader census measurement. Under that assumption, Illinois lost nearly 250,000 taxpayers plus dependents from 2011 to 2014.

The estimated loss of AGI and tax revenue from 2011-2014 is $10.3 billion in annual income, along with $1.7 billion in state and local tax revenues.

Over the last 20 years, Illinois has lost 1.36 million people to other states on net, according to the U.S. Census Bureau. That is equivalent to 1.1 million IRS taxpayers plus dependents, and $45.6 billion in annual AGI.

Due to the last 20 years of flight, the annual tax-revenue loss to state and local governments is a stunning $7.6 billion.

Any long-term fix to Illinois’ budget crisis must address the state’s out-migration crisis. In order to have sustainable budgets, Illinois needs a plan to stop chasing taxpayers away. Given that the No. 1 reason people leave Illinois is for job and business opportunities, a sustainable plan for moving forward must include economic reforms that foster entrepreneurs, encourage business and manufacturing expansion, and allow for local solutions.