Illinois' State Budget Troubles
3/3/26
We have work to do on Illinois’ state budget between now and May 31. Bottom line: the state's projected revenues will not fill the holes created by federal cuts and changes to the SNAP and Medicaid programs in coming years.
Additional pressure from ongoing state pension obligations and inflation make paying for good schools, health care, public safety, and social services, even at reduced or flat-funded levels, difficult without new revenue sources this year. For the people served by health and human services providers, the proposed flat state funding, rising operating costs, and continuing cuts from the federal government could strain services throughout the state. Mental health, afterschool, housing, substance abuse treatment, Medicaid, food security, early childhood, and other needs may go unmet, according to advocates.
Governor Pritzker presented his proposed budget on February 18, and now the General Assembly will hammer out the final budget by May 31. Proposed total expenditures are $56 billion, an increase of $878 million, or just 1.6% from the current year. Most of the increase is in pension costs, medical costs, and education.
The proposed budget suggests measures to reduce spending and increase income, which may or may not be agreed to by the legislature: a social media platform fee (much like what Chicago just implemented), a pause on the data center tax credit, a change to the Net Operating Loss Deduction, an increase to the tax on gaming table revenues for 15 of the state's 16 casinos, and a reduction in the share of income taxes sent to municipalities through Local Government Distributive Fund from 6.47% to 6.23%.
The League's position is to support a diversified revenue system which principally relies on a combination of broad-based taxes and user fees, is equitable, progressive, stable, responsive, and simple. We support the Responsible Budget Coalition's goals of adequate revenues to support vital services and programs, fairly raised.
There are several bills now pending in the Illinois House and Senate to raise additional amounts in addition to Pritzker's proposals: a wealth tax, a digital ad tax, corporate tax changes. Will this be the year they finally decide to move to restructure the tax system to add fairness, starting with a constitutional amendment to remove the flat tax requirement?
Our voices will help steer the outcome.