SPRINGFIELD — An improved revenue forecast is helping ease pressure on state finances as Gov. JB Pritzker calls for tightened spending to balance the budget without tax increases on everyday Illinoisans.
During his annual state of the state and budget address on Wednesday, Pritzker called for a roughly 3% spending increase to $55.2 billion in fiscal year 2026 that will be supported by a similar increase in state revenue to $55.5 billion.
The plan factors in a better-than-expected economic outlook for the coming fiscal year after the governor’s office originally projected a multi-billion-dollar shortfall in November. Pritzker also proposed a significant spending reduction compared to the November estimate while still increasing spending over current-year levels.
But administration officials also warned that the state is in large part at the whim of President Donald Trump’s onslaught of federal policy changes.
The governor’s plan assumes a $173 million increase in federal funding, though Pritzker named several enacted or feared Trump policies that could alter estimates, including tariffs, food safety deregulation and potential health care cuts.
“Let me be clear, this is going to affect your daily lives,” Pritzker said, citing the efforts of Trump advisor Elon Musk via the federal Department of Government Efficiency. “Our state budget can’t make up for the damage that is done to people across our state.”
The governor called his proposal “responsible and balanced,” pointing out that it doesn’t raise taxes on Illinoisans, though he did propose a tax hike on certain casino profits.
“If there’s one thing I’ve learned as governor, there are no magic bean fixes,” Pritzker said. “And each year there’s some difficulty that requires us to work hard to overcome it.”
Read more: Pritzker must address multi-billion-dollar deficit amid federal funding uncertainty
Part of the spending plan includes significant changes to immigrant health care programs, including eliminating a program for low-income noncitizens living in the U.S. without legal permission between ages 42 and 64.
Ultimately, lawmakers and the governor will have to come to an agreement on a spending plan by the end of May. But the governor’s opening salvo could meet opposition from Democratic lawmakers in the General Assembly – especially members of the Illinois Legislative Latino Caucus – due to what it doesn’t fund.
“All of us have been hearing that it was going to be a tough budget year. I think that we expected there to be some things in the budget that we weren’t going to be happy with,” Sen. Karina Villa, of West Chicago, said. “But I think completely removing a program is not anything that we were expecting.”
Tightened spending
Despite the roughly 3% spending increase, most areas of the state budget would see little growth under Pritzker’s plan. About 75% of the spending increase comes from increased funding for education, pensions and growing health care costs.
Outside those areas, spending is up just 1% across the board.
The most notable spending change is the elimination of the Health Benefits for Immigrant Adults program that provides Medicaid-style benefits to certain low-income noncitizens ages 42 to 64. Pritzker proposed leaving the Health Benefits for Immigrant Seniors program intact to serve certain low-income noncitizens age 65 and older, which will cost the state $132 million.
The programs unexpectedly stretched the state budget in spring 2023 when costs were projected to potentially reach $1 billion. Lawmakers gave the governor authority to control costs by pausing enrollment and enacting copays, and projected program costs are now at $558 million in the current fiscal year. Enrollment in the programs, meanwhile, has remained paused.
Eliminating the program for middle-aged adults is projected to save the general revenue fund about $330 million, according to the governor’s office. Pritzker told reporters later Wednesday he expects the federal government will stop reimbursing states for costs associated with programs providing services to noncitizens.
While Pritzker signified he’s open to working with lawmakers on what programs will ultimately be funded, he said his overarching goal is a balanced budget.
“If you come to the table looking to spend more – I’m going to ask you where you want to cut,” Pritzker said. “I have made difficult decisions – including to programs I have championed, which is hard for me, just as I know some of the difficult decisions you will have to make will be hard for you.”
One of the priorities Pritzker put on hold is an increase in spending on the state’s Early Childhood Block Grant program. In the past two years, the state has helped more than 11,000 children access child care as part of a multi-year plan. But the governor did not request another $75 million increase this year that would have helped add more.
Pritzker also proposed redirecting funds previously appropriated for asylum seekers to other services. That includes reducing funding to $40 million from $139 million for “welcoming centers” that helped the state handle migrants bused here from Texas and other states.
Pritzker proposed allocating $282.7 million for Home Illinois, a program that provides services for the homeless and also provided assistance to new arrivals, keeping the program relatively flat from a year ago despite advocates’ calls for $100 million in new funding. The governor’s office said funds that were previously directed toward asylum seekers in Home Illinois would be redirected to homeless shelters and other services for Illinois’ homeless populations.
Pritzker’s proposal calls for allocating $2 million toward maintenance in the Department of Corrections, the minimum amount recommended. The move comes a year after the state allocated $900 million to rebuild the Stateville and Logan prisons after years of deterioration and behind-schedule repairs.
Pritzker also proposed increasing the “rainy day” fund by $154 million, bringing its balance to $2.5 billion at the end of FY26.
Notably absent from the proposal, however, was any new funding for public transportation. Chicago-area transit agencies face a more than $700 million shortfall in the coming year. Pritzker told reporters there still needs to be negotiations with the agencies about reforms before the state commits to new funding.
Education and human services
One of the few areas of the budget targeted for a substantial increase is PreK-12 education.
Pritzker’s plan includes the statutory minimum increase of $350 million for the Evidence-Based Funding formula, a plan lawmakers enacted in 2017 to focus new education spending on the neediest districts.
That would bring the total funding under the EBF formula to $8.9 billion, a $2.1 billion cumulative increase since the program began. Pritzker credited that funding for helping raise student test scores and improving graduation rates.
“I believe in building on what works,” he said. “So, despite the challenge we are facing this year, my budget proposal increases our commitment to Evidence-Based Funding for public education so that we put new resources in underfunded schools first.”
His plan also calls for adding $1.3 million for career and technical education and maintaining spending of $3 million next year to implement the state literacy plan.
But it also calls for flat funding of $748 million for Early Childhood Block Grants, which help subsidize the cost of preschool for at-risk and low-income children.
All told, Pritzker’s plan would bring total general revenue fund spending on PreK-12 education to just under $11.2 billion, or about $200 million less than the Illinois State Board of Education had requested.
State Rep. Will Davis, D-Homewood, who chairs the House appropriations committee that deals with public schools, said after the speech that he thought Pritzker’s plan was insufficient, “for the simple fact that I think we can be better at EBF.”
“Last year, I wanted to argue for $450 million,” he said in an interview of the standard yearly increase in EBF funding. “I think that’s doable. I mean, if we’re ever going to have a real conversation about getting to full funding in K-12, we’re going to have to increase the EBF allocation more than what it is right now.”
The governor is also continuing his effort to increase the number of employees at the Department of Children and Family Services. Pritzker proposed adding 100 new employees to increase staffing to 4,100 at the department, the most since 2002. Under his proposal, overall funding for DCFS will have increased by 100% since Pritzker took office.
The Department of Human Services would receive $7.9 billion, including $20 million to fund 50-cent-per-hour wage increases for direct service providers.
With most of the state’s federal pandemic relief funds now spent, Pritzker proposed allocating some state funding to keep up affected programs. That includes appropriating $40 million from the state’s general fund to implement the Reimagine Public Safety Act, a program designed to reduce gun violence.
Revenue changes
The governor’s budget office typically makes conservative estimates about revenue. The November forecast from the Governor’s Office of Management and Budget had projected revenues to remain flat, driving a deficit of $3.2 billion.
But it relied on a September economic forecast from the financial services company S&P Global. The governor’s office says S&P has since revised its forecasts, leading the GOMB to increase its estimate by $1.6 billion. Pritzker’s office also now expects strong personal and corporate income tax growth next year in addition to limited sales tax growth.
The revenue outlook for the current FY25 budget was also revised upwards by $421 million thanks to personal income growth, consumer spending and a stable job market. The governor’s office plans to use the extra revenue to introduce $550 million in additional spending for the current fiscal year.
But Pritzker also proposed spending about $1.2 billion less than what the GOMB projected in its November estimate.
Another $469 million in revenue would be raised through other changes to law, including adjusting tax rates on electronic gambling and table games at casinos to generate $100 million in revenue. The plan also calls for pausing the transfer of $171 million in sales tax collected on motor fuel to the road fund and raising $198 million by providing temporary amnesty for individuals making delinquent tax payments.
But much uncertainty still surrounds how much federal funding Illinois will receiving going forward as the Trump administration pledges to cut federal spending. “Only an idiot” would think cutting off critical federal funding is a good idea, Pritzker said.
His proposal still anticipates roughly the same level of federal support in FY26 as the state currently receives. Pritzker’s office stressed it’s impossible to predict what Trump’s administration will do, but they believe the federal government must honor longstanding agreements.
State government efficiencies
Pritzker also emphasized making state government more efficient to save costs during his speech.
The governor announced new site readiness and surplus property programs that are designed to spark economic development, which ultimately could also amount to savings for the state. Pritzker proposed allocating $300 million to the Illinois Department of Central Management to repurpose five shuttered state prisons and developmental centers to ultimately attract new private economic development at the sites.
“This proposed budget enacts cost-saving operational efficiencies, improves productivity, curtails new hiring at agencies, consolidates unnecessary segregated funds, eliminates dormant boards and commissions, and overhauls state purchasing to save taxpayers money,” Pritzker said.
This includes studies of CMS and the Department of Transportation to identify better hiring and contracting practices, merging the mental health and substance abuse divisions at the Department of Public Health and reviewing potentially overlapping responsibilities between townships and other units of government.
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