Reports

Analysis of Illinois' FY 2022 Enacted General Fund Budget

RELEASED: 

July 22, 2021

At the time of the initial FY 2022 General Fund budget proposal that Governor Pritzker made back in February, CTBA described the budget as “sobering,” because it would have constituted a year-to-year cut in real spending on education, healthcare, human services, and public safety, given that 95 cents of every dollar of General Fund spending goes to those four, core service areas.

However, things significantly changed a month later on March 11, 2021, when President Joe Biden secured passage of the American Rescue Plan Act (“ARPA”). ARPA came on the heels of various other federal relief initiatives that passed in 2020—most notably the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). When considered together with ARPA, nearly $12 billion in federal relief funding has been designated to cover state-level spending on core public services in Illinois over fiscal years 2021, 2022, 2023, and 2024.

Meanwhile, in addition to receiving this significant and somewhat unexpected federal financial support, Illinois enacted state legislation that will generate an estimated $655 million in new General Fund revenue annually beginning in FY 2022, through elimination of various tax expenditures that had primarily benefited corporations.

Yet, despite obtaining the aforesaid new federal and state funding, the FY 2022 Enacted General Fund Budget that passed into law (“P.A. 102-0017”) increases overall net spending on core services in FY 2022 by just $586 million over FY 2021 levels, in nominal, non-inflation-adjusted dollars. That is notable for one simple reason: the total year-to-year increase in General Fund spending is less in nominal dollars than the $655 million in new recurring revenue the state raised by eliminating the aforesaid tax expenditures—and is significantly less than the $3.8 billion in federal relief funding the state utilized in FY 2022. Indeed, after adjusting for inflation, total net General Fund spending on services in FY 2022 is scheduled to be only $24 million—or 0.1 percent—more in real terms than it was in FY 2021. 

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Topics:Illinois Budget

Tags:FY2020, FY 2021, FY 2022, Governor Pritzker, Illinois General Fund, State Budget, State Revenue, Pensions, COVID-19

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Related Reports

Illinois FY 2021 Enacted General Fund Budget Analysis

Released: Wednesday, August 19, 2020

If the Illinois FY 2021 Enacted General Fund Budget proves anything, it is that no matter how much things change in the world at large, the structural revenue problems in the state’s budget remain the same. Consider that, not even accounting for the impact of COVID-19, Illinois would nonetheless still have a General Fund deficit—meaning the state would not have had enough current revenue to cover some spending on public services this year—even if the pandemic never happened.

Despite the poor performance of the state’s revenue system over time, many commentators and editorial boards still try to blame the state’s historic, recurring deficit problems on overspending for services. The data, however, have simply never supported that canard, which is explained at length in this Report. The long-term structural deficit in Illinois’ General Fund—which will certainly become worse over the next few years as the impact of the COVID-19 pandemic on the economy is projected to drive revenue down significantly in all 50 states—is a real cause for concern.

A structural deficit like the one in Illinois’ General Fund, which is demonstrably driven by an underperforming revenue system, cannot be eliminated without raising taxes. In fact, Governor Pritzker has worked with the General Assembly to pass a tax reform package—known as the “Fair Tax”—predicated on replacing the flat rate individual income tax Illinois currently imposes with a graduated rate income tax. Recognizing the difficult political battle that will be waged over the Fair Tax, Governor Pritzker introduced two different General Fund budget proposals for FY 2021. But all of that happened before COVID-19 devasted the economy and drove down tax revenue in all 50 states, including Illinois. 

So, as expected, the economic downturn created by the COVID-19 pandemic has significantly worsened the state’s fiscal condition. That said, the analysis in this Report makes it clear that, even if the coronavirus had never happened, the fiscal shortcomings that plague Illinois’ General Fund are long-term, material, and structural, and cannot be resolved without comprehensively reforming the state’s tax policy. 

FY 2020, FY 2021, Governor Pritzker, Illinois General Fund, State Budget, State Revenue, Pensions, Fair Tax, COVID-19, CARES Act

Recommended Changes to Illinois Tax Expenditures, FY 2022

Released: Thursday, May 13, 2021

To address some of the shortcomings that have created the structural deficit in the state’s fiscal system, the FY 2022 GF Proposal includes a number of initiatives designed to generate new revenue for the General Fund.  Key among these are initiatives that would:

(i) eliminate or modify a number of tax breaks—which are more accurately described as “tax expenditures”—the state currently grants to corporations, to generate some $932 million in General Fund revenue for FY 2022; and

(ii) “decouple” Illinois from tax expenditures granted to businesses by the federal government, that cannot be expected to generate any benefit in the state, but would cause the loss of anywhere from $500 million to $1 billion in annual General Fund Revenue.

FY 2022, Governor Pritzker, Illinois General Fund, State Budget, State Revenue
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