Tax and Budget

CTBA Responds to FY 2027 Budget Proposal

On February 18, 2026, Governor JB Pritzker delivered his 8th State of the State budget address to the 104th General Assembly. He also released his $56.1 billion General Fund budget proposal for FY 2027 (the “Proposed FY 2027 Budget”), which includes a very slight year-to-year increase in spending on services of less than 0.5% in nominal, non-inflation adjusted dollars. But that ignores the impact of inflation, which drives up the cost of funding services in the public sector, just like it increases costs in the private sector. After adjusting for inflation, proposed FY 2027 spending on public services will be about 1% less than FY 2026. Read CTBA's response.

Despite the elimination of the accumulated deficit and a projected FY 2026 General Fund (FY 2026 GF Budget) surplus of $370 million, the enacted budget relies on $1.1 billion in manufactured, one-time, and recurring revenue enhancements to sustain its funding levels. The total net appropriation of $55.2 billion dedicates $15.9 billion (28.7%) to Hard Costs, including the back-loaded $11 billion pension contribution. After adjusting for inflation, the minimal nominal increase in appropriations translates to continued real disinvestment in core current services, with overall real spending on those services projected to be 14.3% less than it was in FY 2000. This fiscal strain, exacerbated by a state tax policy that consistently fails to generate adequate structural revenue growth, leaves the state unable to fund the cost of maintaining current service levels over time. Moreover, without significant tax and pension reform, the long-term structural deficit will be severely widened by federal H.R. 1 ("BBB") legislation, which will impose billions in new costs on the state by reducing federal Medicaid and SNAP support starting in FY 2027.

On June 6, 2024, Governor Pritzker signed into law the General Fund budget for FY 2025 (the “FY 2025 Enacted GF Budget”).  The FY 2025 GF Enacted Budget makes two things clear about the state’s finances.  First, the General Fund continues to be in better fiscal condition than it historically has been over the last three decades. That’s the good news. Second, the state’s structural fiscal problems, which were partially redressed by revenue enhancements passed over the last three fiscal years, as well as somewhat masked by one-time federal financial assistance provided during the pandemic and the strong economic growth that followed, are re-emerging. And that’s the bad news.

Overall, the state’s fiscal condition has improved significantly since Governor Pritzker first took office in 2019. Back then, Pritzker inherited an $8 billion backlog of unpaid bills from Governor Rauner’s Administration.  A budget hole of that size meant roughly 30 percent of all General Fund expenditures during Rauner’s final year as governor constituted deficit spending. Unfortunately, that deficit under Rauner was also nothing new. For more than two decades prior to Pritzker’s inauguration, Illinois had failed to produce anything close to a balanced budget in its General Fund.  

Governor Pritzker started changing that narrative by being a responsible fiscal steward of the state’s finances. Yes, over the past few years Illinois received significant pandemic-related financial support from the federal government, totaling some $6.4 billion, that helped shore up the General Fund during the pandemic.   The state also realized around $4.3 billion in unexpected revenue growth in FY 2024.  This was primarily due to a combination of factors including the robust economic recovery that followed the pandemic, and corporations taking advantage of a 40 year high in inflation to price gouge and thereby generate record profits. The FY 2025 Enacted GF Budget analysis takes an in depth look at Illinois’ revenue and spending in the General Fund for the current fiscal year.

In collaboration with the University of Illinois School of Labor & Employment Relations Project for Middle Class Renewal, CTBA’s report, “Reforming the Illinois Estate Tax to Advance Tax Equity and Fund Public Services” provides a historical overview of the Estate Tax in Illinois. In addition, the report highlights how the Estate Tax can be used as good, sound fiscal policy in today’s economy. Even more, this report estimates how changes to the Illinois Estate Tax policy could have significant impacts on future Illinois budgets.

Between FY 2022 and FY 2023, aggregate Personal Property Replacement Tax ("PPRT")revenue for all school districts increased by a record 76 percent. As things stand today, more record growth in PPRT revenue is projected for FY 2024. That revenue is a welcome addition to school district resources, however, if the projections for FY 2024 prove to be accurate, it will mean that collectively over the FY 2020 through FY 2024 sequence, the statewide Adequacy Gap under the Evidence Based Funding formula was reduced at a significantly faster rate because the local revenue increased at a faster rate over this time period compared to the increase in state-based revenue (new Tier funding).

CTBA’s most recent report highlights how the Personal Property Replacement Tax is a relatively odd revenue source that allocates revenue to school districts in accordance with their respective collections of Personal Property Tax revenue in either 1976 or 1977 and how this revenue source has big impacts on Illinois education policy,  

Volume VI of the Fully Funding the EBF series continues CTBA’s modeling of fully funding the EBF to 90% of Adequacy, which aligns more closely with the Illinois State Board of Education’s methodology. Volume VI uses the Enacted Fiscal Year 2023 General Fund Budget appropriations for the Evidence-Based Funding formula found in Volume V, but applies the ISBE EBF calculated shortfall for FY 2023 (released in August 2022), rather than a projected shortfall as provided in Volume V. The new release maintains the four scenarios found in the Fully Funding the EBF series Volume V.