Structural Deficit

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.

This report shows how the data make it quite clear that: Illinois incurred pension debt—under both Republicans and Democrats-- to mask its fiscal problems, not to pay irresponsibly high benefits; Illinois is not a high spending state, and in fact has cut spending on services in real terms by more than 23% since FY2000; that over $9 out of every $10 Illinois, and frankly every other state in America, spends on services goes to the four core areas of Education (including Pre-K, K-12, and Higher Ed), Healthcare, Human Services and Public Safety—meaning those are the services which are imperiled if the feds don’t come through with a significant relief package for state governments suffering revenue loss from the downturn caused by the COVID-19 pandemic; and the Pritzker Administration has actually pushed a number of fiscal initiatives that are actually responsible and counter some of the poor practices of the past.