SPRINGFIELD, Ill. (Capitol News Illinois) —Revenue returns remain on track halfway through Illinois’ budget year, though it’s next year that is causing concern in the Capitol.
The Governor’s Office of Management and Budget projects a $3.2 billion deficit for the fiscal year that begins July 1, and the number one task facing Gov. JB Pritzker and the new General Assembly that was seated last week will be to eliminate it.
Pritzker is slated to give his budget address on Feb. 19, facing the largest projected deficit entering a spring session since 2021, when the pandemic hurt state income – though federal stimulus funds and a strong economic recovery helped erase the gap that year.
Since then, the state has enjoyed more robust revenue with little need for new revenue-generating policies – until the current-year budget that passed in May with about $1 billion in new revenues through a tax hike on sportsbooks and businesses among other changes.
But with one-time federal funding in the rearview mirror and the economy slowing, lawmakers face flat revenue projections for the coming year with spending on the rise.
As for the current year, revenues are keeping pace with what lawmakers projected when they approved the $53.1 billion spending plan last May.
According to the December monthly report from the Commission on Government Forecasting and Accountability, the state brought in $52.6 billion last year, and through December, this year’s revenue is $35 million, or 0.1%, ahead of the six-month mark of fiscal year 2024.
December was a strong month for the state, with revenue up $327 million compared to December in FY24, driven by income tax receipts. Income tax receipts are up 9.2% so far this year, even as corporate income taxes have declined by 11%. Sales tax receipts rose in December for the third consecutive month thanks to holiday shopping and are now up 1.2% for the year.
Though revenue remains on track, it’s also showing little sign of growth — something GOMB warned in the fall would be a challenge for lawmakers as they craft a new state budget this spring.
As a new General Assembly begins, it remains unclear how lawmakers and the governor plan to plug the projected deficit. Republicans’ main concern is Democrats will resort to tax increases to boost revenue and avoid spending cuts.
“I know they’re going to be talking about needing additional revenue, but there’s no reason to do that. We’re spending almost $20 billion more than we were eight years ago,” Rep. CD Davidsmeyer, R-Murrayville, who is a co-chair of COGFA, told Capitol News Illinois.
Pritzker told reporters on Wednesday that tax increases aren’t his preferred method, but he didn’t elaborate on how he will propose closing the deficit.
“That’s certainly not the first thing on my list is thinking about tax increases,” Pritzker said. “I’m looking at how we can balance the budget within our means.”
Dissatisfaction with the budget has also grown among Democrats. Several voted against the FY25 budget last May. The revenue plan passed in the Illinois House with the bare minimum 60 votes despite Democrats holding 78 seats in the chamber. Rep. Fred Crespo, D-Hoffman Estates, who voted for the state spending plan but against the revenue bill last year, told Capitol News Illinois Democrats need to revamp their budgeting approach.
“There has to be discipline,” Crespo said. “I’ve recommended in the past when we work on our budget that we establish our revenue number. So we know based on GOMB, based on COGFA, they can project how much we’re going to bring in next fiscal year. We should use that as a standard and say, ‘hey, there’s a revenue number we have to hit; we can’t exceed that.’ We don’t do that.”
Crespo said he feared the FY25 revenue enhancements that were enacted to close a roughly $900 million deficit would limit lawmakers’ options to increase revenue this year. He’s also been harping on his Democratic colleagues for passing bills “subject to appropriation,” which means the bill creates a new program that will only be funded if the state agency it is housed in asks the General Assembly to fund the program. Without funding, the program can’t move forward.
“Anytime we pass a bill that is subject to appropriations, what it means is the bill as it passes, you create a line item on the budget, you’re putting pressure on the budget,” Crespo said.
Donald Trump entering the presidency this month is also a factor that could affect the state’s bottom line. Exactly how his administration’s decisions will impact the state remains to be seen, but Pritzker expressed concern on Wednesday about declining federal funds or changes to federal health care programs.
Changes to Medicaid reimbursement rates, for example, could drastically alter the type of care Illinois can provide for those enrolled in the program or increase the state’s costs.
Trump is “so unpredictable that we need to consider that as we’re putting a budget together and debating it,” Pritzker said.
Davidsmeyer said he believes Illinois could see financial impacts soon, particularly because Trump’s “border czar’s” stated goal to go after sanctuary states by blocking grant funding in hopes of spurring compliance with federal immigration authorities.
(Reporting by Ben Szalinski, Capitol News Illinois)
Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
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