Illinois “spending cuts” aren’t from good behavior

Illinois lawmakers claim the state saved nearly $500 million in fiscal year 2026, but most “savings” are either from federal decisions or shifting costs, not serious fiscal restraint.

Illinois is already struggling to balance its 2026 budget. Recent projections show the state ending fiscal year 2026 with a $267 million deficit, growing to a $2.19 billion shortfall in 2027.

In response, state officials have touted $482 million in “savings” for fiscal year 2026, framing them as evidence of fiscal discipline amid economic uncertainty.

Yet a closer look shows these cuts are far less significant than advertised.

A Jan. 22 memo from the Governor’s Office of Management & Budget outlines agency-level reserves, including $200 million in savings at the Department of Healthcare and Family Services and $119 million at the Department of Human Services. Most of these figures, however, reflect technical adjustments rather than policy restraint or meaningful agency cuts.

Federal timing does the heavy lifting

The largest item in spending reduction comes from a $200 million reduction stemming from the state foregoing transferring money to the Healthcare Provider Relief Fund. These reductions follow the federal approval of a hospital provider assessment that occurred after the budget was enacted. The memo also notes lower-than-expected caseloads.

This was not a deliberate policy choice to reduce spending. It was a technical adjustment reflecting federal and demand conditions that would have occurred regardless of legislative action.

Similarly, much of the claimed human services reserves come from hiring lags, reduced overtime and lower caseloads. These are routine variances when spending falls below projections, not when policymakers actively reduce programs or restructuring costs.

Revenue assumptions, not restraint

Another $50 million comes from group health insurance savings, which comes improved assumptions, not reduced government activity. When revenue conditions improve, savings appear on paper without structural change to spending patterns. While that helps with short-term balances, it does little to address long-run cost drivers.

Real spending reductions are minimal

Real discretionary savings are minimal. The administration does not plan to release $29.5 million in higher education funding that was conditionally authorized in the budget. Rather than a cut, this reflects the withholding of an additional increase beyond the 1% already approved, contingent on stronger fiscal conditions.

Beyond that, some agencies were directed to manage vacancies and contractual spending more tightly. Combined, these actions amount to only a few tens of millions in limited, largely temporary savings.

A budgeting process that masks problems

These changes highlight deeper flaws in Illinois’ budgeting process. When budgets rely on highly volatile projections, it creates the illusion of balance while leaving taxpayers vulnerable to the next round of deficits and tax hikes.

The state continues to fund thousands of vacancies. The Civic Federation found that Illinois had more than 5,000 vacancies in 2024, an 8.6 percent vacancy rate. These gaps allow agencies to report “cuts” on funds that would have gone unspent anyway, without meaningfully reducing bloated departmental costs.

While these adjustments may make the 2027 budget deficit appear smaller on paper, they do nothing to address Illinois’ underlying fiscal challenges. The state continues to suffer from weak economic growth, the highest property taxes and the third highest corporate taxes in the nation along with persistent losses of residents and businesses.

Real long-term stability requires aligning spending growth with sustainable levels, not just benefiting from favorable timing and assumptions. Illinois Forward 2027 offers a blueprint for Illinois to achieve this including enacting spending caps, truly rightsizing over bloated agency costs, eliminating pork projects and making real reforms that strengthen growth without relying on burdensome tax hikes.