Pritzker’s $56 billion budget relies on $700 million in new revenue

Gov. J.B. Pritzker’s $56 billion budget proposal for 2027 relies in more than $700 million in new revenue.

Gov. J.B. Pritzker’s $56 billion budget proposal is the largest in state history with more than $700 millions in new revenue. Of that, $589 million comes from tax hikes, and $139 million in redirected funds.

The proposal is roughly $879 million higher than the previous year, with a narrow $24 million surplus.

Optimistic assumptions account for $1 billion to close an estimated $2.2 billion gap. While the governor’s office has emphasized disciplined budgeting, much of the plan depends on volatile projections and temporary fixes rather than lasting reform.

“Savings” and shifting costs

While the governor points to savings and cost containment, overall General Funds spending still rises by $879 million over fiscal year 2026.

Lower reported spending reflects the transfer of nearly $1.2 billion from the Department of Human Services, into a newly created Department of Early Childhood under the education category. That’s moving money, not spending less.

Another major area of “savings” appears in health care financing. General Revenue Fund support for healthcare declined by $520 million compared to FY2026.

Much of this reduction came from $504 million less in spending into the Healthcare Provider Relief Fund from the General Revenue Fund. The HPRF has appropriated $1.28 billion more to Medical Assistant Providers, suggesting the governor has moved healthcare costs across funds instead of spending cuts.

The budget includes no major workforce restructuring, and no pension reform beyond statutory payments.

Spending rises

The FY2027 proposal marks a roughly 40% increase in General Funds expenditure since Pritzker took office.

Compared to FY2026, the budget includes increases of:

• $305 million in education as per Evidence Based Funding.
• $269 million in health insurance costs.
• $192 million in pension contributions.

While the governor emphasizes making the statutorily required pension contribution, the total 2027 pension appropriations will be more than $5 billion short of what actuaries recommend.

Without making the full actuarial payment, Illinois’ budget is inherently imbalanced, despite the governor’s claim.

No structural fixes

The latest budget also leaves Illinois’ fundamental fiscal challenges unresolved.

The budget does not include:

• Structural pension reform
• Spending caps tied to economic growth
• Meaningful deposits into the Budget Stabilization Fund
• Long-term healthcare cost realignment

It does nothing to address key drivers of Illinois’ economic struggles, such as high taxes and an uncompetitive business climate.

Without such reform, future budgets will remain exposed to economic slowdowns and revenue volatility.

Targeted revenue increases, limited reform

Rather than prioritizing long-term fiscal stability and growth, the budget relies on targeted tax increases and temporary financing strategies.

The largest tax hike comes from extending Illinois’ cap on corporate net operating losses, raising an estimated $269 million in additional revenue.

The cap, enacted in 2021, was supposed to sunset in 2026. Instead, it has been extended and will phase out gradually during the next three years. Limiting these deductions increases effective tax burdens on businesses even when companies are recovering from prior losses. Illinois already has the third-highest corporate income tax rates in the nation

The state also increases casino tax collections and imposing fees on large social media platforms. Gaming taxes were already increased in the 2026 budget, when the state added an extra $0.25 to $0.50 per sports betting wager.

That increase followed a reported decline of 15% in the number of wagers placed between September 2024 and September 2025, illustrating how higher taxes can dampen economic activity.

In addition, lawmakers reduced the share of income taxes it passes on to local governments, a pool of money called the Local Government Distributive Fund. The state has been doing this for years with the share for local governments falling from 10% in 2012 to less than 7% now.

That drop has meant $10.9 billion less for local government that they normally would have had kept by the state.

Lower collections mean fewer dollars for local programs, services and infrastructure which puts more pressure on local governments to raise property taxes to make up the difference. Illinoisans already pay the highest property taxes in the nation.

This budget proposal increases tax burdens, hurts long-run competitiveness and continues the pattern of temporary balancing strategies rather than structural reform.

Illinois has ranked among the slowest growing state economies in the nation since 2019. Policies that raise business costs and shift fiscal pressures on local governments risk further weakening long-run growth potential.

Over-optimistic revenue growth?

Recent revenue updates project higher collections for 2026, which lawmakers assume will continue into 2027. The FY2027 budget hinges on income tax revenue increasing by another $1 billion and sales tax revenue by $300 million during the current year.

Much of the recent revenue improvement reflects strong national economic conditions rather than structural changes within Illinois. Personal income growth has recently matched the national average, but during the longer-term Illinois’ income growth has lagged much of the country, driven by population losses.

Projections have also proven volatile. Since October 2025, the Governor’s Office of Management and Budget revised FY2027 income and sales tax projections upward by $1.12 billion.

That means the state’s improved revenue picture may prove temporary if economic conditions weaken. When budgets rely on volatile projections, it creates the illusion of balance while leaving taxpayers vulnerable to the next round of deficits and tax hikes.

The FY2027 budget expects a modest surplus, yet projections rely on high revenue growth, targeted tax increases and one-time fixes.

Improved revenue estimates driven by national economic conditions have temporarily eased pressure, but they do not resolve the state’s structural fiscal challenges. If projected revenue doesn’t happen, the state faces renewed deficits and pressure for additional tax hikes.

Future budgets will require deeper reforms — including spending discipline, pension reform and structural changes to the budgeting process — to prevent recurring deficits and additional tax burdens on Illinois families.