Illinois’ emergency reserves lowest in nation
Illinois is dead last of the 50 states in its ability to handle a financial crisis. It couldn’t last a month. The rainy-day fund that should be its primary reserve, and that Gov. J.B. Pritzker lauded himself for refilling, could barely cover two weeks.
Illinois has less money on hand to pay its bills than any other state in the nation: it has just 28 days of reserves.
Illinois’ total fund balances – which includes savings in the state’s rainy-day fund and money left over from last year’s state general fund – are the lowest of any state in the nation. Illinois’ total reserves are capable of funding less than one month of state spending. The typical state has nearly three months’ of total reserves.
While Gov. J.B. Pritzker touted the state’s rainy-day fund balance of just over $2 billion during his annual State of the State address as a serious achievement, the reality is the state has less money to brace for budgetary uncertainties than any other state. The rainy-day fund by itself has just 15 days of spending and the rest of Illinois’ 28 days would be funded by leftover cash.
Some states, such are North Dakota and Wyoming, where revenues tend to fluctuate more widely because of fluctuations in natural resource production, have more than 250 days’ worth of total reserve balances. Illinois is the only state in the nation with less than 30 days’ worth of total reserve balances.
Total reserve balances represent the most comprehensive picture of a state’s potential resources in the event of an economic downturn. However, Illinois consistently uses these balances to further increase spending, rather than saving them. For example, Illinois is projected to spend more than $1 billion of its unspent appropriations – excess funds from last year’s budget – in the current 2025 budget, and another $965 million worth of unspent appropriations in the upcoming 2026 budget.
This is particularly problematic, as Illinois’ tax revenues are the most volatile in the entire Midwest. In other words, Illinois’ revenues are subject to wide swings, making it imperative that the state have dedicated funding to deal with unexpected downturns in revenues.
Making matters worse, the large increase in spending Pritzker has proposed for the 2026 budget is built on highly optimistic revenue projections. The Governor’s Office of Management and Budget was projecting a $3 billion budget deficit as recently as last November. These projections estimated upcoming FY 2026 revenues would slightly decrease compared to 2025 levels, as Illinois’ economy was expected to slow compared to recent trends. The most recent forecast from the Commission on Government Forecasting and Accountability – a body of the state legislature that tracks revenues – is expecting revenues to come in $1.2 billion below what Pritzker’s office estimates.
If correct, these estimates indicate Illinois’ budget will be out of balance by $1 billion, forcing the state to cut spending, raise taxes or dip into the rainy-day fund. Illinois’ rainy-day fund – the dedicated savings the state has set aside to deal with unexpected revenue losses – has a current balance of $2.2 billion. Inaccurate revenue projections could slash this figure nearly in half.
Illinois’ paltry rainy-day fund balance has been a long-standing issue and remains an outlier among virtually all states. The current balance only has enough money to fund 14.9 days’ worth of spending – just over two weeks’ worth of the state budget. That’s the second-lowest savings rate in the nation. While this figure is up from 0 days’ worth in 2021, in large part thanks to $35 billion in federal pandemic aid and unexpected revenues for the state, it is still lower than every other state except New Jersey. The typical state has enough money dedicated to its rainy-day fund to cover more than 48 days’ worth of state spending.
Experts with the Government Finance Officers Association recommend having enough in reserve to run the state for 60 days. That would require about $9.2 billion in 2026, meaning Illinois would need to nearly quadruple its rainy-day fund to have adequate savings on hand. Rather than attempt to bolster the state’s paltry rainy-day fund, Pritzker’s budget proposal will only add $154 million to the state’s rainy-day fund in 2026 – if his revenue estimates are correct – despite spending a record-setting $55.2 billion.
Illinois’ rapid increase in spending, low reserves and large outstanding pension liabilities, which tally $144 billion, coupled with insufficient savings are part of the reason why Illinois’ credit rating is the lowest of any state.
Fortunately for Illinoisans, there is an alternative to Pritzker’s budget approach. The Illinois Policy Institute has proposed an alternative budget plan that would bring long-term financial stability to the state, create significant budget surpluses that could be used to bolster the state’s rainy-day fund and foster an environment in which families and businesses can thrive – without overly optimistic revenue projections that could exhaust the state’s savings if they don’t materialize.