Illinois’ finances have been in decline for decades, with debt and pension obligations accelerating rapidly in the wake of the Great Recession. As of March 2015, the state had $111 billion in pension debt and more than $6 billion in unpaid bills.

In 2011, politicians raised income taxes for individuals to 5 percent from 3 percent, and to 7 percent from 4.8 percent for corporations for the purpose of paying down pension debt and unpaid bills, which stood at $83 billion and nearly $8.5 billion respectively. The tax hike, which sunset on Jan. 1, 2015, brought in more than $30 billion – more than what Illinois spends on all core government services (e.g., education, health care, human services, public safety) in a full budget year. But Illinois didn’t use that money for education, health care or human services. Instead, the state used the tax-hike revenue to pay approximately $3.6 billion in old bills, make approximately $8 billion in pension obligation bond payments and put the remaining $21 billion into the state’s pensions systems. Nearly 90 cents of every tax-hike dollar went to pay for pensions.

On Jan. 1, 2015, the tax hike expired, as required by state law.

In February 2015, Gov. Bruce Rauner proposed a balanced budget that did not include another tax hike, but lawmakers have proposed some budget and policy ideas that would turn once more to tax hikes to bring in additional revenue.

The aftermath of the 2011 income-tax hike proved this approach was a policy failure. Since the pas­sage of the tax hike, Illinoisans have steadily fled the state. In 2014, the state suffered a record loss of 95,000 residents on net, which will cost the state more than $3 billion in annual income, and $500 million in annual state and local tax revenue.

This budget analysis report will examine the governor’s budget proposal, and will offer additional solu­tions to right-size state spending.


Right-sizing Illinois state government’s payrolls

Illinois’ spending problem

Debt service on state bonds diverts billions from essential programs 

Improve health care for Medicaid patients while controlling costs for taxpayers

State-employee health insurance: Opportunities for reform 

State-employee health benefits: Avoiding the ObamaCare “Cadillac tax”

Reform education spending: Eliminate loopholes in General State Aid formula

Illinois spent $2.1 million on association memberships in 2014 

Illinois has already spent $3.5 million for short-term work in fiscal year 2015

Illinois has already spent $586,000 on taxpayer-funded tuition in fiscal year 2015 

Travel-spending cuts would save taxpayers $750,000 

Reforming Illinois Medicaid: How to cut waste, fraud and abuse

Overview of the governor’s fiscal year 2016 proposed budget