Missed opportunity: Irresponsible budgeting costs Illinois nearly $27 billion
Illinois had a prime opportunity with increased revenues and COVID relief funds to balance the budget. Instead, the government spent it all and now faces an even larger shortfall.
Starting in 2020, Illinois took in higher than projected tax revenue and was also awarded temporary federal COVID-19 relief funds, yielding multi-year budget surpluses. Instead of using the excess money responsibly, office holders just kept overspending, setting the stage for future tax hikes.
Instead of raising taxes, the Illinois General Assembly should implement a variety of long-term cost-saving measures, such as a spending cap.
Under a spending cap, the government can’t increase spending more than the percentage growth of gross domestic product each year. If a cap had been implemented in 2019, the state would have saved around $27 billion, nearly $6 billion for fiscal year 2025 alone. This would have generated a surplus the state could have used to alleviate many of its fiscal pain points, such as rising pension debt, which is projected to have a $5.1 billion shortfall in the upcoming fiscal year.
The higher-than-expected revenue allowed the government to take some positive steps – eliminating the bill backlog, adding some money to the rainy-day fund and improving its credit ratings. However, most of the temporary funds were used to expand permanent expenditures, increasing Illinois’ budget to a record $55.5 billion proposed for fiscal year 2026. This is a steep increase from $40.3 billion in 2019, outpacing inflation.
For years, tax hikes have been the go-to method to make up for Illinois’ overspending. Just last year, the Illinois General Assembly approved a $1.1 billion tax hike for 2025. Other indicators of Illinois’ spend-then-tax approach include its record income tax hikes in 2011 and 2017, $4.6 billion in new taxes and fees in 2019, a proposed $3.6 billion income tax hike in 2020, and a $665 million tax hike mostly on small businesses in 2021. Gov. J.B. Pritzker is now pushing a $100-million casino tax “realignment” for the fiscal year 2026 budget, which in reality is another tax hike – this time on table and electronic games.
Illinois' long-standing practice of taxing its way out of deficits makes the governor’s sudden discovery of $1.5 billion in extra revenue worth scrutinizing.
In November, Pritzker’s 2026 budget was projected to have a $3 billion deficit, with revenues expected to slightly decrease compared to 2025 levels. The most recent report from the Commission on Government Forecasting and Accountability also showed similar revenue performance in 2026, confirming these projections.
However, in a change right before his budget address, Pritzker projected a $1.5 billion increase in revenues and no budget deficit. If the $1.5 billion increase doesn’t materialize – and previous projections suggest it will not – then Illinois taxpayers will once again be left with the bill for the government’s runaway spending.
This is unsustainable. Illinois already has some of the highest property taxes, sales taxes, and income taxes in the nation, driving away residents and businesses, leaving fewer people to tax and weakening the state’s economy. The Illinois General Assembly and Pritzker must break their reliance on tax hikes to cover excess spending and should instead implement responsible budgeting measures
Despite this missed opportunity, Illinois can still get itself back on track. This month, State Rep. Dan Ugaste introduced House Bill 3014, and Sen. Suzy Glowiak Hilton introduced Senate Bill 1546, two bills that institute a GDP-tied spending cap.
Other reforms are also necessary. These include rolling back COVID-era spending increases and reducing administrative expenses. These measures, along with others, are highlighted in our report, Illinois Forward 2026.