Our perspective: Illinois’ state budget is nearly $13B higher today than it was 6 years ago

Pritzker proposes to permanently repeal the 1% state grocery tax. That’s good. The ballooning size of the state budget, not so good.

During his Feb. 21 budget address, Gov. J.B. Pritzker introduced a $52.7 billion state budget – up from his first $40 billion budget in 2019. From his address:

“One of my missions as governor is to make life easier for working families. … And even though inflation continues to cool off, folks are still feeling the squeeze every week at the grocery store. So, there’s one more thing we ought to do. For the good of our state’s working families, let’s permanently eliminate the grocery tax! It’s one more regressive tax we just don’t need. If it reduces inflation for families from 4% to 3%, even if it only puts a few hundred bucks back in families’ pockets, it’s the right thing to do.”

We like eliminating the 1% grocery tax, which is a huge burden up and down the income ladder and why few states do it. Proposing $800 million in new taxes on businesses seems … not great.

The state is spending more money than ever, and that makes us very nervous. Lawmakers need to show more restraint. With one-party control across the board, it’s unlikely that will happen this year. Here’s what else you should know about the budget address and Illinois’ economy:

• The governor offered a pointed critique of the migrant crisis. Pritzker criticized the federal government’s handling of asylum seekers and announced a state response plan, including a request for $181.7 million to cover the costs of supporting asylum seekers arriving in Illinois.
• The state is investing $350 million for K-12 education … after cutting school scholarship tax credits for poor kids. Pritzker’s budget includes increased investments in K-12 education, following the evidence-based funding model with a $350 million increase, and a more than $30 million increase in support for higher education institutions.
• Pritzker’s budget includes millions for homelessness. The governor has proposed spending an additional $50 million to address the root causes of housing insecurity, particularly among Black Illinoisans, and continuing efforts to prevent and end homelessness.
• Our economy is lagging and it’s forcing people out. We’re losing people, yes, and that’s bad. About 364,000 people chose to leave the state since 2020. A main driver of the exodus is the state’s economic climate. Illinois ranked 42nd for job growth in 2023. Virtually every sector of the economy trailed the national average when it came to adding jobs in 2023. Wage growth in Illinois is 43rd in the nation and average hourly wages, which total $33.61 in Illinois, were below the U.S. average of $34.36 in December 2023.
• Taxes are too high. Doing away with the grocery tax is a great start. Still, taxes are way too high here. Illinois Policy Institute polling showed 45% of Illinoisans identified high taxes as one of the biggest issues facing the state. Illinoisans pay the seventh-highest state and local tax burden in the country and the highest in the Midwest. Illinoisans pay the second-highest property tax rates in the nation, at a rate of 1.95% of their home’s value each year – about double the national median.
• Debt and overspending are driving costs higher. Illinois’ state pension debt is an estimated $142.2 billion, and current pension payments take up 22% – more than $11 billion – of the state’s budget. Illinois is currently underfunding pensions by $4.9 billion annually. Last year, the state shorted pensions by $4.1 billion despite Pritzker’s “extra” pension payments. This year, the state is spending another record amount by adding $800 million in taxes, mainly on businesses. This is not sustainable – or good for the state and its people.

“We are encouraged to see that tax relief is part of the governor’s budget proposal. There are still a lot of areas that need to be improved. Under Pritzker’s leadership, Illinois has become an increasingly expensive state to live and do business in. Efforts to ease the high tax burden residents face – driven primarily by the state’s growing pension crisis – and invest in core public services will significantly improve quality of life for Illinoisans.” – Bryce Hill, director of fiscal and economic research at the Illinois Policy Institute