A spending cap, school district efficiency, pension reform and right-sizing government health care costs could permanently balance Illinois’ budget. The alternative is big deficits.
STATEMENT from the
ILLINOIS POLICY INSTITUTE
CONTACT: Micky Horstman (312) 607-4977
‘Illinois Forward 2026’ can balance state budget permanently, save taxpayers nearly $26.7B by 2030
A spending cap, school district efficiency, pension reform and right-sizing government health care costs could permanently balance Illinois’ budget. The alternative is big deficits.
CHICAGO (Feb. 12, 2025) – Even after receiving $35 billion in unexpected revenue during the pandemic, Illinois’ state government faces budget challenges with a projected $3 billion deficit in 2026 and a $5 billion shortfall by 2029.
There is an alternative. To end Illinois’ perpetual budget crisis, the Illinois Policy Institute today released “Illinois Forward 2026” – a comprehensive fiscal plan to balance the state budget without raising taxes. The plan uses common-sense reforms to save taxpayers an expected $26.7 billion by 2030.
Its release comes ahead of Gov. J.B. Pritzker’s 2026 budget proposal and State of the State address on Wednesday, Feb. 19, which may include plans for future tax hikes on businesses and residents. Illinois saw a brief reprieve from decades of budget deficits thanks to $35 billion in federal pandemic funds and windfall revenue, but the money is nearly gone and deficits are ahead. State leaders used some of that money for fiscal repairs, but most – $21.5 billion – was used to pad rising spending. The institute found Illinois’ annual budget has ballooned by over $17 billion since 2015.
“Federal aid during the pandemic provided temporary relief for the state, and it helped us see budget surpluses for the first time in 22 years. But the chance to use that money to fix long-term fiscal issues was squandered and we can’t make the same mistakes again,” said Lauren Zuar, policy analyst at the Illinois Policy Institute. “We need to correct decades of overspending, and lawmakers must pledge to stop adding and raising taxes on Illinoisans to plug the budget deficits created by their poor fiscal decisions.”
“Illinois Forward 2026” proposes a spending cap linked to the projected rate of inflation, reinvesting unnecessary administrative costs into classrooms, right-sizing taxpayer costs for state worker health insurance and enacting government pension reform.
“‘Illinois Forward’ offers a plan to meaningfully reduce costs without burdening taxpayers or straddling future generations with endless debt,” said Ravi Mishra, policy analyst at the Illinois Policy Institute. “Without long-needed structural financial reforms, the state’s finances will end up in an even worse position than before 2020. It’s time state leaders meaningfully address Illinois’ key cost drivers by enacting pension reform, cutting excessive academic administrative costs and reducing taxpayer burdens for state worker health insurance.”
‘Illinois Forward 2026’ solutions:
- Expenditure savings and spending cap ($3B in savings in first year, around $21B over five years): Enact responsible growth linked to projected inflation, creating at least $1 billion in savings from the 2026 budget to offset massive spending increases. Then ensure the state’s expenditures are in line with the economy’s growth.
- School district efficiency ($2.8 billion in savings over five years): Invest in classrooms, students and teachers by reducing excessive school district administrative costs. This would allow Illinois to grow state spending more slowly while boosting student outcomes.
- Right-size health insurance ($2.7 billion in savings over five years): Adjust the taxpayer burden for state health insurance plans to bring costs more in line with what private-sector workers receive.
- Pension reform: Amend the state constitution so earned benefits are still an ironclad contract, but future benefit growth can be adjusted to sustainable and affordable levels – such as by pegging cost-of-living adjustments to inflation.
For interviews or interviews, contact media@illinoispolicy.org or (312) 607-4977.