I spent some time talking with a top legislative budget negotiator last week who said rank-and-file legislators will very soon have to come to terms with a state budget environment unlike anything many have ever seen before.
The “budgeteer” didn’t know yet how things would shake out, but the person was adamant that weak revenues combined with total uncertainty from both the federal government and in the national economy meant the new state budget should most definitely not be overloaded with spending.
Statehouse types talk about “budget pressures” every year around this time. It’s second nature for legislators and interest groups to propose more spending, regardless of what the revenue situation looks like.
Public employee unions are pushing for the most spending, and at the top of their list is a proposal to spend $30 billion during the next 20 years to bolster pensions for their members.
The teachers want a $200 million annual increase in the K-12 Evidence-Based Funding program, above the current $350 million hike. And there’s a proposal to spend about $1.7 billion in the coming years to increase funding for higher education, a similar plan to the K-12 EBF model.
Everywhere you look, somebody wants $10 million more a year, or $20 million, or $60 million or whatever for their programs.
Nobody is really wrong. In some cases, small and even large increases beyond what the governor’s proposed budget contains are very much needed. There’s also little doubt that a strengthened K-12 EBF program would help tamp down property taxes, and more money for higher ed could keep tuition from rising even faster.
But, as the governor said in his February budget address, state-sourced (non-federal) revenues grew by 15.9% in Fiscal Year 2021 and 13.2% in FY2022. “We expect to finish this year with 5% revenue growth,” Gov. JB Pritzker said at the time. “For 2026, our forecast projects a 1.9% increase.”
While that’s tiny, Pritzker’s FY26 revenue projection was still $712 million above what the legislature’s Commission on Government Forecasting and Accountability originally predicted.
The commission did revise its revenue estimates upward not long ago. But next fiscal year’s forecast is still significantly below the governor’s budget forecast.
The new commission revenue prediction for the coming fiscal year, which begins July 1, was revised up by $266 million, which is a lot of money, but only represents a half-percentage-point increase.
But that more generous estimate is still $471 million below the governor’s base revenue forecast. The governor added about $500 million on top of that with his proposed changes to existing laws.
As a percent of the overall budget, they’re not far apart. But the $471 million difference is still real money and not easily dealt with, particularly since the governor claimed in February to have proposed increasing state discretionary spending by less than 1%.
The federal government is a very big reason why the new commission estimate wasn’t as high as some had hoped. Federal revenues will fall by $270 million in the coming fiscal year, or 6%.
During the current fiscal year, which ends June 30, federal revenues are projected to drop by $347 million, or 8.5%, compared to the revenue estimate issued just a couple of months ago in March.
Both of those projections could be on the low side, depending on what the courts and the Republican-controlled Congress approve.
Combining both state and federal revenues, the Commission on Government Forecasting and Accountability says this fiscal year should see a $317 million revenue increase, due mainly to tax returns filed in April, which is a positive reflection on last year’s economy.
But going forward, the party’s over.
Even some Republicans are warning the economy under President Donald Trump could very well drag down state revenues.
State Rep. C.D. Davidsmeyer, R-Murrayville, told reporters late last month the increases in capital gains taxes during President Joe Biden’s last year in office “are not sustainable” going forward, according to Capitol News Illinois.
And Davidsmeyer said of Fiscal Year 2027: “I think it’s going to be an even worse look.” He also pointed out that Illinois growth often lags other states, which will compound the problem.
The legislative leaders and the governor can decide to use either the legislature’s forecast or the governor’s forecast or somewhere in between.
But considering we don’t yet know what impact the next federal budget and other presidential actions could have on the state’s finances and its economy, choosing the most conservative outlook would most definitely be the prudent path.
Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.
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