What to expect as lawmakers rush to pass 2026 budget
State lawmakers have given themselves until May 31 to pass the state’s upcoming budget, here’s what might be included.
Illinois lawmakers are approaching the end of their scheduled spring session, which ends on May 31. Legislators have until this deadline to pass the upcoming 2026 budget via a simple majority vote. If the process runs into June 1 or beyond, the requirement increases to a three-fifths majority in order to pass the state budget.
Even though lawmakers have one day remaining in this process, many legislators – and all of the general public – have yet to see the full details of what will be included in the bill. While details are sparse, here is what Illinoisans should be on the lookout for over the weekend:
Record Spending:
The state budget is poised to spend a record-setting amount. Gov. J.B. Pritzker’s original budget proposal from February included $55.2 billion in spending – an increase of $2 billion compared to last year’s budget.
The largest spending increase in the proposed budget was for public sector pensions with $514 million in additional spending from the state’s general funds budget next year.
This increase in pension funding included a measure to increase “Tier 2” benefits – for workers hired in 2011 or later – by increasing the tier 2 pensionable salary cap. Increasing the cap to match the social security wage base, as proposed, would spike benefits by more than $28 billion through 2049. The measure would also require Illinoisans make far higher pension contributions in each budget going forward.
The state costs that are growing the fastest are health insurance costs for state workers. The 2026 proposed budget anticipated these costs to increase by $341 million, or nearly 15%, for the 2026 fiscal year. This growth in costs is largely because of the record-setting AFSCME contract approved by Pritzker in 2023.
Under the state’s evidence-based funding formula, PreK-12 education spending will increase by $308 million. This is an increase of $2.9 billion since Pritzker was elected, despite lower total school enrollment. This expenditure increase has also had almost negligible impacts on student outcomes with SAT scores constantly falling during the past eight years. Proficiency levels for 3rd to 8th graders still lag below pre-covid levels in math.
Meanwhile, the state’s economic development spending could be cut by $325 million. Economic development is the only spending category to see reductions in general funds spending in each of the past two years.
While spending is largely rumored to look similar to what the governor proposed in February, transit funding for the Regional Transportation Authority has become a hot button issue as budget negotiations unfold.
The RTA says they’re facing a $771 million budget shortfall for the coming fiscal year, and are looking for state funds to bail out the system. A variety of new taxes to pay for the system have been proposed and may wind up being included in the state budget. This spending and potential new taxes were not included in the governor’s original budget proposal.
In addition to transit funding, budgeteers are facing hurdles with how exactly to finance such high spending throughout the rest of the budget as well.
Tax Hikes:
Since 2010 alone, lawmakers introduced 70 new or higher taxes on Illinois residents, costing them $110 billion more. Of those tax hikes, 49 went into effect during Pritzker’s tenure.
While Pritzker has alleged that he would reject any budget containing “broad-based” tax increases, large swaths of the funding sources the governor was planning to use to finance the upcoming budget are drying up. His initial budget proposal relied on $1.5 billion in higher-than-expected state revenues, however his office has since reduced these revenue projections by $536 million. The General Assembly’s Commission on Government Forecasting and Accountability estimates baseline state revenues will come in $737 million lower than Pritzker claimed.
With spending pressures mounting and revenue projections failing to come to fruition, the odds that lawmakers attempt to raise taxes becomes even more likely. In recent weeks, more than $10 billion in additional tax and fee hikes have been proposed and lobbied for in Springfield, including:
- State payroll tax
- Expanding the state sales tax to services
- Capital gains surcharge
- Tax on carried interest
- Taxing overseas income
- Taxing unrealized capital gains
- Increasing the corporate income tax
- Tax on digital advertising
- Ending corporate tax exemptions and credits
- Expanding the estate tax
In total, these taxes have been estimated to generate more than $10 billion annually, giving lawmakers plenty of ideas on ways to raise your taxes.
Instead of maxing out the budget and adding billions in new spending, Illinois’ budget should focus on increasing reserves to build the foundation for future tax relief.
By adopting policy solutions such as a spending cap on future state budgets, right-sizing employee health care costs and constitutional pension reform, lawmakers can put the state on a sustainable fiscal path and provide much-needed relief for Illinoisans who are struggling under the weight of the nation’s highest state and local tax burden.