Illinois spends less on education, other services than it did 25 years ago

The latest report from the Center for Tax and Budget Accountability shows that spending on four core state services in the governor’s proposed fiscal year 2026 budget will be 9.1% less in real dollars than it was way back in fiscal year 2000.

Those four core services are education, health care, human services and public safety.

The Center has been tracking this number for years. And although they didn’t mention it in their latest report, that 9.1% figure is actually a remarkable improvement. It’s also food for thought whenever you see claims that Illinois’ spending is at record levels. For core services, at least, we’re still far below where we were 25 years ago.

But that gap has closed a lot.

The fiscal year 2014 state budget’s core service expenditures (before the state budget impasse that lasted more than two years) were 28% less than in FY 2000, according to the Center at the time.

So, the “structural deficit,” as the Center calls this comparison to 2000, has fallen by more than two-thirds in real dollars since 2014.

Fiscal year 2022 ran from July 1, 2021, through June 30, 2022. The Center reported back then that expenditures on those four core services were 22.3% below that of FY 2000, after adjusting for inflation.

That means the structural deficit will fall by 59% in just four years, if the Center's predictions and the budget hold up through next June 30.

Using federal pandemic money to pay off billions in state debt was a huge help.

And the state pension funding problem, which has historically crowded out necessary spending, has stabilized. Yes, the payments grow every year, but they’ve stayed somewhere around 20% of the total budget for several years.

Pension payments in the FY 2016 budget were $6.7 billion. They’re budgeted this coming year at $10.6 billion. After inflation is calculated over that 10 years, that’s about a $1.75 billion increase in today’s dollars (about $175 million a year), and it will be lower than that by the end of June 2026 when the fiscal year expires.

Pritzker proposes additional $78 million for Tier Two pensions

Speaking of pensions, the governor has proposed spending an additional $78 million in the coming fiscal year to make sure the state doesn’t have a “safe harbor” problem with Tier Two retirees.

The state passed what’s called a Tier Two pension plan because the original plan — which had been grossly underfunded and overpromised for decades — was simply costing too much to be affordable. The plan reduced pension benefits in several ways for new hires.

However, under federal law, state pensions have to be at least equal to Social Security benefits. And when the state lowered benefits, at least some folks won’t receive that bare minimum when they retire.

The penalty for not meeting the minimum requirement is severe. All employees would have to be put into the Social Security system and the state would have to give those workers retroactive Social Security benefits for up to 10 years, which could be billions and billions of dollars.

In addition, new hires wouldn’t be contributing to the pension funds, which would deprive those systems of revenue.

The teachers’ unions, however, say they want to go well beyond that minimum requirement. Taking care of the safe harbor issue would benefit mainly high-wage employees like principals. They want more money put into the system to increase benefits, to encourage more people to become teachers in the first place and keep them on the job.

The Illinois Federation of Teachers released a statement last month saying the governor’s proposal was just “the beginning of a broader repair to a grossly unfair pension that hobbles Illinois’ ability to recruit and retain educators. Our members will continue to press for a proper and full legislative repair to Tier 2 pensions this session.”

The Illinois Education Association’s statement last month said it wants “a fix to Tier Two that allows all those who serve students in Illinois an equitable retirement and that entices people to stay in the profession.”

That proposal would cost a huge amount of money. A study done for the Commission on Government Forecasting and Accountability found that the union proposal would cost the state $1.13 billion extra this coming fiscal year.

The governor has never seemed enthusiastic about that plan, hence his $78 million proposal.

Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.

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