As Trump administration holds back funding, new taxes could be in store for Illinois

As I write this, Gov. JB Pritzker is preparing to give his annual budget address. It’s an unenviable task.

Earlier this month, the Governor’s Office of Management and Budget released a report showing federal tax cuts caused a $587 million reduction in state revenues this fiscal year.

The governor announced last month that he was withholding $482 million in state spending to help mitigate federal attacks on the state budget.

It’s not all horrible news. The latest monthly revenue report from the Legislature’s Commission on Government Forecasting and Accountability showed January revenues from state sources were up, according to the commission.

Personal income tax receipts increased 2.1% in January compared to the previous January (which is still below inflation). Corporate income tax revenues rose by 3.5% after months of lagging. Gross sales tax revenues increased by 3%.

Estate tax receipts are up 60%, or about $200 million, so far this fiscal year compared to last year at this time, the commission reported. The commission said asset valuation increases, including the stock market, likely contributed to the increase.

So far this fiscal year, revenues are up a bit more than $1 billion, or 3.5%, compared to the same period in fiscal year 2025.

But there is that big federal downside. According to the Commission on Government Forecasting and Accountability's report, federal revenues experienced a “notable decline,” falling $169 million, or almost 36% in January, compared to the same month last year.

During the fiscal year to date, federal sources have dropped by about 8%. But January marked the third straight month for federal revenue declines, so it may be accelerating.

“To meet initial fiscal year estimates, Federal Sources will need to show meaningful improvement over the remaining five months,” the monthly report declared. The fiscal year ends June 30.

What else will White House cut?

And nobody knows what tomorrow may bring. Heck, by the time you read this, something new could’ve happened. At any given moment, White House operatives could try to pull funding for whatever program they can dream up.

Last week, the Trump administration announced that it was canceling $100 million for local public health grants in Illinois.

Illinois was one of just four Democratic-led states that were targeted for the cuts.

According to the Illinois Department of Public Health, some of the cuts were for “HIV Prevention and Surveillance, which includes programs to expand HIV testing to cover more people who may not be aware they have HIV; linking newly-diagnosed patients to appropriate care; expanding access to PrEP, medication which can reduce the spread of HIV; and conducting partner notification.”

Attorney General Kwame Raoul quickly won a temporary restraining order last week, giving the state a 14-day reprieve.

Raoul has so far fought off numerous federal attempts to withhold money from the state. But there’s just no way of knowing what could happen as the litigation moves up the federal judicial food chain.

In other words, there is just no way to craft a reliable fiscal plan in this environment.

My associate Isabel Miller wrote a subscribers-only story last week for my newsletter about how more than 40 Democratic members of the Illinois House and Senate have been meeting weekly to come up with a plan to find some government efficiencies and create new revenue streams to help the state meet its obligations.

“We must lean into transforming our tax system and creating sustainable revenue to protect people and the services we all depend on,” the Affordability and Tax Justice Coalition declared in a statement.

I was told that six ideas are under discussion, and four have been introduced into bill form: A digital advertising tax — Senate Bill 3353/House Bill 4894); A billionaire wealth tax (Senate Bill 3376/House Bill 5215); Expanded tax haven reporting (House Bill 5318/Senate Bill 3486) and closing corporate loopholes (Senate Bill 3796/House Bill 5125).

As Isabel noted, House Speaker Emanuel "Chris" Welch has also been promoting a tax on millionaires, which has heartened the progressives.

Sen. Graciela Guzmán, D-Chicago, sits on the coalition’s executive committee.

“I think right now the growing sentiment is ‘Let’s get as much revenue as possible,’" Guzmán told Isabel.

Guzmán also said the coalition is pressing revenue advocates for specifics, including projected revenues for each proposal, constitutionality and implementation.

Too often, these groups just throw together proposals and hope for the best. But Guzmán said they’re focusing on whether these ideas can pass both chambers and be signed into law.

"The roll call is something that we keep talking about every week because we know the votes that we have to get up to in any one of these proposals," Guzmán told Isabel.

A lot is riding on those efforts.

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