Illinois' budget blues were around long before Trump's cuts

Gov. JB Pritzker just put a $56 billion general fund budget proposal for fiscal year 2027 on the table. Of that amount, roughly $16.2 billion, or 29%, covers “hard costs” the state must pay, because they’re either required by law, such as debt service owed to bondholders, or contractual obligations.

That leaves $39.8 billion to fund services for the year, with 95% of those service expenditures targeted to the four core areas of education (pre-K, K-12 and higher education), health care (primarily Medicaid coverage for low-income families), social services and public safety.

As governors are wont to do, Pritzker made a point of emphasizing his fiscal accomplishments during the budget speech. Usually, when elected officials crow about their performance, there’s a fair bit of spin that has to be unwound before the reality of that performance is laid bare. Not so in this case. The data shows Pritzker has been a truly responsible fiscal steward.

Under Pritzker’s watch, the state has garnered 10 consecutive credit upgrades, which happen to be the first such upgrades for Illinois in the last 25 years. That’s a far cry from the eight downgrades Illinois suffered under his predecessor, Gov. Bruce Rauner, who left Pritzker an $8 billion backlog of unpaid bills and next to nothing in Illinois’ rainy day fund. Pritzker completely eliminated that unpaid bill backlog, built the rainy day fund up to $2.4 billion while also paying off some $12 billion in debt.

But Pritzker’s budget address wasn’t all sunshine and lollipops. Categorizing FY 2027 as a “challenging” budget year, Pritzker proposed increasing general fund service expenditures by less than “one-half of 1 percent” over last year, that is if you ignore inflation.

But just like in the private sector, inflation drives up the cost of funding services in the public sector. After adjusting for inflation, proposed FY 2027 spending for the four core services is actually about 1% less than this year. Illinois’ fiscal condition is so “challenging” that Pritzker had to include $649 million in new revenue-generating initiatives in his budget proposal, just to limit the year-to-year real spending cut to 1 percentage point.

The governor laid much blame for Illinois’ FY 2027 fiscal challenges at the feet of President Donald Trump, claiming the tax cuts, Medicaid cuts, and Supplemental Nutrition Assistance Program, or SNAP, cuts in the president’s “Big Beautiful Bill” will cost Illinois some $8.4 billion to backfill over the next five years. And that estimate actually understates the long-term problem. Beginning in FY 2028 and continuing thereafter, the average annual cost to Illinois of fully compensating for all the damage done in Trump’s "Big Beautiful Bill" hits $4.43 billion.

While it’s appropriate to blame Trump for fiscal difficulties his ill-conceived policies create for all 50 states, in Illinois, Trump’s shenanigans have simply exacerbated a longstanding “structural deficit” that’s historically plagued the general fund. Illinois’ structural deficit exists because state tax policy is so flawed it doesn’t align with the modern economy. Hence, general fund revenue consistently grows at a slower rate than needed to cover inflation-adjusted increases in the cost of maintaining service levels over time. Worse, Illinois unfairly overtaxes low- and middle-income folks, while under-taxing the wealthy.

And contrary to common belief, overspending hasn’t caused Illinois’ structural deficit. In fact, after inflation, spending on the four core services is 13% less under Pritzker’s FY 2027 proposed budget than it actually was under Republican Gov. George Ryan back in FY 2000. That’s problematic because current spending levels aren’t even adequate to cover existing needs. While space doesn’t permit listing all public services the data show are inadequately funded, two of the more compelling examples involve education.

Start with K-12. The good news is Illinois ties school funding to paying for educational practices the evidence shows actually improve student achievement. The bad news is K-12 funding is $3.2 billion less than what the evidence indicates is needed to provide every child a quality education.

Then there’s higher education. After inflation, proposed general fund spending for higher education in FY 2027 is 43% less than actual spending was in FY 2000. This disinvestment makes no sense. Why? Well, in 1979, a full-time worker with a bachelor’s degree earned 38% more than a high school grad. By 2020, that wage gap more than doubled to 85%. Underfunding higher deducation puts Illinois at a competitive disadvantage in the modern economy.

Fortunately, there are textbook approaches to tax reform that’d simultaneously eliminate the structural deficit and tax people more fairly. But for decades state politicians have avoided fixing tax policy, choosing instead to demagogue the issue. That scores political points but doesn’t solve problems.

Bottom line: Illinois will never overcome its structural fiscal challenges and invest adequately in core public services, until elected officials put politics aside and fix tax policy to work in the modern economy.

Ralph Martire is executive director of the Center for Tax and Budget Accountability, a nonpartisan fiscal policy think tank, and the Arthur Rubloff Professor of Public Policy at Roosevelt University.