Illinois Governor’s State of the State and FY 2026 Budget Proposal Summary
Third Reading Consulting Group
On February 19, Gov. J.B. Pritzker gave his annual State of the State and budget address. He outlined priorities for the Stateof Illinois in FY 2026 while highlighting the state’s fiscal successes under his leadership. Gov. Pritzker revised his FY 2025 revenue forecast to $53.9 billion, an increase of $421 million from his office’s November 2024 forecast, due to strong personal income tax and sales tax collections. Given the positive revenue adjustment, he proposed a total of $650 million in supplemental appropriations and transfers in FY 2025: a $550 million FY 2025 supplemental appropriations package and $100 million proposed transfer of funds to Fund 611. Assuming the supplemental appropriations and transfers occur, the state projects to have an $8 million surplus in FY 2025.
While the Governor’s Office of Management and Budget (GOMB) projected a $3.2 billion budget deficit in November, Gov. Pritzker revised those estimates to a balanced FY 2026 budget proposal. His FY 2026 budget proposal estimates $55.453 billion in General Funds revenues and $55.234 billion in General Funds expenditures, leaving an estimated $218 million surplus. $154 million of the projected surplus would be reserved for a contribution to the Budget Stabilization Fund (rainy-day fund). The budget proposal fully funds the state’s $10.6 billion FY 2026 statutorily required pension contribution and reserves $78 million to make an additional pension contribution to address the Tier 2 Social Security safe harbor issue. While not explicitly mentioned in the FY 2026 budget address, Gov. Pritzker left the door open to his proposal from last year’s budget address to extend the long-standing 90% funding in FY 2045 pension funding ramp to 100% funding in FY 2048. This would be accomplished by earmarking revenues from expiring bond obligations in FY 2030 and FY 2033 to pensions.
Projected General Funds revenues are up 2.9% (or $1.553 billion) over GOMB’s most recent estimate for FY 2025. Relative to the enacted FY 2025 budget, revenues are projected to increase by 4.08% (or $2.17 billion). The revenue forecast benefits from an estimated $489 million in revenue increases: $198 million General Funds increase from a new Delinquent Tax Payment Incentive Program, $171 million from pausing the final shift of state sales taxes on motor fuel purchases to the Road Fund, $100 million from the realignment of tax treatment for table and electronic games at casinos, and $20 million from eliminating the 280E state-level deduction for cannabis industry business expenses.
On the spending side, total General Funds expenditures are up 2.5% (or $1.3 billion) over GOMB’s most recent FY 2025 estimate, which includes $650 million in proposed supplemental appropriations and transfers. Relative to the enacted FY 2025 budget, spending is projected to increase 4.07% (or $2.16 billion). 75% of all spending increases result from three items: $350 million increase to the Illinois State Board of Education’s (ISBE) evidence-based funding formula for K-12 schools, $436 million increase in pension spending, and $738 million increase in medical expenditures. When factoring out these three increases, overall spending is up less than 1% over the enacted FY 2025 budget.
The General Assembly will pass a final budget before they are scheduled to end on May 31.