State budget talks enter final week amid fears of congressional cuts

Illinois lawmakers have one week to pass a new state budget with little room for new spending and Congress presenting further challenges and uncertainty.

Revenue projections had already been declining as the spring session has progressed. Now, lawmakers who have long feared further federal cuts, are grappling with the U.S. House’s passage of a spending plan that Illinois’ Senate president warns would be “catastrophic for working families” — as well as state finances.

“There’s no state in the union that could survive the sorts of cuts they’re proposing to health care for working families,” Senate President Don Harmon, an Oak Park Democrat, told Capitol News Illinois about the bill, which still needs U.S. Senate approval.

The General Assembly has through May 31 to pass a budget with a simple majority vote before the threshold increases to a three-fifths vote on June 1. House Democrats approved a portion of last year’s budget with the minimum number of votes required to pass a bill after several Democrats dissented over spending concerns.

The state’s fiscal picture is even more challenging this year. The Governor’s Office of Management and Budget lowered revenue projections earlier this month for fiscal year 2026, which begins July 1, by $536 million from its February estimate, to $54.9 billion in revenue.

Gov. JB Pritzker’s introduced spending plan, which was proposed in February before the latest revenue projection cuts, called for a 3% increase in state spending in a budget totaling $55.2 billion. But outside of education, health care and pensions, spending was only projected to grow by 1%.

The revenue projection cut means lawmakers likely have even less room for spending increases than what Pritzker requested in February.

“The biggest thing that I’ve said to the caucus pretty consistently since Day One is that no one’s going to get everything they want, that we have to have reasonable expectations, that we have to balance the budget,” House Speaker Chris Welch, a Hillside Democrat, told Capitol News Illinois last week. “We’re going to spend what we bring in, no more.”

The challenge of balancing the budget was complicated even further Thursday when, in the early morning hours, the U.S. House passed legislation to enact much of President Donald Trump’s domestic agenda, which includes slashing federal spending on Medicaid, education and clean energy programs.

Medicaid, the health care program for low-income individuals that is jointly funded with state and federal dollars, is one of the largest categories of state government spending. The program is jointly funded with state and federal funds and provides health care coverage to more than 3.4 million people in Illinois, or about a fourth of the state’s population.

In fiscal year 2024, according to the Department of Healthcare and Family Services, the state received approximately $20 billion in federal matching funds for Medicaid. That represented about 62% of the program’s total cost.

But the legislation that passed the U.S. House Thursday morning would make substantial changes to the program that would both reduce the number of people covered by Medicaid and the amount of federal matching funds the state receives.

Illinois would also have to spend more on the Supplemental Nutrition Assistance Program, or SNAP, beginning in 2028. The bill would require states to pay for 5% of benefits and 75% of administrative costs, rather than 50% of administrative costs and nothing for benefits.

Other legislative reforms being considered this spring also come with budget implications, and many may be off the table for now, according to Harmon.

Lawmakers are continuing to work toward a funding solution to cover a $771 million funding gap for Chicago-area public transportation agencies in 2026. Despite being close to agreements on reforms for the agencies, funding remains undecided.

Pension reform has also been discussed to improve benefits for public employees who entered the system since 2011 and fix compliance with Social Security law.

Pritzker has said he will not look at major tax hikes to balance the budget and asked lawmakers in February to come up with corresponding cuts for any new spending they want. He also proposed about $400 million in tax changes to balance the budget.

But as progressive groups rallied in the Capitol Thursday in favor of $6 billion of tax increases they want lawmakers to consider, Republicans feared Democrats will be tempted to tap into taxpayers to fund larger spending increases. House Democrats reviewed possible tax increases in a closed-door meeting Thursday afternoon.

“The legislature has a great track record of using this time, squandering time for many months, and using the waning hours of the legislative session to enact gigantic changes that have real world consequences for taxpayers,” Spain told reporters.