Pritzker to present budget as Illinois faces federal funding uncertainty
Gov. JB Pritzker will stand in front of the General Assembly on Wednesday in a familiar position: confronting tremendous uncertainty over the state’s financial future.
Pritzker will present his eighth budget as he seeks reelection to a rare third term and becomes a growing national presence as a possible 2028 presidential candidate and one of President Donald Trump’s loudest critics.
The Trump administration has put Illinois and other states whose leaders disagree with his vision in the crosshairs, targeting them for massive cuts to federal funding. In the last two months alone, that has included a $1 billion child care funding cut that’s temporarily been blocked by the courts and $100 million in threatened health care funding cuts.
The ever-changing federal funding landscape presents lawmakers and Pritzker with a murky picture of the future — one that can change as fast as the president can send a social media post or a judge can issue a restraining order.
But the state constitution requires lawmakers to pass a balanced budget, and Pritzker will outline his plan for one on Wednesday. His annual budget address sets up months of negotiations — mostly between supermajority Democrats. They’ll try to balance their desires to fund programs while revenues — both from the feds and the state’s base sources — are projected to flatten at best.
Rep. Kam Buckner, a top House Democrat budget negotiator from Chicago, said one of the goals of this year’s budget will be to play “defense.”
“It’s hard when the biggest variable in the budget is not something that you can control,” he said, referring to federal funding. “And with this president, the volatility isn’t a possibility; it’s a given.”
Pritzker and his team have already started setting expectations for a conservative budget, telling agency leaders in memos and signaling to legislators that it will be difficult for the state to fulfill funding requests this year.
Federal impacts
The Governor’s Office of Management and Budget estimated in October that lawmakers will have to close a $2.2 billion deficit for fiscal year 2027, which begins July 1. Much of that deficit is driven by the state’s spending exceeding projected revenue. But GOMB projected changes at the federal level are making the problem more challenging.
Pritzker’s budget office estimates income tax revenue for the state will be lower because of federal tax code changes and some administrative costs for food assistance programs will be required this year.
Economic conditions
It’s not just federal funding that presents a challenge for lawmakers — the overall health of the economy does as well. A forecast by Moody’s Analytics released last week set an ominous tone: “Illinois’ economy is in a precarious spot,” and a weak economy ultimately makes it difficult for revenue to naturally grow.
The forecast predicts employment will not grow or decline, and the economy will grow at a slower rate than other states because of outmigration, a shrinking tax base, and a massive long-term pension liability. Additionally, tariffs are hurting the state’s manufacturers, and rural areas are suffering from both tariffs and higher farming costs.
Health care costs to balloon
Lawmakers could also consider taking proactive steps to absorb new health care costs and cuts set to take effect in the coming years.
Under a provision in Trump’s “Big Beautiful Bill” — one that applies only to states like Illinois that expanded Medicaid eligibility under the Affordable Care Act — a 6% cap on the tax Illinois can charge health care providers will gradually be cut starting in FY28 until it reaches 3.5% in FY32.
When the lower cap is combined with a decline in federal aid for Medicaid, the state could lose $1.7 billion annually by FY31, according to the governor’s budget office.
Current-year changes
The October GOMB report also revealed the state was on track to run a small deficit in the current fiscal year ending June 30, largely because Congress made changes that will ultimately lower tax revenue flowing into Illinois.
In response, lawmakers decoupled the state’s tax code from the federal government in certain areas, which GOMB expects to reduce the deficit by $243 million. But the state still faces a $587 million deficit because of the federal tax changes.
Pritzker also warned lawmakers last year that if they want to increase spending for a certain program, they must come up with a corresponding cut. Pritzker has also opposed broad tax increases, such as statewide sales and income tax hikes.
Senate Republican Leader John Curran of Downers Grove said at a news conference earlier this month that he expects limited spending to continue in this year’s proposal.
“You saw the rollback on the health care for working-age population for undocumented immigrants last year,” Curran said. “That was something that the governor, in his budget address, readily admitted that it was a mistake to go down that road, and the state could not afford that.”
What lawmakers want
A group of progressive Democrats want to raise taxes substantially to fill gaps in the budget. The $4 billion tax package calls for taxing the appreciation of billionaires’ assets, a 10% tax on digital ads, increasing taxes on corporations’ offshore earnings, and closing loopholes in the corporate tax code.
Lawmakers said the hikes are necessary because businesses and wealthy Americans have benefited from tax policies in Washington.
“If we don’t fight back with taxing the ultra-wealthy, we’re going to continue to chop services in order to balance budgets,” said Sen. Karina Villa, a Democrat from West Chicago.
Rep. Amy Elik, a Republican from downstate Godfrey, said GOP lawmakers are worried Democrats will go to the taxpayers’ well for more money.
“They’re not even ashamed or embarrassed anymore to say we need to raise taxes,” Elik said. “And so when they’ve got so many people on board with that theory and concept, I’m very, very concerned.”