Illinois’ latest budget asks taxpayers to pay more for Springfield’s spending

As a business owner, imagine signing a 3,700-page contract in the middle of the night after receiving it only hours earlier.

That is how Illinois lawmakers wrapped up the spring legislative session, passing a record-high $55.9 billion budget at 4:13 a.m. after some line items were provided to them just hours before.

Year after year, lawmakers wait until the final hours of session to assemble massive budget packages that put businesses and residents on the hook for spending that few people actually reviewed. The process lacks accountability and can involve gimmicky maneuvering.

Supporters are calling the fiscal 2027 budget “balanced,” but it relies on more than $800 million in tax hikes, $185 million in fund sweeps and other moves to make those numbers work. It now heads to Gov. JB Pritzker, who has increased state spending by roughly $16 billion since taking office.

Here’s what’s in this year’s budget.

Tax hikes

The budget extends limits on net-operating-loss deductions, generating an estimated $300 million in additional corporate tax revenue. It also creates a new fee on social media companies, a new tax on cryptocurrency transactions, a tax on fantasy sports operators and a targeted digital advertising tax that lawmakers estimate could generate anywhere from $200 million to more than $800 million if it survives expected legal challenges. Another provision eliminates a tax benefit for investors in qualifying startups and small businesses.

Illinois already has the third-highest corporate income tax rate in the nation. At a time when neighboring states are competing aggressively for jobs and investment, lawmakers chose to make Illinois a more expensive place to do business.

Increased spending

Lawmakers temporarily suspended the scheduled July increase in the state gas tax, which would have added 1.3 cents per gallon to bring the total to 49.6 cents per gallon. It sounds like relief until taxpayers look at the rest of the budget. Illinois remains one of only five states that impose a general sales tax on gasoline purchases, and lawmakers plan to transfer roughly $150 million in excess gas sales tax revenue into general state spending.

The budget also creates the FRESH program, providing one-time $400 payments to individuals who lose SNAP benefits because of changes to federal work requirements. The program will cost taxpayers an estimated $60 million to $70 million.

Meanwhile, lawmakers approved a pay raise for themselves. Legislative salaries will increase by more than 3%, pushing base pay above $101,000 annually.

Some bright spots

Lawmakers rejected Pritzker's proposal to cut Local Government Distributive Fund payments by $60 million. Preserving municipalities’ current share of state income tax revenue helps local governments avoid additional pressure to raise property taxes.

The General Assembly also showed restraint by declining to rush through a Chicago Bears stadium proposal during the final hours of session. The Bears’ search for a new home has dragged on for several years, and Illinois’ difficult business climate has not helped. But lawmakers were right not to approve a complicated package before taxpayers, businesses and surrounding communities had a chance to review the details. If a stadium deal moves forward later this year, it deserves a full public debate.

Illinois’ biggest financial challenge remained untouched. The state will contribute nearly $12 billion to its pension systems next year, yet actuaries say they need $17 billion a year to effectively chip away at a pension debt of $143 billion. The budget does extend the state’s successful pension buyout program, which has helped reduce long-term liabilities, but the state continues to avoid broader reforms that would put it on firmer financial footing.

Before asking residents and employers to pay more, lawmakers should take a harder look at spending growth, special-interest programs and other areas where costs continue to rise.

Illinois families and job creators deserve a budgeting process focused on transparency, accountability and long-term financial stability instead of another round of last-minute tax hikes.

• Matt Paprocki is the president and CEO of the Illinois Policy Institute.