Federal funding cuts, policy changes will be job killers for Illinois

“First, do no harm” is the guiding principle of the medical profession. Most of us would probably like to see it applied to public policymakers as well.

The past year has seen massive changes at the federal level. Steep cuts were made across agencies. Hundreds of billions of dollars in federal spending that had been authorized by Congress was rescinded, canceled, suspended, or paused. We endured the longest federal government shutdown in our nation’s history. The so-called “One Big Beautiful Bill Act,” the main piece of legislation passed this year, brought about major changes in the health, food, and energy programs on which tens of millions of Americans rely for care, affordability, and their livelihoods.

So what does it mean for Illinois?

First, some context. Illinois is a “donor state.” That means we send the federal government far more in taxes than we get back in expenditures or investments. More specifically, our residents send at least $6 billion more to Washington, D.C., in taxes every year than we get back, ranking 46th nationally in our return on federal investment.

And that was before Elon Musk and the Department of Government Efficiency’s (DOGE) cuts, the budget reconciliation law passed on a party-line vote, and the White House began targeting “blue states” by suspending specific projects — including 33 Illinois energy projects and two major mass transit modernization projects in Chicago.

Researchers at the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign recently endeavored to analyze and forecast the cumulative impact of these events on the Land of Lincoln.

All told, more than $8 billion in federal funding reductions were passed this year that will take hold either immediately or by January 2029. These cuts will shrink our state’s $1.2 trillion economy by $10 billion annually, reduce state tax collections by more than $1 billion per year, and cost about 86,000 Illinoisans their jobs.

And that’s not all.

Changes to Medicaid eligibility, cuts to the Supplemental Nutrition Assistance Program (SNAP), and the expiration of premium credits for the Affordable Care Act coverage are expected to cost around 400,000 of our neighbors their health insurance, spike health care premiums, and eliminate food assistance for more than 216,000 people — mostly children and people with disabilities. There also are hundreds of millions of dollars in cuts to education, energy investments, and programs that control infectious disease outbreaks.

It’s important to understand that not all the cuts eliminate spending entirely. In many cases, such as with SNAP, higher education, and ACA credits, they just shift burdens onto our cash-strapped state government, public universities, and working families in the form of higher out-of-pocket costs.

These changes will shrink employment more than they will shrink government. While federal employment will decline by a few thousand positions, the lion’s share of job losses will be among skilled construction workers, educators, and the spillover effects of reduced consumer spending across all sectors of the economy. Worse, the strain of reduced state tax revenue and more mandated costs will reduce the state’s ability to make investments in infrastructure, health care, and education that have historically been proven ways to catalyze private sector job creation.

Fortunately, if the past year has taught us anything, it’s that no policy is forever. For example, as tariffs drove consumer costs higher and the administration’s public approval to historic lows, we’ve seen recent reversals. That certainly could happen again.

But as any good doctor will tell policymakers, the standard of care should be to first do no harm. And if the prescription kills your job, your health care, your school, or the foundational investments that fuel a growing economy, it may be time to seek a second opinion.

• Frank Manzo is an economist at the nonpartisan Illinois Economic Policy Institute.