Gov. JB Pritzker is heading into his seventh funds with some key strain factors, together with the potential want for extra bills to fend off President Donald Trump’s administration — and mounting monetary burdens just like the state’s pension obligation and well being care prices.
The Governor’s Workplace of Administration and Funds in November projected a $3.2 billion deficit — and warned that “the power to fund new applications shall be severely restricted.” Pensions, faculty funding and the state’s Wet Day Fund stay prime priorities on this yr’s funds.
However Deputy Gov. Andy Manar in November additionally warned in a memo to state companies {that a} new Trump administration is creating “further uncertainty” relating to federal funding and the financial outlook.
“We have to take steps to make sure that the State is in place to deal with any financial disruptions that will come up,” Manar wrote.
Pritzker will define his budgetary priorities in an deal with on Feb. 19 on the Illinois State Capitol. Thus far, he has hinted that elevating taxes to stability the funds is a last-resort proposition. However issues may change.
“It’s essential that we dwell inside our means on this state, and that we not resort to tax will increase as a option to, you already know, to stability the funds,” Pritzker stated final month.
Uncertainty over Trump and federal funding
With Pritzker again on his bully pulpit to voice his displeasure at Trump and Elon Musk’s hacks to the federal authorities, the Democratic governor is undoubtedly involved about what cuts to Medicaid will imply to the greater than 3 million Illinois residents who depend on it for well being protection.
Republicans in Congress are discussing a plan to slash the Inexpensive Care Act’s Medicaid enlargement — which might decrease prices for the federal authorities, however improve prices for states. The cuts are being floated as a method to assist fund Trump’s tax minimize and his immigration crackdown invoice.
However Illinois has a “set off” legislation that may mechanically finish Medicaid expansions within the state if federal reimbursement falls beneath 90% — that means greater than 900,000 Illinoisans would lose protection. And the state doesn’t have an answer ought to there be a shortfall.
The governor may also be taking a look at elevated requests for funding at Illinois Lawyer Normal Kwame Raoul’s workplace, which has already filed 4 lawsuits in opposition to the Trump administration.
Raoul nodded an enormous sure when Pritzker was requested by a reporter final month about whether or not his workplace wanted extra funds for authorized bills.
The necessity for pension fixes
One other funds means one other huge cost to Illinois’ desperately underfunded pensions, this yr to the tune of practically $10.6 billion as required by state legislation, which requires a fifth of the funds to go towards liabilities that also prime $140 billion.
Scores companies have counseled the governor’s workplace for its progress, however requires pension reform may problem Pritzker’s aim of main the state to full funding by 2048.
State staff employed since 2011 have much less beneficiant advantages than longer-tenured staff, even beneath federal requirements for Social Safety for which they aren’t eligible.
A proposal to convey so-called Tier 2 pensions as much as federal ranges is estimated to value an extra $5.6 billion over 20 years, however a earlier union-backed proposal would value a number of instances that quantity.
“If we don’t repair our system to satisfy that Social Safety minimal, it’s going to value taxpayers in Illinois excess of it ought to, as a result of we may find yourself getting sued and penalized and having to place again Social Safety-level funding into the pension system,” Pritzker stated final month. “That’s not a good suggestion.”
Transit reform on the horizon
As lawmakers hammer out a funds by the spring, they’ll even be deciding the way forward for the Chicago space’s transit companies.
With federal COVID-19 reduction {dollars} drying up, the CTA, Metra, Tempo and Regional Transportation Authority face a mixed funds shortfall of greater than $750 million beginning in 2026, prompting requires the state to step in with upwards of $1 billion in further annual funding, or else danger widespread service and job cuts.
Extra pores and skin within the recreation for the state ought to include extra oversight, many lawmakers have argued, with some suggesting the companies ought to be merged below a single state physique.
The newest proposal from a coalition of influential labor unions would give the RTA extra leeway over the opposite companies however maintain all of them autonomous whereas introducing a brand new system-wide police power, amongst different incremental reforms.
However it’s not clear how a lot that may value — or the place the cash would come from. Transit funding is separate from the overall income fund that lawmakers hash out within the state funds, however they’ll must take transit fiscal pressures into consideration wherever they land on reforms.
New income coming quickly?
Pritzker’s workplace for months has been urging company heads to seek out value cuts, suggesting Democrats received’t have the ability to tax their option to a balanced funds as they did final yr with about $1 billion in new income by a patchwork of tax code modifications.
However some lawmakers say there’s more cash to be squeezed from Illinois’ sprawling playing trade, this time by legalizing web playing to permit individuals to play the slots, blackjack, poker and extra on their cellphones.
That might generate an estimated $450 million for the state, based on supporters within the sports activities betting trade who have been slapped with huge Illinois tax hikes final yr, however would profit from on line casino video games slotting easily into their apps.
Opponents argue so-called iGaming would increase playing dependancy in a state that has 16 casinos and the most important video gaming terminal community on the planet.
Authorities finance consultants on the Civic Federation say the state must make “a holistic re-evaluation of the state’s fiscal construction and undertake a extra strategic method to taxing and budgeting.”
That features increasing the state gross sales tax to providers like dry cleansing and plumbing. Illinois at the moment taxes 29 varieties of providers; on common, different states tax 62 providers, based on the federation. An enlargement may increase about $2 billion, they estimated.
The federation additionally referred to as for a scientific evaluation of tax exemptions and a consolidation of particular funds.
“The state has completed admirable work stabilizing its fiscal state of affairs inherited from years of unsustainable funds and tax practices,” Civic Federation president Joe Ferguson stated in a press release. “But when Illinois lawmakers need to get the state again on observe, they should transfer past marginal stabilization to holistic optimization and start to take action now.”
