Illinois

State Fiscal Briefs

April 2021

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Illinois’s budget basics

According to the National Association of State Budget Officers (NASBO), Illinois’s total expenditures in fiscal year (FY) 2020 were $77.5 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Illinois’s combined state and local direct general expenditures were $123.0 billion in FY 2018 (the most recent year census data were available), or $9,667 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.

Illinois’s largest spending areas per capita were elementary and secondary education ($2,146) and public welfare ($1,835). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Illinois’s combined state and local general revenues were $124.3 billion in FY 2018, or $9,768 per capita. National per capita general revenues were $10,071. Illinois uses all major state and local taxes. Illinois’s largest sources of per capita revenue were property taxes ($2,277) and federal transfers ($2,013).

Illinois’s politics

Governor J.B. Pritzker, a Democrat, was elected in 2018 with 55 percent of the vote. The next gubernatorial election is in 2022.

Democrats control both the House of Representatives (73 Democrats to 45 Republicans) and Senate (41 Democrats to 18 Republicans), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Illinois. All Illinois House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve a combination of two- and four-year terms during each decade’s legislative district apportionment cycle. This 2-4-4 term system ensures all Senate seats are up for election after new legislative district boundaries are drawn. All senators are therefore up for election in 2022.

Illinois’s budget institutions, rules, and constraints

Illinois uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. The state does not have any tax or expenditure limits (a temporary expenditure limit expired in 2015), but there are limits on total authorized debt incurred by the state (but not on debt service).

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Illinois’s recent fiscal debates

  • Illinois is one of only eight states with a flat individual income tax, meaning the state levies a single rate (4.95 percent) on all taxable income. In his 2019 state of the state address, Governor Pritzker called for a graduated income tax, saying the progressive tax is a “fair tax” to improve the state’s fiscal sustainability and promote equitable growth. The legislature approved a constitutional amendment in May 2019 allowing a graduated income tax and passed legislation legislation in June creating six income brackets with tax rates ranging from 4.75 percent to 7.99 percent. For the law to take effect, however, voters must approve a ballot amendment in November 2020 to accept the change to the state’s constitution.
  • In June 2019, Illinois legalized marijuana and established a marijuana tax with the Cannabis Regulation and Tax Act. Illinois is the first state to tax marijuana based on each product’s amount of THC (tetrahydrocannabinol, the drug’s principal psychoactive chemical), with a 10 percent rate levied on lower-potency products and a 25 percent rate levied on higher-potency products. The Illinois Department of Revenue forecasts tax revenues of $140 million in FY 2021, $254 million in FY 2022, and $324 million in FY 2023.
  • Governor Pritzker’s budget presentation called Illinois’s pension debt “the state’s biggest fiscal challenge.” His predecessor, Governor Bruce Rauner, also said the state’s public pension system was the state’s biggest fiscal challenge. Contributions to pensions are taking up a growing share of the state’s budget. According to the Pew Charitable Trusts, Illinois increased its pension contributions 424 percent between 2007 and 2017. But because the state has underfunded its pension for so long, Illinois still has one of the nation’s worst-funded pension systems: it has less than 40 percent of the assets it needs to fund its pension liabilities. Rauner unsuccessfully tried to shift some pension obligations from the state to the school districts. Pritzker has not signed any major changes to the state’s pension system; he instead plans to use funds from the new marijuana tax and progressive income tax to support the system.

Illinois’s current budget

Governor Pritzker released his FY 2021 budget proposal in February 2020. The proposed budget included $42 billion in general-fund spending, a 4 percent increase from FY 2020. The proposed budget assumed a budget surplus for FY 2021 and allocated $100 million toward the state’s rainy-day fund.

Illinois enacted its FY 2021 budget in June 2020. The enacted budget allocated $42.9 billion to general fund spending, a $900 million increase from the proposed budget. The enacted budget relied on over $5 billion from federal CARES Act funds, borrowing from state funds, and cuts to some programs (including transportation) to prevent further spending reductions. The enacted budget also permitted the state to borrow up to $5 billion from the Federal Reserve’s Municipal Liquidity Facility if additional federal assistance dollars do not materialize. (The state borrowed $1.2 billion in June to support the FY 2020 budget.)

Governor Pritzker released his FY 2022 budget proposal and gave his State of the State address in February 2021. The governor’s plan includes $41.6 billion in general fund spending and $95.5 billion in total spending. The plan reduces state spending roughly 3 to 4 percent, including budget cuts for economic development programs and health care services. The proposal also institutes a hiring freeze and keeps K–12 public education spending flat. Still, even with the cuts, the plan relies heavily on federal funds to balance the budget. The governor is not proposing any tax rate increases, but he did put forward a series of corporate income tax changes (what the governor calls “closing loopholes”) that would raise roughly $900 million. In his speech, Governor Pritzker said, “This will be one of the most challenging budgets this government has ever had to craft.”

For more on Illinois’s budget, see