Illinois lawmakers pass $55.2B budget with new taxes, immigrant health cuts, no transit funding
Experts say ongoing Chicago-area public transit budget shortfall could impact jobs, commuters
SPRINGFIELD, Ill. -- Giving almost no time for public review, Illinois Democrats pushed through a $55.2 billion budget for next fiscal year late Saturday, bolstering coffers with new taxes on sports bets, nicotine products and businesses.
The $55.2 billion spending plan is supported by $55.3 billion of revenue, including just over $1 billion in new taxes and revenue changes.
It is a budget that is technically balanced, but it may be more significant for what is not in it than what is. Namely, an agreement on how to pay for the more than $770 million dollar shortfall the Regional Transit Authority is facing by year's end.
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The four bills making up the budget and capital spending plan, were part of a flurry of thousands of pages of legislation that went from introduction to passage in the final 48 hours of the legislative session.
The budget marked a roughly 3.9% spending increase from the current year, while Republicans criticized it for containing few cuts. It raises about $500 million more in new revenue than what Gov. JB Pritzker proposed in February to make up for declining base revenues.
I cannot overstate or understate the importance of how quickly [a transportation funding plan] needs to happen... It's something that is going to affect whether you use public transportation or not.Dr. P.S. Sriraj, UIC Urban Transportation Center director
The minority party also aired frustration with supermajority Democrats for providing next to no time for public review of the massive spending plan and other major bills.
"We're rushing this process like we always do. 'Let's hide this stuff. Let's hide it so that the public doesn't see it until it's too late,'" Rep. John Cabello, R-Machesney Park, said.
Democrats said it was the best budget they could manage in a difficult year. To address potential uncertainties stemming from federal policy changes, they gave the governor authority over a new $100 million "emergency" fund. And they frequently lobbed criticisms at President Donald Trump and Republicans in Congress.
"I am very pleased to be able to present a balanced budget crafted to be fiscally and socially responsible, because we see the decisions made in Washington right now are neither," House Majority Leader Robyn Gabel, D-Evanston said. "Erratic leadership in Washington has affected our economic outlook, our revenue projections, and even threatened federal funding for our most crucial services."
The GOP also took issue with the tax increases, although the measure did not raise or create new sales, income or service taxes.
Instead, the measures expand state taxes on foreign and out-of-state income for businesses, raise tax rates on tobacco, vapes and sports gambling, and sweep fund balances from several lesser-known and utilized state funds.
The spending measure, Senate Bill 2510, passed the House 75-41 just before 10 p.m. The Senate followed around 11:30 p.m. with a 34-23 vote. The revenue and tax changes, House Bill 2755, and the budget implementation bill, House Bill 1075, both passed with relative ease before the constitution's midnight deadline and only Democratic votes as well. Gov. JB Pritzker issued a statement saying he would sign it.
Governor Pritzker congratulated himself on Sunday for what he said is his seventh consecutive balanced budget.
"We've been prudent this year about making cuts to government where we thought we could," Pritzker said. "There are hundreds of millions of dollars of cuts."
Another spate of tax increases included in a transit governance overhaul bill surfaced late but sputtered. The failed measure would have added a $1.50 fee on food and package deliveries and taxed electric vehicle charging statewide among other changes. Talks on that bill could resume later this year.
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Republicans and government watchdog groups are criticizing the lack of transparency of a 3,000-plus page bill that was not introduced until just hours before it was voted on.
"Anyone who says they knew exactly what they were voting for is not telling you the truth," Civic Federation President Joe Ferguson said.
According to Ferguson, the budget's main challenges lie with the legislature's failure to pass a transit reform bill and address a $771 million dollar budget hole faced by the RTA now that COVID-19 funding has gone away.
"We're out of track," Ferguson said. "The transit service boards the RTA, Pace, Metra and the CTA are going to go back into doom and gloom scenarios to scare the bejeesus out of everybody."
Dr. P.S. Sriraj, the director for the University of Illinois Chicago's Urban Transportation Center, said he anticipates even more impacts that extend to commuters.
"I cannot overstate or understate the importance of how quickly this needs to happen... This could have some really serious implications across the board," Dr. Sriraj said. ""It's something that is going to affect whether you use public transportation or not... If they are leaning on public transportation now, they are going to be on the roads, which is going to increase travel times, increase mental anguish, more other road rage issues. There's going to be a whole slew [of impacts], including accidents."
Governor Pritzker on Sunday said legislators have more work to do to get everyone on board a single track transit funding fix. He also said lawmakers need to address transit funding as fast as possible, expressing confidence that they will do so over the course of the summer and early fall.
"We need transit reform," Pritzker said. "We need to make sure were addressing the needs of commuters not just in the city of Chicago or Cook County or in the collar counties, but all across the state."
Once the budget was passed, the Regional Transit Authority issued a statement, in part, applauding the General Assembly's efforts while underscoring the need to find funding as its agencies prepare budgets for the upcoming fiscal year, which it says can only include the funding they are "confident" to receive.
New taxes on vaping, gaming, deliveries
The revenue bill creates a tax of 25 cents per wager for a sports betting licensee's first 20,000 wagers accepted, and 50 cents per wager after that.
Consumers will also see new taxes on tobacco products. The tax rate will rise to 45% from 36%. Vape products and nicotine pouches would also now be included under the tax.
The revenue plan amends state law to tax sales from all businesses that transact in the state, rather than only businesses with a physical presence in Illinois. The plan also eliminates a "safe harbor" exemption for businesses that move money outside the state.
Businesses that move profits to other countries would also be subject to the state's corporate income tax. The federal government currently taxes half of income moved offshore and Illinois would tax the other half under the revenue plan.
Businesses outside Illinois that sell $100,000 or more to people in the state must also collect Illinois sales taxes even if the business doesn't have a physical location in Illinois. This would apply to businesses like Amazon.
"I will not support this betrayal of hard-working Illinoisans," Sen. Don DeWitte, R-St. Charles, said. "And if you care about the people who sent you here, if you truly represent them, you'll vote no too. Enough is enough. It's time for this body to stand with taxpayers, not stand up against them."
Another source of new revenue is a delinquent tax payment incentive program designed to help the state recuperate overdue tax payments. It will generate $228 million, Rep. Will Guzzardi, D-Chicago, said.
The state would also pause the final transfer of motor fuel sales tax revenue to the road fund in order to free up $171 million, according to the governor's office's estimate.
A separate bill designed to lower prescription drug prices calls for levying a fee on pharmacy benefit managers based on the number of patients they insure. Money from that fee would go into a fund for the Department of Commerce and Economic Opportunity to award up to $25 million a year in grants to independent pharmacies and pharmacies located in rural counties. The remaining money would go to the state's general revenue fund.
The measure also extends the state's Hotel Operators' Occupation Tax to short-term rentals like Airbnb and Vrbo.
Immigrant health cuts
A controversial program that provides health insurance to more than 30,000 noncitizens between ages 42 and 64 will be cut in FY26. The program's elimination saves the state $330 million, but a $110 million program for seniors will remain in place.
Together, the two programs have cost the state at least $1.6 billion, according to an audit released in February, far exceeding budgeted costs for the program.
"We had to make some tough decisions here. That program grew at greater rates, financially, than we thought it would, and we had to make some hard decisions," Gabel said.
Federally Qualified Health Centers are set to receive $40 million in the budget. The centers provide health services to low-income and uninsured people. Democrats touted that increase to provide care for immigrants who would have qualified for the health care program.
Illinois still risks losing some Medicaid funding under a proposal in Congress that threatens to slash reimbursements for states that provide health insurance to people illegally in the United States. But Gabel noted it's possible those reductions won't take place until 2027.
The budget also increases funding for safety-net hospitals with federal Medicaid funding cuts possible.
"We would not have suffered this problem had we not had the Trump slump affecting us," Pritzker said. "There are $500 million of reduced revenues to the state of Illinois as a result of what Donald Trump has done."
Education spending
The state's evidence-based funding model for K-12 schools calls for $350 million in additional funding each year, with a portion of that going to a property tax relief fund and the rest directly to schools. The proposed budget fully funds the K-12 education portion at $307 million but does not add $43 million in property tax relief funds, according to Democratic leaders.
Funding for the Illinois Community College Board would also decrease by $24 million, mostly because lawmakers reduced spending on a workforce development grant that Democrat leaders said was not being fully utilized.
Funding for state universities would only increase by 1%. Pritzker proposed a 3% increase for higher education even as most other areas of his budget would've increased by 1%. Senate Democrats' budget leader Sen. Elgie Sims, D-Chicago, said the budget allows for an additional 2% increase in FY26 if the federal government eliminates substantial funding.
Pensions
Despite more than a year of discussions, Illinois lawmakers did not tackle pension reform this spring. Illinois' Tier 2 pension system is likely out of compliance with Social Security's "safe harbor" law that requires pension benefits to be at least equal to Social Security.
Part of the budget package created a new Tier 2 reserve fund that can be accessed if there are violations of the "safe harbor" law. Lawmakers appropriated $75 million for the fund this year, in line with Pritzker's proposal.
'Emergency' fund, raises, more
Notably not in this year's budget is an increase to the "rainy day" fund. Pritzker has taken pride in the fund's increases in recent years, as it's grown to a balance of $2.3 billion, up from less than $60,000 when Pritzker took office. The FY26 budget would suspend the monthly transfer for one year, freeing up $45 million for general fund use.
The budget package also establishes a new $100 million fund that the governor can tap into "in the event of unanticipated delays in or failures of revenues." The measure, an apparent nod to the uncertainty of federal funding amid ongoing congressional budget negotiations, will come from money swept from other funds.
"That will allow us to respond to actions by the federal government and challenges that present themselves and costs that have been diverted from the federal government to the state government," Sims said in a committee hearing.
The attorney general's office would get $116 million from the general fund. Attorney General Kwame Raoul asked lawmakers to boost funding for his office as he engages in a growing number of lawsuits against the Trump administration. Raoul was hoping to receive $120 million in funding.
Direct service providers are in line for an 80-cent per hour wage increase, but Republicans said calling it a funding increase is "sleight of hand," because the measure would also reduce work hours for DSPs by the hundreds of thousands. That makes the increase negligible, Sen. Chapin Rose, R-Mahomet, said in committee.
"It's not a great budget, but it is a good budget and it is the budget we need for this very difficult moment," Rep. Lindsey LaPointe, D-Chicago, said.
Lawmakers will see their salaries rise as part of the budget, going to a $98,304 base salary from roughly $92,000. That's an annualized rate of increase that is set by law.
"You raised our pay, you gave yourselves hundreds of millions of dollars of our taxpayers funds to spend on your pet projects," Rep. Amy Elik, R-Godfrey, said. "So I simply don't believe you anymore that you ever intended to be fiscally careful."
No Bears stadium funding
Lawmakers did not appropriate funding for the Chicago Bears to build a new stadium. But NASCAR would be the recipient of a $5 million grant ahead of the sport's third downtown Chicago race in July, and the PGA Tour would receive a $1 million grant as part of hosting the 2026 President's Cup in DuPage County. Those were two economic development measures criticized by Republicans during the Senate committee hearing.
The budget also contains $200 million to prepare unused state properties to be repurposed for development, Sims said. Lawmakers removed another $300 million that Pritzker had sought in spending aimed at offloading surplus property.
Gabel said the state's employee management department has negotiated more than $100 million in health care cost savings as well.
Any remaining federal pandemic relief funding would also be sent to recipients that have not received payments in previous years before the funding expires in 2026.
ABC7 Chicago's Michelle Gallardo and Cate Cauguiran contributed to this report.
Jade Aubrey contributed to this report.
Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of print and broadcast outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.
