While deficit looms in next year’s budget, current-year revenues remain
on track
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[January 16, 2025]
By Ben Szalinski
SPRINGFIELD — Revenue returns remain on track halfway through Illinois’
budget year, though it’s next year that is causing concern in the
Capitol.
The Governor’s Office of Management and Budget projects a $3.2 billion
deficit for the fiscal year that begins July 1, and the number one task
facing Gov. JB Pritzker and the new General Assembly that was seated
last week will be to eliminate it.
Pritzker is slated to give his budget address on Feb. 19, facing the
largest projected deficit entering a spring session since 2021, when the
pandemic hurt state income – though federal stimulus funds and a strong
economic recovery helped erase the gap that year.
Since then, the state has enjoyed more robust revenue with little need
for new revenue-generating policies – until the current-year budget that
passed in May with about $1 billion in new revenues through a tax hike
on sportsbooks and businesses among other changes.
But with one-time federal funding in the rearview mirror and the economy
slowing, lawmakers face flat revenue projections for the coming year
with spending on the rise.
As for the current year, revenues are keeping pace with what lawmakers
projected when they approved the $53.1 billion spending plan last May.
According to the December monthly report from the Commission on
Government Forecasting and Accountability, the state brought in $52.6
billion last year, and through December, this year’s revenue is $35
million, or 0.1%, ahead of the six-month mark of fiscal year 2024.
December was a strong month for the state, with revenue up $327 million
compared to December in FY24, driven by income tax receipts. Income tax
receipts are up 9.2% so far this year, even as corporate income taxes
have declined by 11%. Sales tax receipts rose in December for the third
consecutive month thanks to holiday shopping and are now up 1.2% for the
year.
Though revenue remains on track, it’s also showing little sign of growth
— something GOMB warned in the fall would be a challenge for lawmakers
as they craft a new state budget this spring.
As a new General Assembly begins, it remains unclear how lawmakers and
the governor plan to plug the projected deficit. Republicans’ main
concern is Democrats will resort to tax increases to boost revenue and
avoid spending cuts.
“I know they’re going to be talking about needing additional revenue,
but there’s no reason to do that. We’re spending almost $20 billion more
than we were eight years ago,” Rep. CD Davidsmeyer, R-Murrayville, who
is a co-chair of COGFA, told Capitol News Illinois.
Pritzker told reporters on Wednesday that tax increases aren’t his
preferred method, but he didn’t elaborate on how he will propose closing
the deficit.
“That’s certainly not the first thing on my list is thinking about tax
increases,” Pritzker said. “I’m looking at how we can balance the budget
within our means.”
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Gov. JB Pritzker takes questions from reporters on Wednesday, Jan.
8, 2025, at the Illinois Capitol. (Capitol News Illinois photo by
Jerry Nowicki)
Dissatisfaction with the budget has also grown among Democrats. Several
voted against the FY25 budget last May. The revenue plan passed in the
Illinois House with the bare minimum 60 votes despite Democrats holding
78 seats in the chamber. Rep. Fred Crespo, D-Hoffman Estates, who voted
for the state spending plan but against the revenue bill last year, told
Capitol News Illinois Democrats need to revamp their budgeting approach.
“There has to be discipline,” Crespo said. “I’ve recommended in the past
when we work on our budget that we establish our revenue number. So we
know based on GOMB, based on COGFA, they can project how much we’re
going to bring in next fiscal year. We should use that as a standard and
say, ‘hey, there’s a revenue number we have to hit; we can’t exceed
that.’ We don’t do that.”
Crespo said he feared the FY25 revenue enhancements that were enacted to
close a roughly $900 million deficit would limit lawmakers’ options to
increase revenue this year. He’s also been harping on his Democratic
colleagues for passing bills “subject to appropriation,” which means the
bill creates a new program that will only be funded if the state agency
it is housed in asks the General Assembly to fund the program. Without
funding, the program can’t move forward.
“Anytime we pass a bill that is subject to appropriations, what it means
is the bill as it passes, you create a line item on the budget, you’re
putting pressure on the budget,” Crespo said.
Donald Trump entering the presidency this month is also a factor that
could affect the state’s bottom line. Exactly how his administration’s
decisions will impact the state remains to be seen, but Pritzker
expressed concern on Wednesday about declining federal funds or changes
to federal health care programs.
Changes to Medicaid reimbursement rates, for example, could drastically
alter the type of care Illinois can provide for those enrolled in the
program or increase the state’s costs.
Trump is “so unpredictable that we need to consider that as we’re
putting a budget together and debating it,” Pritzker said.
Davidsmeyer said he believes Illinois could see financial impacts soon,
particularly because Trump’s “border czar’s” stated goal to go after
sanctuary states by blocking grant funding in hopes of spurring
compliance with federal immigration authorities.
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