New taxes on sports bets, nicotine products as Democrats pass $55.2B
budget
[June 02, 2025]
By Ben Szalinski and Jerry Nowicki
SPRINGFIELD – 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.
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.
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.
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.
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.
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State Sen. Elgie Sims, D-Chicago, introduces the budget bill in a
committee hearing on Saturday, May 31. (Capitol News Illinois photo
by Jerry Nowicki)
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.
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.
Jade Aubrey contributed.
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