Pritzker to present 8th budget as Illinois faces federal funding
uncertainty
[February 17, 2026]
By Ben Szalinski
SPRINGFIELD — Gov. JB Pritzker will stand in front of the General
Assembly on Wednesday in a familiar position: confronting tremendous
uncertainty over the state’s financial future.
Pritzker will present his eighth budget as he seeks reelection to a rare
third term and becomes a growing national presence as a possible 2028
presidential candidate and one of President Donald Trump’s loudest
critics.
The Trump administration has put Illinois and other states whose leaders
disagree with his vision in the crosshairs, targeting them for massive
cuts to federal funding. In the last two months alone, that has included
a $1 billion child care funding cut that’s temporarily been blocked by
the courts and $100 million in threatened health care funding cuts.
At the same time, the economy has been shaken by Trump’s tariff policies
and Congress passed a sweeping domestic policy bill, known as the One
Big Beautiful Bill Act, that will alter the fiscal landscape for states
across the country. That measure cuts eligibility for Medicaid and the
Supplemental Nutrition Assistance Program, increases administrative
costs and reduces what the state can collect in provider taxes.
The ever-changing federal funding landscape presents lawmakers and
Pritzker with a murky picture of the future — one that can change as
fast as the president can send a social media post or a judge can issue
a restraining order.
But the state constitution requires lawmakers to pass a balanced budget,
and Pritzker will outline his plan for one on Wednesday. His annual
budget address sets up months of negotiations — mostly between
supermajority Democrats. They’ll try to balance their desires to fund
programs while revenues — both from the feds and the state’s base
sources — are projected to flatten at best.
Rep. Kam Buckner, a top House Democrat budget negotiator from Chicago,
said one of the goals of this year’s budget will be to play “defense.”
“It’s hard when the biggest variable in the budget is not something that
you can control,” he said, referring to federal funding. “And with this
president, the volatility isn’t a possibility; it’s a given.”
Pritzker and his team have already started setting expectations for a
conservative budget, telling agency leaders in memos and signaling to
legislators that it will be difficult for the state to fulfill funding
requests this year.
Federal impacts
The Governor’s Office of Management and Budget estimated in October that
lawmakers will have to close a $2.2 billion deficit for fiscal year
2027, which begins July 1. Much of that deficit is driven by the state’s
own spending exceeding projected revenue. But GOMB projected changes at
the federal level are making the problem more challenging and will
further exacerbate deficits in the coming years.
In the short-term, Pritzker’s budget office estimates income tax revenue
for the state will be lower because of federal tax code changes and some
administrative costs for food assistance programs will be required this
year.
Most of the impacts of Trump’s big bill won’t be felt until FY28. But
that doesn’t mean it won’t factor into this year’s process.
“You can’t ignore what is coming down the road, and so we should expect
and work towards a proactive plan for next year’s gap starting now, not
after May, because the gap is being driven by forces that won’t wait for
the spring,” Buckner said.
Dwindling federal funding is already starting to appear in the state’s
balance sheets. The Commission on Government Forecasting and
Accountability’s January report shows revenue was 3% lower in January
compared to the same month in 2025, largely because of decreased federal
funding.
Federal funding to Illinois has declined for three consecutive months,
though the commission cautioned there could be a variety of reasons for
that, such as the timing of payments. In any case, federal funding was
35% lower this January than last and is now down 8% for the year.
Overall revenue for the year is still up 3.5%.
Economic conditions
It’s not just federal funding that presents a challenge for lawmakers —
the overall health of the economy does as well. A forecast by Moody’s
Analytics released last week set an ominous tone: “Illinois’ economy is
in a precarious spot,” and a weak economy ultimately makes it difficult
for revenue to naturally grow.
“Potential budget shortfalls in Illinois and the city of Chicago mean
lawmakers may need to consider a mix of revenue enhancements and
spending adjustments, measures that could ultimately stifle consumer
spending,” the report said.
The forecast predicts employment will not grow or decline, and the
economy will grow at a slower rate than other states because of
outmigration, a shrinking tax base, and a massive long-term pension
liability. Additionally, tariffs are hurting the state’s manufacturers,
and rural areas are suffering from both tariffs and higher farming
costs.
“Illinois has a lot at stake, given its reliance on manufacturing and
logistics and its above-average exposure to foreign trade,” the report
said.
Moody’s said the results of Trump’s big bill will be mixed by region,
but the overall impact of the policy will be negative because it
weakened social services.
More broadly, Moody’s notes an artificial intelligence bubble in the
stock market could burst and trigger a recession.
Health care costs to balloon
Lawmakers could also consider taking proactive steps to absorb new
health care costs and cuts set to take effect in the coming years.
Under a provision in Trump’s big bill — one that applies only to states
like Illinois that expanded Medicaid eligibility under the Affordable
Care Act — a 6% cap on the tax Illinois can charge health care providers
will gradually be cut starting in FY28 until it reaches 3.5% in FY32.
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Rep. Amy Elik, R-Godfrey, speaks at a news conference at the
Illinois Capitol in May 2021. (Capitol News Illinois photo by Jerry
Nowicki)
When the lower cap is combined with a decline in federal aid for
Medicaid, the state could lose $1.7 billion annually by FY31, according
to the governor’s budget office.
The impending limits on Medicaid provider taxes will pose a significant
challenge for lawmakers who will either have to find some other way to
pay the state’s share of the cost or adjust the program to fit within
the new fiscal constraints.
Since the federal changes do not take effect for another year, it is
possible lawmakers will not feel pressure to take immediate action in
the upcoming legislative session.
Current-year changes
The October GOMB report also revealed the state was on track to run a
small deficit in the current fiscal year ending June 30, largely because
the state’s income tax code was tied to the federal level and Congress
made changes that will ultimately lower tax revenue flowing into
Illinois.
In response, lawmakers decoupled the state’s tax code from the federal
government in certain areas, which GOMB expects to reduce the deficit by
$243 million. The state still faces a $587 million deficit because of
the federal tax changes.
Pritzker has also asked several state agencies to reserve nearly $500
million in spending because of uncertainty over how revenue will shake
out as federal funding remains in flux. The reserves largely focus on
cost savings, such as forgoing hiring in certain agencies for the
remainder of the fiscal year, reducing available grants and saving money
on health insurance costs.
In the last two budgets, Pritzker and lawmakers have also relied on
targeted tax increases. Though the FY26 budget ultimately amounted to a
$2 billion spending increase, most discretionary spending outside core
areas increased by less than 1%. Pritzker also warned lawmakers last
year that if they want to increase spending for a certain program, they
must come up with a corresponding cut. Pritzker has also opposed broad
tax increases, such as statewide sales and income tax hikes.
Senate Republican Leader John Curran, R-Downers Grove, said at a news
conference earlier this month that he expects limited spending to
continue in this year’s proposal.
“You saw the rollback on the health care for working-age population for
undocumented immigrants last year,” Curran said.
The Health Benefits for Immigrant Adults program was launched in 2021
and covered qualifying individuals aged 42-64 but was ended in this
fiscal year’s budget because it far outstripped initial estimates.
“That was something that the governor, in his budget address, readily
admitted that it was a mistake to go down that road, and the state could
not afford that,” Curran said. “So I think that process already started
last year. I expect that to continue this year in this budget.”
What lawmakers want
A group of progressive Democrats want to raise taxes substantially to
fill gaps in the budget. The $4 billion tax package calls for taxing the
appreciation of billionaires’ assets, a 10% tax on digital ads,
increasing taxes on corporations’ offshore earnings, and closing
loopholes in the corporate tax code.
Lawmakers said at a news conference earlier this month that the taxes
are necessary because businesses and wealthy Americans have benefited
from tax policies in Washington.
“If we don’t fight back with taxing the ultra-wealthy, we’re going to
continue to chop services in order to balance budgets,” Sen. Karina
Villa, D-West Chicago, said.
Speaking to CNI, Buckner said any new revenue must be reliable for the
state beyond one year and fair to taxpayers so they “are not the default
state ATM.”
“We got to create some certainty in this chaos and that means that we
have to build a budget that can take a hit without passing the pain
straight to families, hospitals, schools and local governments,” Buckner
said.
Rep. Amy Elik, R-Godfrey, who leads budgeting for House Republicans,
framed concerns about federal funding differently.
“In my opinion, it is always volatile because you are relying on another
level of government with programs that they may begin or end,” Elik told
Capitol News Illinois.
Elik said Republicans are worried Democrats will go to the taxpayers’
well for more money.
“They’re not even ashamed or embarrassed anymore to say we need to raise
taxes,” Elik said. “And so when they’ve got so many people on board with
that theory and concept, I’m very, very concerned.”
Republicans in the House have largely been shut out of budget
negotiations for several years and Elik said she doesn’t expect this
year will be different, adding Republicans won’t agree to vote for a
budget before it is completed.
The House Democratic Women’s Caucus said in a statement they are hoping
to see the governor boost funding for social services that have been cut
at the federal level and are “open to potential revenue options that do
not negatively or disparately impact the vulnerable populations we
represent.”
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