February 12, 2025
CHICAGO – Today, the Civic Federation released a comprehensive report calling for Illinois legislators and Governor Pritzker’s administration to begin work on modernizing Illinois’ tax structure and improving its budgeting process. This report follows a Civic Federation issue brief outlining the State of Illinois’ economic challenges: Illinois Economic Landscape and Fiscal Structure. Together, these reports provide data and evidence of the economic and structural tax challenges that hinder Illinois’ economic and revenue growth. The report released today also offers a series of long-term recommendations to guide lawmakers in moving the State toward fiscal sustainability.
While progress has been made in stabilizing the budget in recent years, Illinois faces an array of financial challenges, including a high tax burden, structural budget deficits, legacy pension obligations, and a combination of disincentives and underinvestment in areas critical to a vibrant and equitable economic future. Overshadowing these challenges is the unprecedented uncertainty in Washington, D.C., with a new federal administration that threatens to eliminate billions of dollars in federal funding. While the impacts on key programs are still unknown and federal funding of state and local government is a serious concern, at the base level, Illinois needs the strategic framework essential to ensure consistent revenue growth, efficient spending, and economic competitiveness.
“We have ample data showing that Illinois is struggling on key economic metrics. The reality is, we continue to lag other states regionally and nationally in employment growth, output, and population trends—which has a real and immediate impact on the State’s financial health,” said Civic Federation President Joe Ferguson. “Our tax structure is not set up for growth. We have a high tax burden, a regressive tax structure, and an inhospitable environment for business investment.”
Rather than taking a short-term approach to each year’s budget, the Federation is urging lawmakers to begin a holistic re-evaluation of the state’s fiscal structure and adopt a more strategic approach to taxing and budgeting. The full report is available here: civicfed.org/IllinoisFY2026BudgetRoadmap.
“Illinois, including the Chicago region, possesses most of the core strengths needed to change its reality and reputation. The State has done admirable work stabilizing its fiscal situation inherited from years of unsustainable budget and tax practices. But, if Illinois lawmakers want to get the State back on track, they need to move beyond marginal stabilization to holistic optimization and begin to do so now,” said President Joe Ferguson. “This report presents a roadmap for a fiscally sustainable future. There is an understanding that we can’t continue on the same path that brought us to this challenged place. We hope lawmakers take these recommendations seriously as they prepare for the upcoming legislative session and in the cycles beyond in what must necessarily be a long-term strategic effort.”
Key Recommendations from the report include:
- Modernizing Illinois' Tax Structure to align with the needs of a modern economy. This includes:
- Expanding the sales tax base to include services
- Conducting a systematic review of tax exemptions
- Evaluating and developing a sustainable revenue structure
- Reviewing and consolidating Special Funds
- Strengthening the Budgeting Process to ensure sound, long-term financial planning: As part of this, the State should:
- Enhance the performance-based budgeting process to align spending decisions with measurable outcomes
- Address pension liabilities and only make the enhancements to Tier 2 benefits necessary to comply with federal law
- Build a more robust rainy day fund
- Support local governments by collaborating on funding matters
- Improve transparency in state decision-making to empower residents
The Civic Federation stresses that Illinois must move beyond short-term budget fixes. We urge lawmakers to engage in meaningful and robust discussions and take policy actions that will be more conducive to natural growth and strengthen Illinois’ position in the years ahead.