April 28, 2026
by Paula Worthington
Click here to read the full report
This report is part of a three-part series on Illinois' proposed FY2027 budget. Click here to view the one-page summary of these reports.
Executive Summary
Governor Pritzker’s FY2027 State of Illinois (Illinois or the ‘State’) budget proposal balances the books amidst a $2.2 billion budget gap, offering a “maintenance” budget that yields a modest general funds surplus of $24 million. This report examines how Governor Pritzker’s FY2027 State of Illinois budget proposal advances the State’s long-term goals for financial stability. This question is particularly important given Illinois’ tepid economic growth and persistent structural challenges, including an underlying mismatch between revenues and expenditures, limited fiscal resiliency, growing pension obligations, and a fiscal framework that does not fully support sustained and inclusive economic growth.
As part of an assessment of whether the proposal advances long-term goals, this report evaluates the budget across four key indicators:
- Long-term structural sustainability:
The FY2027 proposed budget achieves balance through restrained spending growth, targeted adjustments to existing taxes, and limited new revenues. While this approach addresses near-term fiscal pressures, it largely maintains the status quo and allows underlying structural imbalances to persist. Specifically, the State’s core tax base—personal income, corporate income, and sales taxes—has been growing more slowly than spending on core (non-Medicaid) services. Recent revenue strength has been driven primarily by policy changes, including the 2017 income tax rate increase and the introduction or expansion of smaller revenue sources, rather than sustained growth in the tax base. As a result, if current trends continue, revenues will not keep pace with expenditures, leading to future budget gaps. At the same time, options for raising additional revenue through similar measures are becoming more limited, and the State has neither significantly restrained spending growth nor pursued broader structural reforms to align revenues with long-term spending demands.
- Fiscal resiliency:
The State’s Budget Stabilization Fund (“rainy day fund”) remains underfunded and has seen little growth since FY2023. At 4.5% of general funds expenditures, reserves remain well below the recommended 8% threshold (one month of operating expenditures) and far below the national average. While the proposed budget includes a modest deposit, it does not materially strengthen the State’s ability to withstand future economic downturns or fiscal shocks.
- Long-term pension liabilities:
The proposed budget includes several incremental pension policy changes intended to improve funded ratios and reduce contribution volatility. These include adjustments to funding targets, contribution timing, and risk management mechanisms. While each proposal has merit, their combined impact is modest and does not significantly alter the trajectory of the State’s large unfunded pension liabilities.
- Economic growth:
The budget includes targeted initiatives aimed at supporting economic development, such as the BUILD program, regulatory streamlining, and enhancements to existing incentives. However, it does not address broader structural fiscal issues that influence long-term growth, including tax structure, spending pressures, and policy uncertainty. Given the State’s relatively weak performance in job growth, output, and population growth, the State’s revenue base will remain constrained without stronger underlying economic growth, further exacerbating structural fiscal challenges.
The FY2027 budget proposal successfully closes the immediate budget gap but does not address the State’s underlying structural challenges. The core issue is that the State’s revenue base is not growing fast enough to support its spending commitments, with recent revenue strength driven largely by policy changes rather than sustained economic growth.
Addressing this imbalance will require a combination of policy actions, including restraining spending growth, increasing or restructuring taxes where feasible, and expanding the tax base through economic growth and modernization. Absent such changes, the State’s fiscal position is likely to weaken gradually over time, leaving Illinois less prepared to manage future risks and less well-positioned to achieve long-term financial stability.
Click here to read the full report