Latest Post | Last 10 Posts | Archives
Previous Post: Vote YES on HB 2371 SA 2 to Invest in Healthcare Services for Underserved Communities
Next Post: Keep ROFR And Anti-Competitive Language Out Of The Energy Bill
Posted in:
* Yes, we’ve talked about this before. But it’s important, so I made the topic my weekly newspaper column…
The Governor’s Office of Management and Budget projected last week the current fiscal year’s budget will run a $267 million deficit. The budget office recommended taking “immediate” action to plug the hole.
And the problem gets much worse in the future, with a $2.2 billion projected deficit for next fiscal year, which begins July 1.
So what’s going on? Earlier last week, the Legislature’s Commission on Government Forecasting and Accountability reported that state corporate income tax receipts are absolutely tanking this fiscal year.
Corporate income tax receipts for the first quarter of the fiscal year were a whopping $215 million (net) lower than the same period during the previous fiscal year, the commission reported.
The real mystery was that corporate receipts had actually been projected to grow by 10.8% ($438 million) over the year, “largely due to several revenue-enhancing provisions” passed in May, the commission explained.
That growth is obviously not happening. The commission speculated that corporate tax cuts passed by Congress in July “may offset much of the anticipated corporate tax revenue growth from these state-level reforms.” Since much of the state’s tax code is in sync with federal law, the federal changes were suspected of being the cause of the state’s unexpected shortfall.
Well, the governor’s budget office’s latest report confirms the commission’s speculation.
According to Governor’s Office of Management and Budget, the “One Big Beautiful Bill Act” will cost the state $587.2 million this fiscal year in corporate income tax receipts and another $249 million in individual income tax receipts (although the commission reports that individual tax receipts are still rising as expected).
The largest hit, a change that accelerates research and development expensing, represents about $320 million of that, according to the governor’s budget office.
The governor’s budget office said it wants the Illinois General Assembly to “immediately” change state law to decouple from the new “bonus depreciation” law ($121 million in corporate income taxes and $23 million in individual taxes) and unspecified others. It also wants the General Assembly to update state law to “reflect the federal change from global intangible low-taxed income to net controlled foreign corporation tested income” ($90 million corporate).
The annual fall veto session begins Tuesday. So the assumption is something will happen during that session.
Gov. JB Pritzker’s executive order issued in late September to “identify up to 4 percent General Funds budgetary reserves to mitigate a portion of the impact of the downward revision in the revenue forecast” should keep the deficit at about $267 million, the governor’s budget office said.
Transfers out of the general funds will “decrease by approximately $469 million,” but debt service will increase by $37 million above the originally projected amount. The tax code changes are needed to bring the budget into full balance, on top of the reductions.
But the situation will deteriorate further next fiscal year, according to the budget office: “(B)ased on the current assessment of revenues and maintenance budget pressures for fiscal year 2027, estimated expenditures would exceed revenues by $2.2 billion.”
Last year about this time, the governor’s budget office projected a $3.2 billion budget deficit, which didn’t turn out to be the case. So, take this latest projection with a grain of salt, unless the economy sputters. It’s always been difficult to predict revenues and some spending into the distant future. Things can change so fast.
One side point is that last year’s projections (and previous projections) included the state’s rainy day fund contribution into the end balance number. They’d add up the expenditures and the revenues and show the total, then add in the rainy day contribution and display the final, grand total.
Curiously, the current projections for both this fiscal year and future years do not include that contribution in the deficit projections (a $161 million contribution this fiscal year and $173 million next year). So, the actual deficits may very well be higher than advertised.
It’s unclear at the moment how the Democratic super-majorities will react.
A spokesperson for House Speaker Emanuel “Chris” Welch said the new deficit projections “will be part of the discussion within the caucus” during veto session.
A spokesperson for Senate President Don Harmon said he has been contacted about the situation and expects to be briefed. Meanwhile, “It is under review.”
posted by Rich Miller
Tuesday, Oct 14, 25 @ 9:29 am
Previous Post: Vote YES on HB 2371 SA 2 to Invest in Healthcare Services for Underserved Communities
Next Post: Keep ROFR And Anti-Competitive Language Out Of The Energy Bill
WordPress Mobile Edition available at alexking.org.
powered by WordPress.
“It is under review.”
Gosh that has such a crisp, concise ring to it.
Comment by Annonin' Tuesday, Oct 14, 25 @ 9:47 am
Wait for it…
Comment by Capcitynewt Tuesday, Oct 14, 25 @ 9:50 am
The mega-tax bill passed this summer should be referred to by its title, HR1, and not use the partisan “One Big Beautiful Bill”, which, while big, is showing some not-beautiful effects.
Comment by Ares Tuesday, Oct 14, 25 @ 9:57 am
If there is one silver lining, it is that this fiscal crisis will impact all states, simultaneously. Some more than others, but all states will experience significant losses of revenues this year and the next.
Perhaps that will jar Congress back to work. Not this year obviously, as they have only worked 12-14 days since June 2025, and are convinced they have already solved America’s problems.
But eventually, when this hole in the budget manifests across the nation, perhaps Congress will hold session to discuss it, blame each other, and then consider fixing it. Of course, that will require a super-majority to overcome the billionaires inevitable veto.
Comment by H-W Tuesday, Oct 14, 25 @ 10:03 am
I’ve been involved in and around state politics for 30+ years now. I can’t ever remember the state’s budget not being in a dire position. It is like a chicken and egg situation: is our state of our State screwed because of our budget, or is our budget screwed up because of the state of our State?
Comment by Just Me 2 Tuesday, Oct 14, 25 @ 11:02 am
Every state with rolling conformity to the Internal Revenue Code is going to be going through the same execrise. There will be selective decoupling based on what each state sees as beneficial to their growth. I’m sure the quantum folks will have some input.
Comment by City Zen Tuesday, Oct 14, 25 @ 11:11 am
Mayor Brandon has just reponed the idea to a corporate head tax. Maybe the state should consider one too. /s/
Comment by Downstate Tuesday, Oct 14, 25 @ 11:12 am
“reopened” not “reponed”. sorry.
Comment by Downstate Tuesday, Oct 14, 25 @ 11:12 am
June will be ugly trying to raise,enough taxes to fill 2.2 billion
Comment by Red headed step child Tuesday, Oct 14, 25 @ 11:18 am
I’m eager to see the plan from the Gov to deal with this. I’m sure it won’t just be hiding his head into the sand until 2027 /s
Comment by SWSider Tuesday, Oct 14, 25 @ 11:32 am
June will be ugly trying to raise,enough taxes to fill 2.2 billion
Governor Pritzker and the Supermajority have shown they are up for the challenge…….don’t lose sight of the fact ……those tax increases will be incremental to what’s coming in the next two weeks…..
Comment by It's always Sunny in Illinois Tuesday, Oct 14, 25 @ 11:33 am
Need to find a way to tax compute from all these new data centers
Comment by Chambanalyst Tuesday, Oct 14, 25 @ 12:55 pm
Transfer / transaction charges by Federal / State / local governments, though bitterly opposed by big business and tech giants, may likely take place when the Federal Govt’s fiscal “chickens come home to roost”, and the gerontocracy of both parties has passed from office.
Comment by Ares Tuesday, Oct 14, 25 @ 1:02 pm
Every budget year has challenges, but this one has so many being generated by federal changes. One can only hope that our leaders find a way to lead.
Comment by Friendly Bob Adams Tuesday, Oct 14, 25 @ 1:18 pm