More than a year ago, the Governor’s Office of Management and Budget was projecting a $3.2 billion deficit for what is now the current fiscal year.
Part of the problem was that existing revenues were flat while spending was growing, according to the budget office.
This is a recurring problem in Illinois. The previous fiscal year’s projections were also astonishingly poor. The Chicago-based Civic Federation issued a report last week that delves a bit deeper into why it is a recurring problem.
Next fiscal year’s spending plan achieves balance “through a mixture of modest spending restraint, tweaking existing taxes and levying new ones,” the Civic Federation reported.
New tax increases, not natural revenue growth from taxation derived from economic expansion, have helped keep the state afloat.
Since the income tax was raised in the summer of 2017, receipts from personal and corporate income taxes and sales taxes have grown 7.4% every year, the group found. That’s above the annual non-Medicaid core expenditures (“K-12 education, human services, transportation, and other services”) of 6.6% annual growth.
Without that 2017 income tax hike, annual income and sales tax growth since then would’ve been just 5.2% — which is well below the 6.6% annual non-Medicaid core spending growth.
“The good news is that over the past decade, the State’s growth in expenditures has essentially been met with commensurate revenue growth,” the Civic Federation reported. “The bad news is that this recent revenue growth is not sustainable.”
The state will eventually run out of options, the group predicted.
And while cutting state spending is always mentioned as an option, it’s important to remember some things. The state’s K-12 education funding law mandates annual increases. Medicaid costs rise with medical inflation (which pretty much always outpaces the headline inflation number). And pension costs increase every year. Those three things represent most of the annual spending increases, meaning that other state programs would have to be slashed even further.
Also, keep in mind that spending on core services this coming fiscal year is projected to be 13% lower than it was in fiscal year 2000 under Gov. George Ryan, according to the Center for Tax and Budget Accountability.
This helps explain why progressive groups and legislators are demanding new taxes on the wealthy. With the added fiscal pressures imposed by the Trump administration, on top of the inability of the state to fully fund pretty much any social services program it has, they’re fed up, and more people are recognizing the problem.
The Senate Progressive Caucus, the Affordability and Tax Justice Coalition and the Illinois Revenue Alliance all issued statements in the wake of the House’s passage of the Bears/megaprojects, demanding the same urgency and effort be focused on progressive revenue ideas.
Sen. Karina Villa, D-West Chicago, for example, had this to say about the House action on Bears/megaprojects and its refusal to take up a millionaire’s income tax surcharge: “Illinois families were told there was not enough time to ask the wealthiest few to pay more. Yet there was time to move a Bears package that even the Bears management themselves say still needs changes. When Springfield decides something is urgent, it finds the time. Working families deserve to be treated as urgent too.”
The Affordability and Tax Justice Coalition has several progressive legislators on its executive committee and is pushing bills to create a digital advertising tax, close corporate loopholes and further decouple from federal corporate tax cuts, enact “world wide combined reporting” and “close luxury loopholes for millionaires.” The group demanded that those bills “must now become the central focus of our work for the next four weeks.”
The Illinois Revenue Alliance had this to say: “On May 1st, thousands of Illinoisans will begin losing SNAP benefits, while the ultra-rich and megadevelopers continue to get tax breaks. [The House’s] vote on the megaproject bill is proof that when there is political will, there is a way.”
I’ve seen these progressive revenue pushes come and go for decades. But the legislators and the groups behind them seem (to my eyes) much more organized, disciplined and mindful of the requirements needed for passing major legislation than before.
So this could very well be the biggest story to watch during the rest of the spring legislative session. It would definitely be quite something if a Bears stadium deal helped achieve a decades-long progressive policy goal.
But the Civic Federation warned about another Illinois problem: Economic growth. The state is lagging badly in employment and gross domestic product growth. What we could end up with is continuing the trend of substantially more revenues from ever-lower growth.
- It's always Sunny in Illinois - Monday, May 4, 26 @ 8:44 am:
But the Civic Federation warned about another Illinois problem: Economic growth. The state is lagging badly in employment and gross domestic product growth. What we could end up with is continuing the trend of substantially more revenues from ever-lower growth.
Another way of stating the obvious, substantially more revenue from increased taxes and fees. What started out as our Political leaders pledging affordability and protecting the taxpayers from a “shake down”, has turned into a full sprint to the tax bucket.
- DuPage Saint - Monday, May 4, 26 @ 8:45 am:
“When Springfield decides something is urgent, it finds the time”.
That is about the truest statement ever regarding Illinois government
- @misterjayem - Monday, May 4, 26 @ 8:52 am:
“When Springfield decides something is urgent, it finds the time.”
And if it’s urgent, Springfield will even invent the time by stopping the clock.
– MrJM
- Captain Obvious - Monday, May 4, 26 @ 9:07 am:
That last paragraph neatly and succinctly describes the future. Squeezing more revenue because growth is low will result in what? Even lower growth. Which will then create the need to squeeze more revenue, resulting in lower growth, and so on. The pace of this cycle will also be ever increasing. Which means the focus of the legislature should not be on increasing revenue, but on increasing economic growth. The current crop of legislators don’t seem capable of understanding that concept, let alone actually accomplishing it.
- Jack in Chatham - Monday, May 4, 26 @ 9:21 am:
If the goal is to make the tax system more fair, increase the standard deduction for income tax to $30,000 and raise the alcohol user fees. Sober people deserve discounts on insurance premiums.
- Steve - Monday, May 4, 26 @ 9:23 am:
-and raise the alcohol user fees-
Alcohol consumption has been going down. So, how exactly are you going to bring in more money?
- JS Mill - Monday, May 4, 26 @ 9:30 am:
Increase state sales to to include services and increase by 1/2 percent the overall rate. I know most people here don’t like that approach but it is where our economy is and, the wealthy will pay more (assuming the spend more). The CTBA has suggested this approach for more than 20 years. There could be an offset. for low income, but I honestly don’t know how that would be accomplished, more knowledgeable folks than me would need to craft that.
- Think Again - Monday, May 4, 26 @ 9:46 am:
=I’ve seen these progressive revenue pushes come and go …(to my eyes) much more organized, disciplined and mindful of the requirements needed for passing major legislation than before=
This is happening in IL and nationwide ( NY City, Maine, Seattle…)- super left progressives gaining power points to a usurpation of the center left of the party by the most extreme but organized part of the Dem base. It helps that they frame everything as anti-MAGA, as that plays well in the midterm of an unpopular president.
- Earnest - Monday, May 4, 26 @ 9:50 am:
So appreciative of the Senate Progressive Caucus’ sense of urgency and for pointing out the values disconnect with a handout for billionaire owners. The Big Beautiful Bill is looming over some horrific state budget years in the near future and the choice could well end up being between painful cuts or a distasteful nonprogressive income tax increase as it did in the Rauner years. Action in the current window may save having to make some choices that would be extremely unpopular to Democratic primary voters in the coming years.
- Iron Duke - Monday, May 4, 26 @ 9:59 am:
Does substantially lower employment and economic growth relative to other states play well in the midterms?
- low level - Monday, May 4, 26 @ 9:59 am:
==The current crop of legislators don’t seem capable of understanding that concept==
Fortunately, they do understand the concept of paying our bills on time, unlike MAGA and our previous governor. This has lead to several credit rating agencies upgrades. Apparently you dont understand this.
- Sue - Monday, May 4, 26 @ 10:10 am:
Rather then constantly talking about raising taxes- the State needs to focus on growth( not the spin we get daily from the Gov)- today’s front page WSJ story on jobs for new grads proves the point- young people are finding jobs in lots of places( mostly all in the South
- JS Mill - Monday, May 4, 26 @ 10:36 am:
=young people are finding jobs in lots of places( mostly all in the South=
You make these grandiose statements and almost never with data points. What does “mostly all” equate to in numbers. I suspect, you are way off. Prove me wrong for Illinois.
- Sue - Monday, May 4, 26 @ 10:39 am:
JS- read first page today’s WS journal and then you can apologize- with all the stats there just for you
- BE - Monday, May 4, 26 @ 10:57 am:
Hmm, if I was a woman of fertile years, the South is not where I would want to get a job.
- WK - Monday, May 4, 26 @ 11:06 am:
= Hmm, if I was a woman of fertile years, the South is not where I would want to get a job.=
I keep seeing polls that seem to align with that intent, but yet the data says that the trend is still women moving to sunbelt states. Too bad we seem to have to pick between reproductive rights or better job prospects when picking a state. It would appear as though financial opportunities are winning. Maybe the gov should take note.
- The Farm Grad - Monday, May 4, 26 @ 11:14 am:
“super left progressives gaining power points to a usurpation of the center left of the party by the most extreme but organized part of the Dem base”
A Tax on Wealth isn’t progressive; it’s center-left. If you glance at polling, no fiscal plan during the 2020 Dem primary polled better than a Wealth Tax on the Oligarchy. Even a plurality of GOPers supported it.
In CA, Silicon Valley Dem Ro Khanna championed it, and it’s going to be on the November ballot
- JS Mill - Monday, May 4, 26 @ 11:23 am:
=then you can apologize=
That is rich coming from you.
I don’t read the WSJ. And of course, as usual, you don’t provide the numbers.
- No relation - Monday, May 4, 26 @ 12:09 pm:
JS -
Here is the data the WSJ article was based upon.
https://www.adpresearch.com/2026-youve-graduated-now-what/
Of the top ten cities for hiring four of them are in the south. I guess that is almost all when you disregard 5 of the data points. /s
- Jerry - Monday, May 4, 26 @ 12:18 pm:
One way to not have to raise taxes is for the state not give welfare handouts to for-profit, privately owned corporations that just bought a piece of land to build a TV studio (and don’t want to pay their share).
- Lee Elia - Monday, May 4, 26 @ 12:33 pm:
Jerry if you don’t like electric vehicles just say so
No one is forcing you to buy a Rivian, which is for profit company that received the largest tax benefits in Illinois, and paid its CEO 400 million last year.
- City Zen - Monday, May 4, 26 @ 12:59 pm:
==Increase state sales to to include services and increase by 1/2 percent the overall rate.==
The reason our sales tax rate is so high is because it doesn’t include services. Tax services and reduce the rate.
==This has lead to several credit rating agencies upgrades.==
One pandemic away from fiscal solvency.
- Jerry - Monday, May 4, 26 @ 1:42 pm:
I’m not talking about electric cars. I AM talking about the TV studio that is only open about 10-12 days a year potentially in the Northwest Suburbs. And don’t be surprised if the National Headquarters charges to watch the TV shows. See the Chicago Cubs for an example.
- Demoralized - Monday, May 4, 26 @ 1:55 pm:
==Tax services and reduce the rate.==
The whole point to taxing services would be to raise revenue. Why in the world would you reduce the rate?
- Lee Elia - Monday, May 4, 26 @ 4:30 pm:
At a certain point raising the rate of sales tax actually reduces revenue.
When the rate surpasses the revenue maximizing point, there is a decline in taxable sales- base erosion - that outweighs the higher revenue collected per sale.
We are at 10.25% in Chicago, only Seattle 10.35% and Tacoma 10.3% are higher, so dangerously close to the tipping point where it makes sense to do cross border shopping for big ticket items, which obviously reduces economic activity and tax revenue.