Illinois Policy Institute experts are monitoring key policy issues as Governor J.B. Pritzker prepares to deliver his budget address. Topics under scrutiny include proposals on taxation, pension reforms, and the impact of federal policies.
Lawmakers have renewed efforts to introduce forms of graduated income taxes, despite a constitutional amendment being rejected by voters in 2020. These proposals could affect retirees, small businesses, and taxpayers. A bill has also been refiled that would impose a tax on unrealized capital gains—a measure previously considered during last year’s transit bailout but ultimately dismissed.
On pensions, Governor Pritzker has suggested several reforms. Positive measures include expanding buyouts and reducing debt. However, there is concern about delaying full funding and raising the Tier 2 wage cap without providing updated projections for long-term pension contributions. Experts warn that such changes could increase future payment obligations for later generations.
Legislation is moving forward to expand Tier 2 pension benefits for government employees hired since 2011, which is projected to cost taxpayers $52.7 billion over time. Critics argue these changes are fiscally unsound and unnecessary because previous legislative sessions addressed potential Tier 2 issues.
Governor Pritzker has criticized the Trump administration’s changes to federal business taxes, which reduced Illinois’ taxable base and state revenues by an estimated $587 million. Still, analysts note that Illinois’ budget challenges predate these federal actions; the state faces a $55 billion budget with a $2 billion deficit and remains at high risk of recession.
The budgeting process itself is another area of concern. Unlike states such as California or Texas, Illinois advances spending proposals without comprehensive reviews of long-term costs or necessity. The current approach lacks transparency and often results in special projects being funded without clear plans for payment or necessity assessments.
Tom Demmer, senior fellow at the Illinois Policy Institute and former deputy House Republican leader, stated: “Illinois’ budgeting process is broken and continues to mask deeper fiscal problems. By complaining about lost money from the federal government, the governor is ignoring the very real influence and control he has over most state budgeting,” said Demmer. “The state doesn’t budget like most everyday households do; they just grow spending more every year and fill the gap with tax increases. Achieving long-term stability will require aligning spending with sustainable growth, cutting waste and pursuing structural reforms. It will not come from tax hikes.”
The Illinois Policy Institute provides analysis on fiscal responsibility and government reform within Illinois through its research efforts based in Chicago (official website). The organization promotes free-market principles and limited government while offering data-driven solutions on budgets, taxes, education, and pensions (official website). As an independent nonprofit think tank (official website), it focuses exclusively on state-level issues (official website) using reports and public engagement initiatives (official website).
For further details about balancing Illinois’ budget through policy recommendations from the institute’s ‘Illinois Forward 2027’ plan visit illin.is/Forward2027.
An interview with Tom Demmer discussing the state’s budget can be viewed at youtu.be/MGCJKAcIR1g.
