Chicago City Wire

Illinois lawmakers have passed a record-high $53.1 billion fiscal spending plan for 2025, marking the largest budget in state history and exceeding Governor J.B. Pritzker's request. Analysis from the Illinois Policy Institute indicates that the budget includes approximately $1.1 billion in tax hikes, over $200 million more than what Pritzker proposed. The budget now awaits the governor's approval.

The most significant expenditure in the budget is Illinois’ pension contributions, amounting to nearly $10.5 billion or 20% of the state’s general funds budget, and almost $11.6 billion across all state funds. Although lawmakers discussed Tier 2 pension reform plans, they did not finalize any costs or implement proposed benefit plan increases or funding changes suggested by Pritzker.

“While Illinois is in dire need of pension reform, lawmakers rushing through unstudied changes would’ve been disastrous for Illinois taxpayers,” said Bryce Hill, director of fiscal and economic research at the Illinois Policy Institute. “Fortunately, legislators pumped the brakes on proposals that would’ve ineffectively changed Illinois’ future pension funding and benefit increases without knowing the cost to taxpayers. While Tier 2 changes are needed, the only solution to the Illinois pension crisis is through a constitutional amendment. Without one, Illinois taxpayers will continue seeing new tax hikes and a reduction in services.”

The tax hikes included in the 2025 budget are as follows:

- **Extension of cap on net operating loss deductions:** Companies losing money will face a $526 million tax hike this fiscal year due to an extension of a policy limiting how much revenue loss can be claimed on corporate income taxes.

- **Sports wagering tax increase:** A new progressive structure with rates ranging from 20% to 40%, depending on operators’ gross revenues, is expected to cost sportsbooks an additional $200 million.

- **Cap retailers discount:** This measure limits how much businesses can keep for collecting sales taxes for state and local governments, effectively raising taxes by $186 million on retailers.

- **Re-renters tax:** Changes to Illinois’ hotel tax will require third-party companies reselling large blocks of hotel room reservations to pay the standard hotel operator’s room occupancy tax, expected to increase state revenues by $25 million and local revenues by $35 million.

- **Video game tax:** An increase in Illinois' video gaming tax aims to collect an additional $35 million for the state.

- **Managed Care Organization assessment:** Lawmakers anticipate a $200 million increase in revenues from health insurance companies; however, no further details have been provided.

“Imposing new tax hikes on a shrinking population will exacerbate the outmigration crisis in Illinois," Hill stated. "Illinoisans are forced to keep up with lawmakers’ unhealthy spending patterns which drive away businesses and residents. Instead of increasing the burden, lawmakers should be looking for ways to reduce taxes and spending. Without major changes, Illinois will continue to be an unaffordable state to live and do business in."

For more detailed information about Illinois' latest budget visit illin.is/2025budget.