Chicago City Wire

Its release comes ahead of Governor J.B. Pritzker’s 2026 budget proposal and State of the State address on February 19, which may include plans for future tax hikes on businesses and residents. Illinois experienced a brief reprieve from decades of budget deficits due to $35 billion in federal pandemic funds and windfall revenue, but this money is nearly exhausted, and deficits loom. State leaders allocated some of these funds for fiscal repairs, but most—$21.5 billion—was used to cover rising spending. The Illinois Policy Institute found that the state's annual budget has increased by over $17 billion since 2015.

“Federal aid during the pandemic provided temporary relief for the state, and it helped us see budget surpluses for the first time in 22 years. But the chance to use that money to fix long-term fiscal issues was squandered and we can’t make the same mistakes again,” said Lauren Zuar, policy analyst at the Illinois Policy Institute. “We need to correct decades of overspending, and lawmakers must pledge to stop adding and raising taxes on Illinoisans to plug the budget deficits created by their poor fiscal decisions.”

The "Illinois Forward 2026" plan proposes a spending cap linked to projected inflation rates, reinvesting unnecessary administrative costs into classrooms, right-sizing taxpayer costs for state worker health insurance, and enacting government pension reform.

“‘Illinois Forward’ offers a plan to meaningfully reduce costs without burdening taxpayers or straddling future generations with endless debt,” said Ravi Mishra, policy analyst at the Illinois Policy Institute. “Without long-needed structural financial reforms, the state’s finances will end up in an even worse position than before 2020. It’s time state leaders meaningfully address Illinois’ key cost drivers by enacting pension reform, cutting excessive academic administrative costs and reducing taxpayer burdens for state worker health insurance.”

Expenditure savings and spending cap could result in $3 billion savings in its first year and around $21 billion over five years by linking growth responsibly with projected inflation rates. This approach aims to create at least $1 billion in savings from the 2026 budget while ensuring expenditures align with economic growth.

Improving school district efficiency could save $2.8 billion over five years by investing directly into classrooms, students, and teachers through reducing excessive administrative costs within school districts.

Right-sizing health insurance would adjust taxpayer burdens for state health insurance plans to align more closely with private-sector benchmarks, potentially saving $2.7 billion over five years.

Pension reform would involve amending the state constitution so earned benefits remain guaranteed while allowing future benefit growth adjustments pegged to sustainable levels like inflation-adjusted cost-of-living adjustments.