From State Rep. Dan Ugaste:
CGFA releases Fiscal Year 2027 budget analysis
| The State of Illinois budget for Fiscal Year 2027, HB 111, was passed by the Democratic majority and signed into law as P.A. 104-464. The fiscal year, which began on July 1, 2026, will see the spending of tens of billions of dollars in Illinois taxpayer funds. The budget as enacted was turned over to nonpartisan analysis by the Commission on Government Forecasting and Accountability (CGFA). The FY27 budget appropriated State spending of almost $224.6 billion. It should be noted that much of this spending consists of mandated pass-throughs of Special State Funds, debt service funds, and capital expenditures. In many cases, appropriated moneys for items like capital expenditures are not actually spent, and the appropriations language is rolled over from one year to the next. The slice of the pie that is always the focus of discussion is the “general funds” budget, which in FY27 is slated to spend $55.946 billion in taxpayer funds. The money Illinois residents pay in income tax, sales tax, excise taxes on alcohol and tobacco, and certain other State taxes go into “general funds” and are spent in the General Funds budget. It is this General Funds spending document within which the constitutional duty of Illinois to annually balance its budget hits with special force. In contrast to the “general funds,” if moneys do not come into the Road Fund, then the implementation of a bridge or highway project can be delayed until a point is some future year. General Funds spending, by contrast, is often legally encumbered. It includes essential day-to-day expenses such as paychecks for correctional officers and troopers with the Illinois State Police. I It also includes essential month-to-month cash flows such as school aid, on which local school districts depend. If Illinoisans lose their jobs and stop paying employer-withheld State income tax, or if they cut back on their spending and lessen their payments of State sales and use tax, these shortfalls of incoming State tax revenue will create urgent “general funds” problems for Springfield. The CGFA FY27 budget report makes clear that the budget relies on almost $800 million/year in new “general funds” revenues. These revenues are raised through a series of new taxes and diversions from other sources, including so-called “fund sweeps.” Lawmakers in Springfield consistently want to spend more money than the State is scheduled to bring in, which leads to new taxes and other budget gimmicks. [Emphasis added.] In the FY27 budget package, the statutory changes to the revenue laws governing State general funds included: Targeted advertising services tax Digital asset (crypto) tax Social media platform fee Net operating loss (NOL) deduction cap Motor fuel tax increase suspension EPA filing fee increase Coal Technology Development Assistance Fund transfer New distribution language for EPA tire fee New language on cigarette tax electronic filing and feesRemote retailers and tobacco product changes Temporary casino license extensionsDecoupling from Qualified Small Business Stock Exclusion Tax on Prediction MarketsPass-Through Entity tax method selectionFantasy Contests Tax and new master sports wagering licensesSales tax distribution changes Relying on new taxes and diverting funds from one bucket of funds to another bucket does not address the long-term structural fiscal challenges faced by the State. Instead, this short-term-minded behavior pushes the accumulating fiscal problems of Illinois off until the next fiscal year. Then in the following year, the authors of next year’s State budget will have to find even more creative or destructive ways to balance the budget. If history is an indicator of what is to come, we can expect another round of State tax increases next year. Illinois House Republicans voted against HB 111, the FY27 State of Illinois budget, in May 2026. There were many reasons for these “no” votes, with one of them being that the budget fails to meet the constitutional requirements of a balanced budget. The CGFA report on the FY27 State of Illinois budget confirms that the fundamental requirements of a structurally balanced budget were not met. |
