Illinois Approves $55.2 Billion Budget with New Taxes and Healthcare Cuts

Illinois lawmakers narrowly met their deadline on May 31, 2025, passing a $55.2 billion budget for fiscal year 2026 after intense negotiations, leaving just minutes for review.

The spending plan, a 3.9% increase from the current $53.1 billion budget, relies on over $1 billion in new taxes and revenue measures while cutting a controversial healthcare program for undocumented immigrants.

Governor JB Pritzker, who hailed the budget as his seventh consecutive balanced plan, is set to sign it into law, emphasizing fiscal discipline despite a projected $3.2 billion deficit in 2027 if current trends continue.

The rushed process has sparked criticism for lacking transparency, as lawmakers were given less than 30 seconds per page to review the 3,300-page document.

Targeted Taxes to Close the Gap

To avoid broad income or sales tax hikes, the budget introduces targeted revenue sources. A new sports betting tax imposes 25 cents per wager for the first 20,000 bets and 50 cents thereafter, expected to generate $200 million annually.

Tobacco taxes rise from 36% to 45%, now covering vape products and nicotine pouches, adding $150 million. Corporate tax reforms, targeting firms shifting profits overseas, are projected to yield $72 million, while a tax amnesty program for delinquent payments could bring in $195-228 million.

These measures aim to fund a $307 million increase in K-12 education spending, though the budget cuts $43 million in property tax relief and falls $5 billion short of recommended pension contributions, according to a 2025 actuarial report.

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Healthcare and Transit Face Austerity

The budget eliminates a $330 million healthcare program for approximately 30,000 undocumented immigrants aged 42-64, drawing sharp criticism from Latino lawmakers and advocacy groups like the Illinois Coalition for Immigrant and Refugee Rights, who argue it undermines equitable access.

The decision reflects efforts to curb spending amid an $891 million deficit projection for 2026. Additionally, the budget fails to address a $770 million funding gap for Chicago-area transit agencies, risking 40% service cuts to the CTA, Metra, and Pace by 2026.

No funds were allocated for a proposed Chicago Bears stadium, despite $2 billion in requested state support, leaving infrastructure priorities unresolved.

Political Tensions and Public Reaction

Republicans decried both the budget’s content and the opaque process. House Minority Leader Tony McCombie accused Democrats of prioritizing “politician pay raises” and “pork projects,” noting a 4.9% salary increase for lawmakers costing $1.2 million.

Representative John Cabello criticized the rushed approval, arguing it hid critical details from the public. A June 2025 WGN poll shows 52% of Illinoisans support the budget’s targeted taxes, but 41% oppose healthcare cuts for immigrants, reflecting divided sentiment.

The Illinois Policy Institute warns that underfunding pensions, which consume 20% of the budget, risks long-term fiscal instability, with unfunded liabilities at $142 billion in 2025.

Did You Know?
Illinois’ pension debt, at $142 billion in 2025, is the highest per capita in the U.S., requiring 20% of the state budget to service annually.

Balancing Act with Future Challenges

The budget reflects a delicate balance between fiscal responsibility and political priorities, maintaining investments in education and social services while avoiding broad tax increases.

However, the lack of transit funding and pension reforms raises concerns about sustainability, with 60% of surveyed economists in 2025 predicting a structural deficit by 2028.

Governor Pritzker’s administration points to a $1.2 billion rainy-day fund as a buffer, but critics argue structural changes are needed to address Illinois’ long-standing fiscal challenges.

As the state navigates economic uncertainty, the budget sets the stage for heated debates in the 2026 legislative session.