Illinois’ budget picture tightens in final stretch amid economic
uncertainty
[May 14, 2026]
By Ben Szalinski
SPRINGFIELD — Growing pessimism over the direction of the global economy
is leading budget analysts for the governor’s office and Illinois’
legislature to temper revenue expectations less than three weeks before
lawmakers are set to finalize a new budget.
Both the governor’s budget office and the General Assembly’s Commission
on Government Forecasting and Accountability revised revenue projections
for the current year and fiscal year 2027 down by less than 1%. While
the change is small and generally keeps budget talks on track, it’s a
sign that confidence in the economy is waning.
Deputy Gov. Andy Manar, who leads budgeting for Gov. JB Pritzker, said
in a statement “the revised revenue estimates show that the overall
fiscal picture in Illinois has substantially remained the same since
February, heading into the final weeks of this legislative session.”
But he said it also “underscores the state’s need to remain focused on
fiscal discipline as the entire country is forced to continue to grapple
with economic and geopolitical uncertainty that the Trump Administration
is creating.”
The forecasters revised estimates downward after S&P Global’s April
economic forecast came in less optimistic than the January report that
was used to craft Pritzker’s budget. GDP is now expected to grow 2.1% in
2026 compared to 2.3% that was forecast in January.
Citing the ongoing war in Iran, S&P increased the likelihood of its
downside scenario, which would include higher energy prices and
declining consumer demand.
It all leaves Manar with a warning for lawmakers, including many
Democrats who have sought spending increases.
“The latest estimates shows that our ability to increase spending beyond
the Governor’s introduced levels is limited,” he said.
Estimate reductions
Pritzker’s budget office decreased its FY27 revenue projection by $173
million to $55.9 billion. The change leaves projected revenue $149
million short of the spending Pritzker proposed — provided lawmakers
approve the measures Pritzker proposed in February to bring $728 million
in new revenue. That includes a tax on social media companies based on
how many users they have in Illinois. The other funds would come from
adjustments to caps on operating loss deductions and table and
electronic gambling games.
The reduction is a small amount in the context of the massive state
budget but underscores how little flexibility lawmakers have in crafting
a budget to take effect July 1.
COGFA revised its FY27 projection down by $190 million to $55.3 billion.
That doesn’t include Pritzker’s proposed revenues, meaning COGFA’s
estimate is actually about $180 million more optimistic than the
governor’s office.
COGFA notes that sales tax collections have slowed in recent months in
the state, causing them to lower expectations by $67 million for the
upcoming year. A state law passed last year to plug holes in public
transit agencies’ budgets also requires that the state appropriate more
sales tax revenue from motor fuel sales to public transportation,
reducing the total amount of sales tax revenue available for General
Fund spending.
“I’m hearing from the retail industry, in fact just in the past quarter,
sales are down – prices remain high, but actual volumes are down,” Sen.
Mark Walker, D-Arlington Heights, said. “I looked at everyone’s forecast
for next year’s sales tax – I still think they’re optimistic and so I
would be concerned.”
Year-over-year inflation rose to 3.8% in April, according to the U.S.
Department of Labor, which is the highest rate in three years. COGFA
Revenue Manager Eric Noggle acknowledged there is a lot of uncertainty
surrounding sales tax revenue as prices rise and consumers adapt.
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Senate Revenue Committee Chair Elgie Sims, D-Chicago, listens to a
budget update from Department of Revenue Director David Harris on
Wednesday, May 13, 2026. (Capitol News Illinois photo by Jerry
Nowicki)
“As prices rise, as inflation goes up, you’re going to bring in more
sales tax revenue,” he said. “But if there’s fewer products being
purchased, that’s going to start to offset.”
COGFA is monitoring changes to employment levels that could impact how
much the state receives from personal income taxes. Unemployment has
been on the rise in Illinois, hitting 5.1% in March, according to the
Department of Employment Security. S&P’s April forecast expects
unemployment will peak in early 2027, rather than in early 2026 as was
expected when Pritzker introduced his budget.
“It’s not what you really want to see when you’re thinking about
personal income tax growth,” Noggle said. “The saving grace that we’ve
seen though is wages have been up.”
Amnesty tax revenue the state used to balance the FY26 budget is also
not expected to continue in FY27, Department of Revenue Director David
Harris told a Senate committee on Wednesday. He said that brought in
about $250 million to the general revenue fund this year.
Lower expectations for transfers to the General Fund caused the largest
decrease in COGFA’s expectations for the upcoming budget, in large part
because the state expects to pay more in income tax refunds. Federal
funding is also projected to decrease.
But with interest rates no longer expected to decrease soon, COGFA
expects other revenue sources will collectively perform $133 million
better than previously expected thanks to more revenue from interest.
Sen. Rachel Ventura, D-Joliet, also met the news cautiously.
“Since it’s our job to have a sustainable budget moving forward, when I
see a bunch of shifting, weakening numbers, and only one holding up the
fort, I don’t like to put all my eggs in one basket,” Ventura said.
The impact of high gas prices remains a wild card.
“There’s a lot of uncertainty and we can’t pretend otherwise; we’re just
going to have to take it day by day,” Department of Revenue Chief
Economist Rubina Hafeez said.
Alignment on current year expectations
Revenue has outperformed expectations in the current fiscal year. The
budget lawmakers approved last year was expected to bring in $55.1
billion in new revenue, but the governor’s office now estimates that
will land at $55.7 billion with COGFA even more bullish at $55.9
billion.
Most of that has been driven by better-than-expected personal income tax
revenue, which is up 4.2% through April so far in FY26.
But even though sales tax receipts have been up 4% so far this year,
COGFA sees signs of that slowing. The source has increased by only 2.1%
since January and the commission now expects the state will receive $64
million less than expected in its March forecast. The governor’s office
made a similar revision.
Lawmakers are expected to pass a budget on May 31.
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