* 1/22/26 - Illinois tightens its belt by $500M ahead of budget fights and federal cuts..................
Buzz Sawyer
Illinois tightens its belt by $500M ahead
of budget fights and federal cuts
The state of Illinois says it has come up with a nearly half-billion-dollar cushion against anticipated shortfalls and disruptions in federal funding.
Gov. JB Pritzker told state agency leaders last fall to identify 4% in spending cuts.
The Governor’s Office of Management & Budget today detailed $482 million that various agencies won’t be spending in the second half of the state’s fiscal year, which ends June 30.
The biggest chunk is $200 million pruned from the Healthcare Provider Relief Fund, which provides funding for Medicaid. The state spends about $17 billion annually on Medicaid, 70% of which comes from the federal government.
The Department of Human Services identified $119 million in savings from delayed hiring, reduced overtime and fewer grants because of reduced caseloads. Another $50 million in savings comes from the health insurance program for state employees, which began the year with a higher-than-expected balance, as well as increased rebates for prescription drugs.
There also will be $31 million less in education spending than budgeted, most of it coming from a 2% reserve for universities. Similar reserves from public-safety agencies account for $22 million in savings.
The state says service delivery won’t be reduced, despite lower spending.
The belt-tightening comes less than a month before Pritzker will propose to legislators a budget for the coming fiscal year.
“The outlook for fiscal year 2027 has not changed significantly since last fall,” GOMB director Alexis Sturm said in a memo detailing the spending reductions. “We expect that most agencies will not see their funding requests fulfilled.” (Read the full memo below.)
Budgets have risen steadily, reaching $55 billion this year. Whether Pritzker, who is seeking re-election this year to a third term, will propose less spending remains to be seen.
“Pritzker is saying we have a tough revenue year ahead, the federal government is making it tougher, so the General Assembly should be prepared for tough budget negations,” says Ralph Martire, executive director of the Center for Tax & Budget Accountability.
“This is another clear signal it’s not going to be a robust year from a general fund standpoint. Compounding the issue that the Trump administration is finding all kinds of ways to disrupt funding to the state.”
The Trump White House has proposed various cuts in support for state-level services ranging from mental health to child care, some of which were quickly withdrawn or struck down by courts. Tax breaks in the federal budget and tax bill passed last year, particularly those on tips and overtime, could have the biggest impact on the state's finances.
Illinois, like many other states, uses the federal tax return as a starting point for its own income taxes. The state already has moved to decouple its income taxes from some corporate provisions but not others.
Martire estimates the state could face a reduction of roughly $700 million this year from various federal tax changes. Changes in federal support for the low-income food program known as SNAP could reduce funding to Illinois by $600 million in the year ahead.
The savings identified so far by the state “doesn’t come anywhere near offsetting these other challenges,” he says.
Although the state's revenue collections through the first half of the fiscal year were nearly 5% higher than a year earlier, the Commission on Government Forecasting & Accountability cautions that “the degree to which revenues may surpass (the budgeted level) will largely depend on the performance of income tax receipts during the final payment period this spring."