Gov. JB Pritzker delivers the 2023 state of the state and budget address. [Blue Room Stream] 

Gov. JB Pritzker will deliver his annual budget address Wednesday under the shadow of a looming deficit, spending mandates and the Trump administration. 

It will mark the seventh time Pritzker has laid out his vision for the state budget. The governor has in the past pushed for a balanced budget and often touts balancing the budget as an achievement of his administration.  

The state is predicting a drop in revenue this year, spurred by an end to pandemic-era funding and lagging sales tax revenue. 

Commission of Government Forecasting and Accountability (COGFA) Chief Economist Ben Varner said in December the state’s economy is transitioning from a high inflationary period to one of more normal levels.  

Read more: COGFA presentation to ISBE gives insight on Fiscal Year 2026 revenue expectations 

He said COGFA is anticipating economic growth in Fiscal Year 2026, but tariffs proposed by the Trump administration could hinder that growth. President Donald Trump announced 25 percent tariffs on all imports from Mexico and Canada, yet they have not gone into effect. The White House said Feb. 3 that Trump had agreed to a 30-day delay. Trump also announced less week tariffs on steel and aluminum imports would be raised to 25 percent. Those take effect March 12.  

Revenues are expected to slow but spending is not. In November, the Governor's Office of Management and Budget’s (GOMB) annual Economic and Fiscal Policy report predicted the state is facing a $3.2 billion budget for FY26.  

The report found that spending will increase by $3 billion under current budget policy, driven by the rising cost of healthcare.  

Read more: Governor’s office projects lawmakers to navigate $3.2B deficit in FY26  

Shortly after the report was released, Deputy Gov. Andy Manar sent a letter to agency heads directing them to identify potential spending cuts. This comes on the coattails of the Fiscal Year 2024 budget, which totaled $53.1 billion of spending — the largest in state history.  

Pritzker said he would not turn to tax increases to make up revenue but has not indicated where cuts might be made.  

“It's very important that we live within our means in the state, and that we not resort to tax increases as a way to balance the budget,” he said in January.  

Civic Federation recommends extending sales tax to services  

The Civic Federation, an independent government research organization based in Chicago, released a report recommending the state “modernize” its tax structure.  

The report said that Illinois should extend its sales tax base to include services such as hair appointments or plumbing. The federation anticipates doing so would equate to an additional $2 billion in revenue annually.  

“One of the basic principles of government finance is that to be stable and efficient, a tax should generally have as broad a base and as low a rate as possible,” the report said. “Illinois’ sales tax does not live up to either ideal.” 

The report warned that the tax should only be extended to consumer services and not business-to-business services, as that can create situations where one item is taxed multiple times. Business-to-businesses services can include waste management, software development and financial services.  

Expenses 

Many expenditures in the state budget are mandated by statute. The biggest expenses include education, pensions, social services and healthcare.  

The Illinois State Board of Education (ISBE) approved a budget proposal asking for almost $11.4 billion in funding for FY26, a 4.6 percent increase from the previous year.  

The increase is driven by $350 million in additional funding under the Evidence-Based Funding model. That increase is the minimum required. Other increases includes $75 million for early childhood education — which Pritzker has made a priority — and $142.2 million in other expenses required by statute.  

In 2023, Pritzker announced the creation of Smart Start Illinois, a four-year plan aimed at increasing the number of preschool slots and advancing early childhood education in the state. The spending for the program was mostly frontloaded, with a $250 million increase in early childhood education and care funding included in the Fiscal Year 2024 budget.  

Read more: Pritzker to announce plan to boost access to childcare and Pre-K in Wednesday’s State of the State address 

The required increase for pensions in FY26 is $440 million. Pensions are often brought up as an example of Illinois’ economic struggles. Pritzker’s critics have often said his budgets are not balanced because the pension obligation is not fully funded. That metric essentially says that if every state employee retired today, Illinois would not be able to pay for their pensions.  

State transit agencies are also facing a financial cliff, with Regional Transportation Authority officials proposing a $1.5 million plan to combine agencies while keeping services running.  

Read more: RTA pitches $1.5B restructuring proposal after Illinois lawmaker files public transit reform bill 

The Trump Factor 

Pritzker has expressed concerns over potential changes to the reimbursement model under the Trump administration, which were amplified after the administration announced a pause in federal assistance. That pause has since been temporarily blocked by a federal judge, but Pritzker has said his administration has examined the impacts of cuts on the state budget.  

He said in January that approximately 30 to 40 percent of the state budget comes from the federal government.  

Pritzker used Medicaid as an example of this. For every $1 the state spends on Medicaid, they get approximately 50 cents back. Pritzker said if Congress opts to make cuts to the program, Illinois would not be able to cover them.  

“It's hard to plan for devastation, which is what it would be,” Pritzker said in January. “We're doing our best to put together a budget that is balanced. We're doing our best to think about the contingencies that we might have to have as eventualities because of what we think might be coming from the Trump administration.”  

He said he’s spoken with local leaders across the state, as well as nonprofits, to hear their thoughts and concerns about possible federal spending cuts.  

Pritzker’s budget address will be held at noon Wednesday at the Illinois State Capitol Building.