Increases funded by federal COVID aid have been made permanent, causing a fiscal problem.
Illinois needs to pull back on spending.
Since 2020, the state has gotten $15.6 billion in federal aid related to the COVID-19 pandemic. While that funding was temporary, Illinois has permanently increased what it spends.
That has caused a fiscal problem for the state, with projected budget deficits totaling nearly $21 billion during the next five years. Expenditures are forecasted to grow nearly 20% in that time, but revenues only 11% in that time.
These estimates could be off by billions because of changes such as reductions to federal benefits programs. Still, lawmakers should return spending to pre-pandemic norms. In response to the pandemic, Illinois expanded its budget by nearly $11 billion from fiscal years 2020 to 2023, a 27% increase.
Temporary federal aid supported much of that growth. Even though the emergency has passed, what was federal money now is covered by Illinois taxpayers.
For example:
1. “Environment and culture” spending, which encompasses the Illinois Art Council and Department of Natural Resources, grew 62% in just three years, rising from $61 million to $99 million. Had spending grown in line with the state’s nominal GDP growth, it would have risen only about 10% by 2023.
2. “Human service” spending, for departments such as the Department of Veterans Affairs and Human Rights, jumped from $6.6 billion in 2020 to $10.8 billion 2023, a 64% increase. Employee headcounts are up nearly 5,500 since 2020. If increases had tracked with nominal GDP growth, spending would be about $3.5 billion lower.
One way to rein in these increases is to enact a spending cap tied to that nominal GDP growth. Gov. J.B. Pritzker’s fiscal 2027 budget proposal of $56 billion, adds $880 million higher than the 2026 budget levels. With a spending cap in place, the state would need to cut $2 billion from the current proposal.
To help better manage its spending, Illinois should make more use of its Budgeting for Results Commission. Established in 2010, it can evaluate state programs, identify inefficiencies and ensure taxpayer money is tied to measurable outcomes.
The commission has been underutilized. Strengthening it would help lawmakers target waste and prioritize core services.
Other reforms would help establish fiscal stability. Read more in our report Illinois Forward 2027.
