Red Bud, IL…The Governor’s Office of Management and Budget (GOMB) this week issued a projection of Illinois’ budget forecast for Fiscal Year 2026. The budget projection, contained within its annual “Illinois Economic and Fiscal Policy Report,” includes forecasts of State revenues and expenditures for the approaching fiscal year, which will start on July 1, 2025. The newly elected Illinois General Assembly will have to vote on the FY26 budget in spring 2025.
The GOMB forecast, which included an analysis of current State revenue and expenditure trends, took account of the stagnant current revenue trend numbers reported by the Illinois Department of Revenue (IDOR) to the Commission on Government Forecasting and Accountability (CGFA). In addition, GOMB utilized economic forecast projections generated by economic forecaster S&P Global. These projections utilize worldwide data on changes in interest rates, labor market growth, and overall GDP growth, and their effects on the Illinois economy. These trend lines indicate continued stagnation in State tax revenues moving forward, as flat-lined Illinois employment numbers and consumer spending patterns are expected to lead to near-zero growth in Illinois income tax and sales tax payments to IDOR.
By contrast, “locked-in” State spending numbers continue to soar. The State is already committed, through contracts with organized labor and promises made to key interest groups (such as recipients of vested pension benefits, and school districts), to generating a massive increase in expenditures in FY26. Based on this pattern of stagnant (or worse) revenues and soaring spending, GOMB this week issued a preliminary projection that the FY26 budget will be $3.2 billion out of balance.
The projected $3.2 billion deficit is separate and independent from any additional spending pressures that could be generated by new or expanded programs initiated by the General Assembly or by the Governor.
“The shocking numbers reported by GOMB in their FY26 budget projection show the results of the irresponsible budget passed by the majority party,” Rep. Friess said. “Illinois cannot continue this downward financial spiral. We must turn this ship around and work toward a budget that is sustainable and supports a healthy future for Illinois.”
State income tax receipts decline in October. State receipts from payments of personal and corporate income tax, a traditional bellwether of State revenues as a whole, flashed negative signals in October 2024. Relative to the comparable year-earlier month, October 2023, personal income tax receipts were down $5 million in October 2024, and corporate income tax receipts were down $94 million. Various underlying reasons have led to sharp fluctuations in corporate income tax filings and payments in recent months. The overall trend in the corporate income tax line, however, continues to be downward (down $255 million in the four-month period the began July 1 and ended October 31).
Continued declines in State income tax receipts could relate to ongoing increases in the State unemployment rate. Most income tax receipts are derived from taxes withheld from Illinois employee paychecks, and when fewer people are receiving a paycheck, income tax receipts decrease. Illinois sales tax receipts also declined during this four-month period (down $120 million), although they were flat in October 2024.
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