Governor JB Pritzker has signed Illinois’ fiscal year 2027 budget, a nearly $56 billion spending plan that includes new taxes on businesses, social media, and digital assets. The budget, which takes effect July 1, aims to balance fiscal responsibility with investments in the state’s future, even as Pritzker seeks a third term.
Key Takeaways
- A $55.9 billion budget for fiscal year 2027 has been signed into law.
- New taxes target businesses, social media platforms, fantasy sports, and digital assets.
- The budget includes tax breaks for school supplies and delays a gas tax increase.
- Spending is largely flat year-over-year, with some new initiatives.
A Budget Focused on Affordability and Future Investment
Governor Pritzker emphasized that the budget demonstrates responsible governance and balanced budgets while making life more affordable for working families. He contrasted Illinois’ approach with federal fiscal policies, criticizing what he termed "massive deficits" and "tax breaks for corporations" at the national level.
The budget passed with bipartisan opposition, as all Republicans voted against it, alongside a few Democrats. Despite calls for more aggressive taxation on the wealthy, the final plan focused on new revenue streams from businesses.
New Revenue Streams Introduced
The fiscal year 2027 budget introduces several new taxes designed to generate hundreds of millions in revenue. These include:
- Social Media Tax: A progressive tax on social media platforms based on user numbers, with an expected revenue of $200 million.
- Business Tax Adjustments: Lowering the cap on corporate net operating loss deductions, projected to raise $300 million.
- Digital Asset Sales Tax: A 0.2% tax on digital asset sales, effective January 1, expected to generate $60 million.
- Fantasy Sports Licensing: A 15% tax on receipts from fantasy sports contests, with an estimated $5 million in revenue.
- Prediction Market Tax: A tax starting at 1.75% on sports bets made on prediction markets.
- Remote Retailer Taxes: Collection of taxes on cigars, pipe tobacco, and alternative nicotine products from remote retailers.
- Targeted Advertising Services Tax: A proposed 10% tax on digital ad services, though expected to face legal challenges.
Additionally, Illinois is decoupling its tax code from the federal code, requiring taxes on gains from small business stock sales within five years of purchase. The budget also includes a pause on processing tax incentives for data centers.
Tax Relief and Spending Priorities
While introducing new taxes, the budget also incorporates some tax relief measures. The scheduled 1.3-cent gas tax increase has been postponed until January 1, and the sales tax on school supplies will be reduced from 6.25% to 1.25% between August 7-16. Lt. Governor Juliana Stratton highlighted these breaks as a response to rising costs for families.
Spending in the new budget is largely flat compared to the previous year, with some notable allocations. The budget establishes the FRESH Program to provide a one-time $400 payment to individuals who have lost or seen reductions in SNAP benefits, costing an estimated $70 million. It also allocates $55 million to hire 450 new employees at the Department of Human Services.
Opposition and Vetoes
Republican leaders criticized the budget, arguing that new taxes contradict the governor’s message of affordability. House Republican Leader Tony McCombie stated that the budget "chose to put more spending and more pressure on family budgets instead of pursuing property tax relief, energy affordability, and economic growth."
Governor Pritzker issued "item" and "reduction" vetoes to address drafting errors in the budget legislation, including removing erroneous line items and adjusting appropriations for certain programs. These vetoes are within the governor’s constitutional authority and were made in consultation with legislative sponsors.
Education and Other Allocations
The budget fully funds the Evidence-Based Funding increase for K-12 schools and restores $47 million for property tax relief grants, contingent on school districts agreeing to reduce their tax levies. Funding for free school breakfast and lunch programs has tripled to $26 million.
Higher education will see a 1% funding increase in FY27, following an additional 2% spending increase authorized for the current year. Other significant allocations include funding for homelessness prevention, reproductive health initiatives, infrastructure grants, and lead service line replacement.
