Illinois Insights Special Edition: 2026 Budget Address Recap (2/19)

Gov. Pritzker Gives 2026 Budget Address

On Wednesday, February 18, Governor J.B. Pritzker delivered his eighth annual Budget Address to a joint session of the General Assembly, unveiling a $56.0 billion FY27 Executive Budget. The proposal represents a 1.6% increase over the current fiscal year, with more than three‑quarters of new spending driven by required increases in pensions, Medicaid, and Evidence‑Based Funding for K–12 schools. Outside of these areas, discretionary spending grows by less than one‑half of one percent, reflecting a restrained approach amid ongoing fiscal uncertainty.

The state projects $56.055 billion in General Funds revenue in FY27, an increase of approximately $830 million over revised FY26 estimates, resulting in an estimated year‑end surplus of $24 million. Governor Pritzker framed the proposal as a balanced and disciplined budget that prioritizes core obligations while limiting new spending, even as Illinois faces uncertainty around federal funding and potential policy‑driven impacts estimated at up to $1.7 billion in FY27.

The governor characterized the FY27 proposal as a continuation of seven years of fiscal stabilization, highlighting ten credit upgrades, a $2.4 billion rainy day fund, elimination of the bill backlog, and full pension payments. At the same time, he emphasized new fiscal pressures driven by federal policy changes, estimating Illinois faces up to $1.7 billion in federal funding impacts in FY27.

Governor Pritzker also proposed an adjustment to the Local Government Distributive Fund (LGDF). Under current law, 6.47% of individual income tax collections are distributed to local governments through the LGDF. For FY27, the governor proposes reducing that percentage to 6.23%, capturing the benefit of projected income tax growth for the state’s General Funds while keeping actual LGDF dollar distributions flat relative to FY26 levels. The adjustment is projected to generate approximately $60 million in additional revenue for the state.

Governor Pritzker emphasized that the FY27 budget advances an affordability‑focused agenda, centered on housing supply, education investment, consumer protection, and child safety, while maintaining fiscal responsibility in a challenging and uncertain economic environment.

For more information, please see the proposed executive budget and press release about the address. Below are some of the highlights of the governor’s budget proposal.

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Revenue Proposals

Governor Pritzker’s proposal includes approximately $589 million in new revenue, generated through a combination of new fees and targeted tax adjustments. These include:

• $200 million from a new Social Media Digital Platform Fee
• $269 million from adjustments to the Net Operating Loss deduction cap on corporate income taxes
• $120 million from aligning the tax treatment of casino table games with electronic gaming, which are currently taxed at a higher rate.

 The proposed Social Media Digital Platform Fee would apply to companies with at least 100,000 Illinois users and utilize a tiered monthly structure based on the number of users in the state. Under the plan, platforms would be charged $0.10 per user per month for users between 100,000 and 500,000; $40,000 per month plus $0.25 per user up to one million users; and $165,000 per month plus $0.50 per user for users above one million.

Education

Governor Pritzker framed education as the cornerstone of Illinois’ long-term economic and social stability, reaffirming his commitment to the Evidence-Based Funding (EBF) model and early childhood investments. His FY27 proposal includes:

• $305 million increase for K–12 education through Evidence-Based Funding, bringing total EBF support to $9.2 billion.
• $1.5 million to implement the Illinois Comprehensive Literacy and Numeracy Plans.
• $748 million to sustain investments in the Early Childhood Block Grant.
• A renewed proposal to allow community colleges to offer four-year baccalaureate degrees in high‑demand fields such as nursing, advanced manufacturing, and early childhood education.

The Governor also renewed his call for a statewide bell-to-bell cell phone ban during school hours, requiring districts to limit wireless device use during the school day with specific exceptions for medical and educational needs.

Housing

To address Illinois’ persistent housing shortage, Governor Pritzker unveiled the BUILD Plan (Building Up Illinois Developments), a statewide zoning reform proposal aimed at lowering housing costs by increasing supply and modernizing development standards. The governor noted that Illinois is currently short approximately 142,000 housing units and will need to build more than 225,000 units over the next five years to keep pace with growing demand. He argued that local zoning rules and regulatory practices have too often made it unnecessarily difficult and costly to build new homes, limiting supply and driving up prices.

Under the proposal, the state would limit local governments’ ability to restrict housing types on residentially zoned land, expanding housing options statewide by legalizing duplexes, triplexes, four‑flats, and accessory dwelling units (ADUs) such as “granny flats.” The plan also seeks to reduce bureaucratic barriers that delay or derail projects by streamlining permitting timelines, standardizing impact fee practices, modernizing outdated building codes, and reducing parking mandate requirements. Pritzker cited local parking requirements as one example of policies that add significant costs and limit the number of units that can be built, arguing that the BUILD Plan would make it easier, faster, and more cost‑effective to construct housing across Illinois.

To support these reforms, the governor proposed $250 million in capital investments and grants, including:

• $150 million administered by the Illinois Housing Development Authority (IHDA)
  •  $100 million for capital funding to support middle housing construction
  •  $50 million for down payment assistance for first‑time homebuyers
• $100 million through the Department of Commerce and Economic Opportunity (DCEO)

 Affordability

Governor Pritzker called for a two‑year pause on new data center tax credits, citing growing concerns about the rapid expansion of data centers and their impact on consumer energy costs and community stability. The proposal would suspend authorization of new data center tax incentives effective July 1, allowing the state to evaluate whether continued subsidies align with long‑term affordability and fiscal sustainability. “With the shifting energy landscape, it is imperative that our growth does not undermine affordability and stability for our families,” Pritzker said.

Under the proposal, the governor will direct key state agencies to study the impact of existing data centers on the state’s energy grid, consumers, and state revenues, including whether the facilities are financially sustainable over time and whether costs are being passed on to ratepayers. The administration will also analyze the effectiveness of the current tax credit structure and the electricity excise tax to ensure resources are allocated fairly and consumers are protected from rising energy costs. 

The governor also renewed his push to combat so‑called “junk fees,” calling on lawmakers and business leaders to improve price transparency for consumers. As part of the proposal, businesses would be required to disclose the full price upfront and prohibited from hiding mandatory fees in advertisements or at checkout. The administration framed the effort as a consumer protection measure designed to prevent misleading pricing practices and reduce unexpected costs for Illinois families.

Energy

Governor Pritzker highlighted energy reliability and affordability as key priorities, announcing Executive Order 2026‑01 to advance the development of new advanced nuclear energy facilities in Illinois. The order directs state agencies to evaluate potential reactor sites with a goal of delivering at least two gigawatts of new nuclear capacity by 2033, either through new construction or expansions, marking the state’s first push for new nuclear development in nearly 40 years. 

The executive order tasks the Illinois Power Agency, Illinois Commerce Commission, and other state agencies with immediately assessing regulatory and siting options to support deployment. Pritzker framed the initiative as both an economic and consumer‑focused strategy, emphasizing that expanding clean, reliable baseload power is essential to stabilizing electricity prices, meeting growing demand, and ensuring that affordability, safety, and reliability guide Illinois’ long‑term energy future.

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