Gov. J.B. Pritzker signed Illinois’ eighth consecutive “balanced” budget for FY2027, a record $55.9 billion plan (the largest in state history). He framed it as responsible, affordability-focused governance amid federal headwinds. This claim relies on misleading accounting gimmicks that obscure Illinois’ true fiscal picture. Here’s the full truth.
The Same Old “Balanced” Budget Illusion
Illinois’ constitution requires a balanced budget, but the state uses modified accrual (cash-basis-like) accounting per the Governmental Accounting Standards Board (GASB) standards for general fund budgeting, rather than full accrual accounting, which we advocate.
For context, IRS Code Section 448 will not allow cash-basis accounting for C corporations with average annual gross receipts exceeding $25 million (over a three-year period). They are required to use full accrual accounting. Taxpayers deserve at least the same level of transparency from their governments as corporations must provide to the IRS.
Cash-basis, or modified-accrual, ignores long-term liabilities such as pensions and OPEB. As a result, the state can make the budget appear "balanced" through various accounting maneuvers, including:
- Shifting money from dedicated funds (like the 911 enhancement fund) into the general budget, often called "sweeps."
- Listing borrowed money as revenue.
- Underfunding pensions by paying only the minimum required by state law instead of the full amount actuaries say is needed.
- Other one-time tricks, like delaying payments or using temporary revenue sources (federal grants).
For example, in the FY2027 budget:
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Pensions: The state funds only the statutorily required contribution of $11.9 billion, which falls significantly short of the actuarially determined needs of $17 billion annually. This approach relies on the 1995 “Edgar Ramp” statutory funding schedule, which targets just 90% funding by 2045, the same flawed practices that prompted the SEC’s 2013 cease-and-desist order against Illinois for misleading investors about pension risks in bond offerings.
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New revenues and gimmicks: The budget includes hundreds of millions in new taxes/fees (social media platform fees, digital assets/crypto, fantasy sports, business tweaks, etc., totaling $800 million in some estimates), fund sweeps/transfers, and one-time measures. It pauses a gas tax increase and offers targeted relief (e.g., a school supplies sales tax holiday) while increasing spending in areas such as education and food assistance. No structural deficits were addressed.
These practices echo concerns from the past: shifting dedicated funds, understating true costs, and claiming balance even as liabilities grow.
Illinois Financial Facts Since COVID
According to the State of Illinois’ 2025 financial report, state revenues and expenses both grew substantially between fiscal year 2019 (the pre-COVID baseline) and fiscal year 2025. While post-pandemic recovery, strong tax collections, and temporary federal support fueled this expansion, spending increases outpaced sustainable revenue growth in several key areas.
On the revenue side (FY 2019 to FY 2025):
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Total general revenues and other changes rose 52% from $47.3 billion to $71.8 billion, an increase of $24.5 billion.
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Income tax revenue is up 51% from $24.9 billion to $37.6 billion, up $12.7 billion.
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Sales tax revenue increased 34% from $12.2 billion to $16.4 billion, a gain of $4.2 billion.
On the expense side (FY 2019 to FY 2025):
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Total governmental activities expenses increased 36% from $77.3 billion to $105.0 billion, a rise of $27.7 billion.
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Health and social services (the largest driver) grew 70%, from $31.1 billion to $53.0 billion, an increase of $21.9 billion.
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Other major categories, including education, transportation, and intergovernmental transfers, also rose over the period, though with some year-to-year fluctuations.
Federal operating grants and contributions remained elevated at $36.8 billion in FY 2025, still $15.2 billion, or 70%, above pre-COVID 2019 levels.
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They had surged from $21.6 billion in FY 2019 to a peak of $37.5 billion in FY 2022, an increase of $15.9 billion or 74%, driven primarily by federal COVID relief funding.
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Although they declined slightly from that peak, the persistently high level demonstrates how spending increases introduced during emergencies can quickly become embedded in ongoing budgets long after the crisis has passed.
Overall, this period reflects sustained growth in both revenues and expenses, with revenue growth, particularly in income taxes and federal operating grants, outpacing expense growth over the period, resulting in improved net position compared to the pre-COVID baseline.
Illinois’ financial condition would be worse if not for recent favorable investment market conditions, which have increased the value of its pension system investments. As these investment values grow, more resources are available to pay future benefits.
However, this has not led to a significant reduction in the state’s unfunded pension liability. Again, this is because State contributions have not consistently met the levels set by pension system actuaries; therefore, the pension obligations continue to grow. This growth includes benefits that current employees earn each year, as well as interest on the existing unfunded balance.
As a result, despite strong investment performance, Illinois’ unfunded pension liability has not meaningfully declined and remains a significant long-term financial challenge.
As we noted earlier, Illinois’s 2027 operating budget plans to contribute $11.9 billion to the state’s pension systems. However, the amount actuaries say is actually needed, called the Actuarially Determined Contribution, or ADC, is $17 billion.
Governor Pritzker often claims the state is paying the “full” or “certified” pension contribution. But he rarely mentions this ongoing $5.1 billion shortfall. This raises questions about whether his statements fully align with the spirit of the SEC’s 2013 cease-and-desist order on pension disclosures.
Opportunity for Meaningful Reform
The core issue persists: the GASB-enabled modified accrual (cash-basis) budgeting for the general fund lets officials ignore the full financial picture. Taxpayers need broader accountability for long-term liabilities in the budgets. Truth in Accounting will continue to advocate for transparent, full-accrual accounting in budgeting and financial reporting so taxpayers see the real costs of promises made. Illinois is a clear example of why stricter accounting rules are needed, especially as long-term risks loom.
Illinois taxpayers deserve the full picture. Visit Data-Z.org for interactive state data and comparisons. Support reforms that prioritize truthful accounting over politics.