News Updates

Early takeaways from Governor Pritzker’s FY2027 state budget proposal include transit and climate funding impacts

On February 18, Governor JB Pritzker released his proposed budget for Illinois fiscal year (FY) 2027, which runs from July 1, 2026 through June 30, 2027. Prior to his budget address, the governor warned of a tight fiscal environment stemming from a suite of federal actions, including cuts to federal income tax, Medicaid, and the Supplemental Nutrition Assistance Program. The state’s resources are also impacted by sluggish performance in key revenue streams, including corporate income tax revenues, which have been impacted by federal tax changes in recent years, and state sales tax receipts, which grew at a compound annual growth rate of just 0.5 percent between FY2023 and FY2026.

In response, the governor’s budget proposes minimal new spending and incorporates several new taxes and revenue sources, including a social media tax and changes to the corporate tax net operating loss deduction. The operating budget includes $56.0 billion in General Fund expenditures, an increase of $878 million above FY2026. This represents an increase of 1.6 percent and falls below near-term inflation, which the Governor’s Office of Management and Budget anticipates will continue to hover above 2 percent. The Illinois General Assembly is now considering the governor’s proposal and must adopt budget legislation by the end of the spring legislative session on May 31.

The Chicago Metropolitan Agency for Planning (CMAP) offers early highlights from the governor’s proposed budget and potential impacts on transportation, climate, and the regional economy in northeastern Illinois. Importantly, the budget advances transformational investments in transit and clean energy, in line with two major bills passed last year. However, continued efforts to protect the state’s General Revenue Fund affect other key priorities, including support for local governments. A more detailed analysis will be provided by CMAP before the state adopts the final FY2027 budget.

Transit funding reforms

The budget redirects two new revenue streams toward transit systems in northeastern and downstate Illinois, pursuant to the Northern Illinois Transit Authority (NITA) Act, legislation that delivers many of the reforms envisioned by the region in the Plan of Action for Regional Transit. Due to continued refinement by state forecasters and recent trends in factors like fuel prices, these revenues — the state share of sales tax on motor fuel and interest income from two large state funds — are now projected to perform slightly below initial estimates (Table 1).

Table 1: Projections for key revenue streams redirected to northeastern Illinois under the NITA Act are slightly lower than initial estimates

While the NITA Act provides a major investment in public transportation in northeastern Illinois and across the state, these adjustments show how annual fluctuations or sustained decline in either or both revenue streams could affect the long-term fiscal sustainability of transit. Accordingly, it is important to continuously monitor the performance of these and other transportation system revenues to ensure the region can address current and future investment needs. Future analysis will seek to better understand variation in the factors that impact transportation revenues and will consider strategies to sustain revenues long-term, such as a road usage charge.

Transportation funding and project delivery

The Road Fund balance declines for the second year in a row in the proposed budget. This reflects the impact of the NITA Act, which redirected some transportation revenues from the Road Fund to transit operations. Declines can also be attributed to increased construction expenditures compared to FY2025 and prior years. Faster spending on construction could reflect higher costs, successful project delivery, and other factors. CMAP will continue to review how these trends are informing the cash balance of the Road Fund in light of recent recommendations from the Blue Ribbon Commission on Transportation Infrastructure and the status of Rebuild Illinois. The Regional Transportation Plan has also identified greater regional collaboration and project prioritization as important tools for improving fiscal stewardship and project delivery.

Clean energy investments

The governor’s budget proposes increased appropriations to agencies with expanded responsibilities under the Clean and Reliable Grid Affordability (CRGA) Act, the state’s newest energy legislation. For example, CRGA directs the Illinois Power Agency (IPA) to conduct an initial storage procurement by August 2026, and to develop an energy storage procurement plan that will be updated every two years. CRGA also directs the Illinois Commerce Commission (ICC) to lead the development of an integrated resources plan, which will evaluate the state’s future electricity needs and be updated every four years.

To support these new responsibilities — through which CRGA intends to create a statewide roadmap to secure adequate, efficient, and affordable energy resources — the governor proposes increased operational funding and staff capacity for both agencies (Table 2).

Table 2: Proposed increases to IPA and ICC appropriations and agency headcount support new CRGA responsibilities

In addition to initial funding to advance CRGA, the governor’s budget sustains funding for many programs created in the Climate and Equitable Jobs Act (CEJA). In the coming weeks, CMAP will further review the proposed funding for CRGA and CEJA programs and responsibilities in the context of CMAP’s Comprehensive Climate Action Plan for Greater Chicago, which will be released later this month. Adequate funding for the provisions included in CRGA, CEJA, and related legislation will be integral to successful climate action.

Proposals impacting local governments

The governor has proposed holding FY2027 contributions to the Local Government Distributive Fund equal to FY2026 levels, decreasing the percentage of income tax receipts diverted to local governments from 6.47 percent to 6.28 percent. This action would freeze the level of state resources available to local governments at a time when costs are growing rapidly. Combined with the state’s outdated sales tax structure that primarily taxes goods rather than services, this could drive local governments to further rely on local funding sources like property taxes.

Additionally, the governor’s Building Up Illinois Developments (BUILD) plan aims to improve housing supply and affordability with a suite of housing reforms, many of which were recommended in the final report of the state’s Missing Middle Housing Solutions Advisory Committee. BUILD includes zoning changes that preempt local zoning authority to allow for more multi-unit housing and accessory dwelling units, updates to permitting and inspection processes to expedite timelines and augment local capacity, and $250 million in new capital appropriations to the Department of Commerce and Economic Opportunity and the Illinois Housing Development Authority for site prep, housing development and homebuyer assistance.

Both proposals highlight critical issues related to delivering a high quality of life in northeastern Illinois. CMAP is exploring these issues, including local government capacity and the need for diverse and affordable housing for a strong regional economy, among other topics in The Century Plan, an initiative to better understand how the region will change and what it will need to thrive by midcentury. The State of the Region report examines some of the challenges the region is facing today.

Next steps

CMAP will continue analyzing the budget over the coming months as the governor’s proposals are contemplated by the Illinois General Assembly. CMAP intends for these efforts to support stakeholders and lawmakers as they review the proposed and final budgets. Subsequent analysis later this spring will provide a more in-depth assessment of how state decisions could impact the region and priorities identified by the Regional Transportation Plan, the comprehensive climate action plan, and The Century Plan.

Documents used to analyze the budget proposal can be obtained from the Governor’s Office of Management and Budget.