News Updates

Governor Pritzker’s proposed FY2026 budget balances restrained spending and sustained support for critical investments

On February 19, as required by state statute, Governor J.B. Pritzker released the proposed Illinois budget for fiscal year (FY) 2026, which will run from July 1, 2025, through June 30, 2026. The operating budget component outlines $55.2 billion in General Fund expenditures — a 2.5 percent increase compared to FY2025 — along with a $218 million surplus.

The Illinois General Assembly has been considering this proposal and must adopt budget legislation by the end of spring session on May 31. Although figures may change once the budget is officially adopted, the Chicago Metropolitan Agency for Planning (CMAP) analyzed how this year’s proposal could affect transportation and other selected priorities in northeastern Illinois and statewide.

This year’s state budget process comes at a time of change and uncertainty. Federal support is shrinking as residual American Rescue Plan Act funds are spent down and the new federal administration pursues its policy priorities. Reflecting these and other sources of unpredictability, recent estimates of FY2026 revenue project $471 to $536 million less in revenue than the governor’s proposed budget. This uncertainty pressures decision-makers to balance restraint in overall spending with investments in top priorities and the pursuit of longstanding goals.

Despite constraints, the proposal shows the state and the region have opportunities to work together, modernize existing revenues, and strategically use available resources to ensure near- and long-term impacts. Highlights from this year’s analysis include:

• Rebuild Illinois: Six years after its launch, billions of dollars in Rebuild Illinois transportation bond authorizations have not yet been issued or obligated. These bond funds could allow the Illinois Department of Transportation (IDOT) to continue investing in critical infrastructure while the state contemplates the next capital program. Decisions regarding future capital funding should consider how to support faster project delivery.
• Road Fund diversion: The budget proposal diverts an estimated $171 million of sales tax on motor fuel revenues from the Road Fund to the General Fund. While not large in the context of either IDOT’s multibillion-dollar budget or growing Road Fund balances, funds intended for transportation may be diverted to the General Fund for the second year in a row.
• Transit fiscal cliff: The proposed budget does not address the operational shortfall anticipated by regional transit agencies once federal relief funds run out in early calendar year 2026. CMAP, in conjunction with a coalition of government and civic partners, has urged the state to modernize the sales tax to include consumer services as a critical step to address various state needs, including long-term transit funding.
• Constraint for non-transportation state agencies: Agencies that oversee climate and economic development programs — including the Illinois Environmental Protection Agency (IEPA), the Illinois Department of Natural Resources (IDNR), and the Department of Commerce and Economic Opportunity (DCEO) — face reductions in state resources that reflect past spending levels. In addition to addressing long-standing administrative challenges, the state will likely need to ensure sustained support for these programs.

Transportation funding is generally stable, but the need for sustainable funding solutions persists

The governor’s proposed budget appropriates $4.7 billion to IDOT operations in FY2026, a 2.8 percent increase over the enacted FY2025 appropriation. Compared to the 8.6 percent increase in FY2025, this more modest increase is roughly in line with inflation and reflects a tighter fiscal environment. While IDOT’s capital budget continues to be bolstered by unspent Rebuild Illinois funds, a funding solution for the transit fiscal cliff has not yet been found.

Six years after Rebuild Illinois, unspent funds can improve infrastructure delivery

The Rebuild Illinois capital program, enacted in June 2019, was the state’s first comprehensive multiyear capital plan since 2009. Under Rebuild Illinois, the state appropriated $45 billion for capital projects, including $33.2 billion dedicated to transportation capital projects. Increases to bonding authority ($11.1 billion) and pay-as-you-go revenues were also authorized to pay for transportation improvements. Although Rebuild Illinois was originally crafted as a six-year plan (FY2020-FY2025), underlying revenues and appropriations were not required to be raised or spent on a specific timeline.

As FY2025 draws to a close, a significant portion of the transportation bond authority authorized under Rebuild Illinois remains available. In recent years, pandemic-related labor shortages, supply chain issues, and capacity-related challenges following the Bipartisan Infrastructure Law have complicated implementation. As a result, the governor’s FY2026 budget reappropriates $8.2 billion of the transportation bond funding, reflecting unissued bonds that can continue to bolster investment (Figure 1). As of March 2025, 65 percent of the June 2019 transportation bond balance remained unspent and unobligated.

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Figure 1: The governor’s budget proposal reappropriates $8.2 billion to transportation bond funds in FY2026, reflecting the substantial balance of Rebuild Illinois bond authorization that has not yet been issued or spent

Currently, this funding allows the state to maintain investment levels without requiring new appropriations. For example, the governor and IDOT recently announced a $400 million grant program for local transportation projects. However, despite the availability of capital funding, ongoing delays in project delivery can pose significant costs and risks for implementers and worsen outcomes for system users. Prioritized investment — a core principle of northeastern Illinois’ comprehensive long-range plan ON TO 2050 — calls for directing limited public resources to projects that offer the greatest long-term benefits. Realizing this goal requires not only robust and sustainable funding but also effective and timely implementation. Ongoing efforts to improve delivery offer an opportunity to build on recent progress and explore solutions that support faster project timelines, increase transparency, and enable transformative investment. Such solutions — including a more predictable bond issuance schedule, improved coordination, and performance-based planning and decision-making — are likely to emerge from the ongoing work of the Blue Ribbon Commission on Transportation Infrastructure Fund and Policy.

Proposed Road Fund diversion reduces transportation funding for the second consecutive year

The Transportation Taxes and Fees Lockbox Amendment to the Constitution of the State of Illinois, approved via referendum in 2016, mandates that transportation revenues be used exclusively for transportation purposes. As a result, Public Act 101-0032 directed the state to gradually reallocate motor fuel sales tax receipts from the General Fund to the Road Fund, beginning in FY2022. The Road Fund typically finances critical capital transportation projects, such as road and bridge construction, and provides operating revenues for IDOT. Under the previously established five-year phased schedule, 100 percent of motor fuels sales tax revenues would be transferred to the Road Fund annually beginning in FY2026. Despite this, the governor’s proposed budget allocates only 80 percent of the sales tax on motor fuels to the Road Fund, leaving the remaining 20 percent in the General Fund. Doing so effectively diverts an estimated $171 million in transportation capital funds to the General Fund.

If adopted, this budget recommendation will mark the second consecutive year that the state has constrained Road Fund allocations. In FY2025, the state diverted $75 million from the Road Fund to the Public Transportation Fund (PTF), which supports transit operations in northeastern Illinois by matching Regional Transportation Authority (RTA) sales tax receipts and other locally generated revenues. While Road Fund dollars typically account for 20-25 percent of the funds going into the PTF, the General Fund provides most PTF funding and other transportation operating support via state sales tax revenues. The FY2025 diversion reduced General Fund contributions to transit and increased the share coming from the Road Fund, limiting resources that might otherwise support road and bridge projects.

The proposal to stall part of the sales tax on motor fuel diversion means that fewer revenues may be available for transportation projects as funds are redirected to support General Fund expenditures. At the same time, the governor’s proposal reflects growing fund balances in the Road Fund and the State Construction Account, which combined rose by 34 percent — from $3.8 billion to $5.1 billion — in FY2024. As efforts to improve planning, coordination, and project delivery are pursued, and transportation fund balances are more effectively deployed to address Illinois’ infrastructure needs, it is imperative that the state not establish a precedent that places these revenues at risk.

The FY2026 budget proposal does not address the transit fiscal cliff

Growing operating costs and reduced fare revenues mean that northeastern Illinois’ transit system will face a projected $771 million budget gap once federal COVID-19 relief funds are exhausted in FY2026. Without new funding, the RTA warns that transit agencies will need to cut service levels by 40 percent. However, the proposed budget neither addresses the fiscal cliff, nor does it respond to calls for additional funds — up to $1.5 billion annually — to support broader system transformation. Additionally, annual appropriations to support federally and state mandated paratransit service and reduced fare programs in northeastern Illinois account for only 5 and 15 percent, respectively, of anticipated 2025 costs.

Over the last year, legislative conversations related to the fiscal cliff have emphasized transit governance reform as a precursor to new funding. As these negotiations wrap up, transit funding remains a strategic opportunity for collaboration among the General Assembly, the governor’s office, and regional partners. In the Plan of Action for Regional Transit, CMAP identified a suite of potential solutions — including sales tax modernization.

In Modernizing Illinois’ sales tax: A pathway to a sustainable future, CMAP and a coalition of civic partners built on this recommendation to expand the sales tax base to include consumer services. The sales tax is the state’s second-largest revenue source and supports operations and services across the state, including but not limited to transit. Modernizing the state’s sales tax structure would provide significant benefits to the state, the regional transit system, and local governments.

Other key agencies see reductions in state funding

ON TO 2050’s additional core principles — resilience and inclusive growth — call for investments and strategic planning efforts to make infrastructure and natural systems more durable and to support long-term prosperity by ensuring access to economic opportunities. Programs supporting these goals are administered by state agencies like IEPA, IDNR, and DCEO. Unlike IDOT, the governor’s budget proposes substantial changes in operating funding levels for these agencies.

The shifts observed for these agencies reflect the end of key federal funding streams and the overall tighter fiscal landscape in FY2026:

• IEPA, which administers Illinois’ clean air and clean water programs, is slated for an FY2026 budget of $656.6 million, a nearly 30 percent decrease from FY2025. This is due largely to a 60 percent reduction in federal funding and a 0.5 percent reduction in state support.
• IDNR, which oversees some of the state’s key conservation and recreation programs such as water supply planning, has budgeted $636.1 million, a 7 percent decrease from FY2025. This budget reduction is driven primarily by a 7 percent decrease in state funds, though federal funds are expected to decrease as well.
• DCEO, which manages the state’s business incentive initiatives and business and workforce development programs, is set to receive a $4.5 billion — a 2 percent increase from FY2025 — driven by a 17 increase in federal grants. However, its state funding is set to decrease by 11 percent.

Each of these agencies is also contending with state funding levels that reflect historical under-expenditures. For many years, these agencies have only expended a fraction of their allocated budgets. These patterns, which stem from structural administration challenges, including procurement hurdles and limited staff capacity following severe reductions in the 2000s, impact public agencies across the state. The governor’s proposal to add 44 staff positions at IDNR in FY2026 signals the intent to rebuild capacity and better leverage federal and state resources.

As future federal support for state programs remains uncertain, Illinois will increasingly need to rely on its own administrative improvements and fiscal capacity to sustain critical programs.

Next steps

Final budget legislation is expected imminently before the end of the legislative session. CMAP intends for this analysis to support stakeholders and lawmakers as they review the proposed and final budgets. Documents used in this analysis were obtained from the Governor’s Office of Management and Budget