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February 12, 2025

State of Illinois FY2026 Budget Roadmap: Landscape, Issues, and Recommendations

The State of Illinois (Illinois or the “State”) has made significant progress in stabilizing its budget in recent years, yet still faces ongoing financial challenges, including a high tax burden, structural budget deficits, and legacy pension obligations, all of which put a strain on the state’s long-term sustainability. Overshadowing these challenges is the unprecedented uncertainty in Washington, D.C., with a new federal administration that threatens to eliminate billions of dollars in federal funding and disrupt the fragile government ecosystem. While the impacts of threatened or looming cuts to core government services and programs, including Medicaid, education funding, environmental protection programs, and medical research, are still unknown, the uncertainty surrounding federal funding of state and local government is a serious concern that must be part of conversations about strengthening Illinois’ fiscal stability and resilience.