State ends fiscal 2025 with record revenue

Despite uncertainty over the economy and federal funding during the second half of fiscal 2025, the year closed on June 30 with the state setting a new record for annual revenue.

Numbers compiled by the independent Commission on Government Forecasting and Accountability show fiscal 2025 concluded with $54 billion in revenue, the most the state has ever received in a fiscal year. The state also brought in $717 million more in revenue than lawmakers originally budgeted for when they passed a $53.3 billion budget in May 2024.

All told, the final revenue numbers track closely with projections made in May by both COGFA and the Governor’s Office of Management and Budget that formed the basis of the fiscal 2026 budget. In other words, June revenues produced no surprises, and lawmakers aren’t sitting on any substantial surplus as the new fiscal year begins.

The record revenues also don’t alleviate any uncertainty for the current or future fiscal years as Congress considers drastic reductions to the social safety net and aid to states.

Causes of revenue growth

Strong personal income tax growth drove the revenue increase in fiscal 2025, largely thanks to a “true up” conducted by the Department of Revenue that reallocated business-related income tax revenue into the personal income tax category. Personal income tax revenue was 10% higher than in fiscal 2024, but corporate income taxes declined by 9.5%.

Some other revenue sources also saw minimal growth. Sales tax revenue grew by less than 1%, although COGFA noted it increased by nearly 3% in the second half of fiscal 2025 after a weak start last summer as gas prices dropped and people cut back on large purchases amid growing economic uncertainty.

Federal income was also down 4.6% in fiscal 2025, even when excluding one-time pandemic relief funds the state received in fiscal 2024. But in a bright spot for the state, COGFA found that state revenue sources grew more than anticipated to offset the $178 million decline in federal revenue.

Despite solid revenue growth this year, questions remain about how well it will perform in fiscal 2026.

“Whether this record will be surpassed in [fiscal] 2026 remains to be seen, though the [fiscal] 2026 enacted budget assumes revenues of $55.297 billion – nearly $1.3 billion above the [fiscal] 2025 final total,” COGFA Revenue Manger Eric Noggle wrote.

Bills paid and money left over

The state also ended the fiscal year with $1.9 billion of cash in the General Revenue Fund after all bills were paid, according to the Comptroller Susana Mendoza’s office.

“We work hard each year to pay bills on time, build up the state’s emergency reserves and stress fiscal discipline, even in these uncertain times,” Mendoza said in a statement. “My office will strive for continued improvement in state finances and credit ratings in the new budget year.”

Mendoza’s office also put $256 million into the “rainy day” fund, growing it to a balance of $2.5 billion. The fund is expected to grow at a slower rate in fiscal 2026, however, as lawmakers suspended a monthly transfer that will free up $45 million.

With an extra cash balance to start the new fiscal year, Mendoza said she plans to pre-pay monthly pension payments for fiscal 2026. Lawmakers gave the comptroller authority last year to make pension payments earlier in the year rather than on a monthly basis when extra money is available.

“This will enable the systems to plan accordingly and keep additional dollars in their investment portfolios into the new budget year,” Mendoza said.

An uncertain future

With good new concluding fiscal 2025, attention now turns to fiscal 2026, which began Tuesday, and the vast uncertainty the state faces from budget talks in Congress and the economic fallout of decisions by the Trump administration.

Gov. JB Pritzker signed a $55.1 billion spending plan in mid-June that relies on $55.3 billion in revenue. It’s the largest budget in state history despite minimal discretionary spending growth, and it relies on $1.2 billion of tax increases or one-time revenues.

But state lawmakers have left the door open to the possibility that changes Congress makes to federal funding that requires states to cover greater portions of government programs and ceases funding in certain areas will require lawmakers to change the budget.

“The ability of the state to try to step in and try to mitigate the damage is somewhat limited, although we have the ability to do certain things and may have to in special session or we may have to in veto session,” Pritzker told reporters in Peoria on Tuesday. “It’s a little hard to tell yet. Some of the provisions of this terrible bill in Washington, D.C., don’t go into effect until next year and so we’ll have to evaluate what changes to make in order to deal with it.”

Work requirements for health care and food assistance programs, cuts to Medicaid reimbursements and the elimination of clean energy tax credits could all require the state to take on more costs.

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