Session slog ends in $56B budget, new taxes on social media companies, crypto, fantasy sports

SPRINGFIELD — Illinois lawmakers approved the state budget early Monday morning after slogging through the night, enacting new taxes on businesses and authorizing less spending than what Gov. JB Pritzker proposed in February.

“It’s allowed us to be prepared for the great reality we face today,” Senate Democrats budget leader Elgie Sims, of Chicago, said during debate. “The reality of federal cuts. The reality of chaos coming from Washington … We are not placing blame. We are prepared. We are not acting on fear. We are acting responsibly.”

The budget totals $55.9 billion, supported by a similar amount of revenue. The spending plan included an $830 million supplemental current-year spending plan, meaning the upcoming fiscal year 2027 budget is essentially flat.

To get it across the finish line, Democrats — especially progressives — had to temper their expectations. Many had called for new progressive revenue measures throughout the session, including taxes on big corporations and billionaires and for Illinois to untie itself from parts of the federal tax code.

Instead, the measure freezes corporate net operating loss and enacts taxes on social media companies, digital assets, fantasy sports, tobacco and sports betting on prediction market websites.

Democrats also sought to include at least a few measures that address affordability. It freezes the 1.3-cent gas tax increase that’s slated for July 1, pushing it to January. It also creates a sales tax holiday on school supplies from Aug. 7-16.

Republicans, meanwhile, said the relief didn’t go nearly far enough.

“We’re not going to raise the gas tax in July, we’re just going to wait a couple more months, so we can raise it at the end of the year after election time,” Rep. Joe Sosnowski, R-Rockford, said, adding sarcastically that there was a “lot of courage coming out of that side of the aisle and the governor.”

Path to passage

Its passage comes after an spring session thrust further into unpredictability  by the war in Iran and federal policy changes. Budget analysts for the General Assembly and governor’s office tempered revenue expectations just weeks ago, citing growing pessimism over the economy.

The 3,700-page spending plan and associated implementation bill were introduced late Saturday evening and about 200 additional pages were added around 2 a.m. on Monday. But other components of the budget, including the capital and revenue bills, were not filed until mid-afternoon on Saturday.

“Thirteen million people expect us to do our jobs in the openness of daylight within the months and weeks leading up to a May 31 deadline each year, not in the final few hours of darkness,” Sen. Chris Balkema, R-Channahon, said as the Senate took up the spending bill around 2:30 a.m. “It’s highly embarrassing to the 13 million people.”

No Republicans voted for the plan, though some House lawmakers said they were at least more involved in budget negotiations than in recent years.

“It’s been very recent communication, but it’s certainly better than no communication at all, which has been, of course, the status quo for many years,” Rep. Ryan Spain, R-Peoria, told reporters.

The spending measure, House Bill 111, passed the Senate 37-21 after 3 a.m. Monday morning. The House followed around 4:15 a.m. with a 76-39vote, followed by the budget implementation bill, House Bill 2949. The revenue and tax changes, Senate Bill 3019, passed the House around 11:15 p.m. on a 73-41 vote, followed by the Senate around 12:30 a.m. with only Democratic votes as well.

Tax increases and revenue maneuvers

The budget also calls for transferring $150 million in sales tax revenue from gas to the General Revenue Fund once public transportation is fully funded, opening that revenue up to be spent on any purpose.

“If you’re a driver who is irritated by the high price of gas that you’re paying, you should be extra irritated when you where the funds are going,” Spain said.

Sen. Chapin Rose, R-Mahomet, aired similar concerns earlier on Sunday during committee.

“We ought to be suspending the sales tax on motor fuel right now – not diverting it to the General Revenue Fund, and not diverting it, oddly to the exact same dollar amount that we got for illegal immigrants and welcoming centers,” he said.

That state plans to spend $143 million on a healthcare program for undocumented immigrant seniors and another $4 million on welcoming centers that provide services to immigrants arriving in Illinois.

Lawmakers incorporated a pair of the tax changes that Pritzker had proposed in February. One would lower the cap on corporate net operating loss deductions for business. Another would impose a tax on social media companies based on the number of users the platform has in Illinois. Combined, those would generate $500 million in new revenue.

Social media companies would be taxed on a progressive scale starting with platforms with 100,000 to 499,999 users paying 10 cents per month for each user all the way up to platforms with at least 1 million users paying a $165,000 fee plus 50 cents for each user each month. A similar tax in Chicago is already tied up in court.

New taxes on digital asset sales and fantasy sports are expected to generate $65 million. The state would create a licensing structure for fantasy sports operators and impose a 15% tax on each business — something Rep. Curtis Tarver, D-Chicago, said the industry themselves requested.

Consumers purchasing tires will also see a 50-cent increase in a tax on those purchases, which primarily funds a waste disposal fund.

Sports bets on prediction markets and remote tobacco retailers would also be taxed under the plan.

“This state is addicted to spending money it doesn’t have,” Rep. Blaine Wilhour, R-Beecher City. “It’s addicted to creating programs that it can’t afford. It’s addicted to making promises it can’t keep, and it’s addicted to coming back to the taxpayers constantly, constantly to clean up the mess.”

The revenue package also creates a Targeted Advertising Services Tax, which is more commonly known as a digital ad tax. However, lawmakers expect the tax will also face legal challenges and are not planning to gather revenue from it in FY27. Tarver said the goal was to create a framework to implement the tax later if it’s held up in court. Keith Staats, president of the Illinois Taxpayers Federation, told a House committee the tax likely violates federal internet freedom laws.

The budget package does not eliminate tax incentives for data centers, despite Pritzker calling for it in his budget.

Other spending in the budget appears to rely on numerous fund sweeps that redirect money from one program to another or to the state’s General Revenue Fund. One of those sweeps includes transferring $70 million from the BRIDGE program — created last year to allow Pritzker to allocate funding to programs that fall short in funding because of federal cuts ­— to the Fund for Illinois’ Future for infrastructure projects and other grants. Money in that fund is typically earmarked for specific projects in Democratic legislative districts.

However, the spending bill stipulates that $70 million from the BRIDGE Fund should go to a new program to fill gaps in food assistance programs, which led to some confusion among lawmakers debating the bill in the House.

Spending

Rep. Robyn Gabel, D-Evanston, said the budget includes about $65 million in reductions for government operations, a relatively small cut in the budget. She said no government staff would be laid off.

“Most important in this moment, this budget is not balanced on the backs of working families,” Gabel said. “That means no taxes on working people, and no severe cuts to critical services they depend on.”

The budget would establish a program to help people who have lost Supplemental Nutrition Assistance Program, or SNAP, benefits as the federal government institutes new restrictions on eligibility. Under the new Families Receiving Emergency Support for Hunger, or FRESH Program, people who have lost or seen their SNAP benefits reduced would be eligible for a one-time $400 payment. The program is scheduled to last just one year and is estimated to cost about $70 million.

Following Wilhour’s address, Rep. Diane Blair-Sherlock, D-Villa Park, pointed a finger at the federal government.

“I will not be lectured about excessive state spending at a time when I am watching billion- dollar ballrooms being built, private jets being flown around by staff to go to their girlfriend’s concerts, while SNAP benefits are cut, while Medicaid is cut, while Medicare is cut, while people are desperately trying to get health care,” she said. “We as a state are trying to fill in gaps created by the federal government.”

Funding for local governments will increase. Lawmakers allowed the percentage of the income tax that they receive to stay flat at 6.47%. Because of natural income tax growth, their total dollar amount received will grow — Pritzker had proposed reducing the percentage.

Mayors vigorously lobbied lawmakers this spring not to cut the percentage and Sims told reporters on Sunday morning that senators agreed.

Illinois lawmakers are also in line for a roughly 3% pay raise, which will bring their base salaries to $101,450. State law indexes their pay each year to the rate of inflation.

The bill also fully funds pensions and the state’s Evidence-Based Funding model for K-12 education, including a property tax relief component. However, districts receiving those grants will need to forgo property tax increases for three years, rather than two as current law requires.

Higher education will only receive a 1% increase next year — the second year in a row new funding was below the rate of inflation.

Direct service providers will receive a 60-cent wage increase, half of what is recommended. The budget also does not include any increase in the “rainy day” fund.

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.