On Wednesday, February 2, 2022, Governor Pritzker delivered his FY23 budget address. The General Assembly will now finish the business of making next year’s budget.

Below is a summary of key provisions from the Governor’s FY23 budget proposal. Forefront will provide additional budget updates throughout the spring. For a refresher on Forefront’s positions, feel free to explore Forefront’s core value of racial equity and our Public Policy position statements.

We welcome questions and feedback! Feel free to reach out to our team at [email protected].

Jump to:

• The Big Picture
• Racial Equity
• Tax Policy
• Allowing Nonprofits to Meet Community Needs
• Supporting Nonprofit Jobs, Benefits, and Economic Capacity
• Protecting Communities and Human Potential

The Big Picture

The Governor’s budget reflects dramatic improvements to the state’s financial position. Reactions to this budget from sector stakeholders are generally positive, while most are also still calling for meaningful structural reforms, a deeper investment in historically disinvested areas and populations, more support for our essential workforce, and permanent relief for lower-income residents and families.

• FY22 Year End: The Governor projects a $1.7 billion surplus at the end of FY22 on June 30, 2022, which is another upward adjustment compared to what was reported in the Governor’s Office of Management and Budget’s (GOMB) revenue forecast in November 2021.
• FY23 Year End: A 1% decrease in general fund revenue in FY23 is projected (compared to the revised FY22 total), driven by decreases in corporate income and sales taxes that are only partially offset by an increase in income tax. Additionally, the federal Medicaid match is expected to return to its pre-COVID rate, which is explained further below. Even so, the total expenditures recommended by the Governor ($45.375 billion) would not exceed the total revenue ($45.833 billion), and any surplus would be dedicated to the state’s Rainy Day Fund (see below) and payment backlog paydown.

Source: Governor’s Office of Management and Budget 

• Borrowing During COVID: The State’s general loan from the federal government ($3.2 billion) has been repaid in full two years early as of 2/26/22, saving $82 million in interest. Aside from this, however, and unresolved in the Governor’s budget, is the repayment of interest-bearing advances from the federal government for the unemployment insurance trust fund (over $4 billion). By 9/30/22, $32 million in interest is due. The state must act to avoid unemployment insurance rate hikes for businesses and benefit reductions for those claiming unemployment. The governor’s office said it remains in negotiations with lawmakers and representatives of labor and businesses on a solution, which may include using several billion in unallocated ARPA funding.
• Pensions: Pension debt still looms heavily over the state budget, but there’s progress. The Governor’s budget offers an additional $300 million in FY22 for pension liability based on the projected surplus. Additionally, for FY23, the budget proposal fully funds the state’s obligation plus another $200 million. This would be the first time since 1994 the state paid more than the minimum required, which could save an estimated $1.8 billion by the fiscal year 2045. In general terms, the Governor reported that pension liabilities are down (due to maneuvers like buyouts at a savings of $1.4 billion) and assets are up.
• Budget Stabilization Fund: The Governor proposed adding $600 million to this so-called “Rainy Day Fund” in FY22 using the forecasted surplus, and then another $279 million in FY23, which includes $73 million from cannabis revenue on an ongoing basis. The average state has 28 days of expenses in their BSF; Illinois currently has 15 minutes.
• Other Payment Delays and Unfunded Liabilities: Using the FY22 budget surplus, the Governor proposed a supplemental appropriation of $898 million to eliminate remaining payment delays to health care providers and $230 million to cover remaining unfunded liabilities in the College Illinois! Tuition Plan. The State’s overall payment backlog was projected to be down 70% compared to 2018 by FY23 year-end, to $2.7 billion, which is less than the average amount spent by the State in 30-days.

Source: Governor’s Office of Management and Budget

Racial Equity

Forefront is committed to advancing racial equity and economic justice in Illinois, which in part includes analyzing the state budget and other policies for their potential to do so. We actively support proposals that have the potential to improve racial equity and economic justice, such as these budget recommendations. (Also, note that many of the workforce provisions listed in the related section below have the potential to increase support and wages for BILPOC workers.)

• Minority Teacher Scholarship Program: An additional $2.3 million to expand the program.
  
• Office of Minority Economic Empowerment: $5 million for small business support.
  
• Illinois Nonprofit Security Grant Program: $20 million in new funding for grants to nonprofit organizations statewide for security improvements to reduce risk from hate crimes targeting Latinx, Black, LGBTQ, Asian, and Jewish residents, which have increased in recent years. Also see HB4438 / SB3740 and see the fact sheet that cites Forefront as a member of the Safeguard Illinois Communities Coalition.
  
• Restore, Reinvest, and Renew: Adds $50 million to this grant program that targets reinvestment to populations and neighborhoods that have historically suffered from violence, excessive incarceration, and economic disinvestment.

Tax Policy

Forefront assessed Governor Pritzker’s budget proposal for provisions that reflect Forefront’s interest in supporting communities and families, and for tax policy that strengthens and expands incentives for individuals to give their time and money to nonprofit organizations. Below are things that are worth noting that are (or aren’t) in the proposal.

• Illinois Family Relief Plan: In a series of temporary and short-term maneuvers, the budget proposal offers some financial relief to Illinoisans, including  1) suspension of the 1% grocery tax during FY23. In Illinois, consumers pay a regressive and flat 1% tax on groceries, (not the regular retail sales tax), which goes to local governments. State funds would be used to keep local governments whole.  2) Suspension of the automatic inflation-adjusted increase in the motor fuel tax scheduled for July 1, 2022, which would otherwise add ~$0.02/gallon. Pritzker proposed freezing the tax for one year at the current levels ($0.392/gallon for gasoline and gasohol, and $0.467/gallon for diesel). This change would not affect Rebuild Illinois IDOT road improvements already planned for FY23 or fuel-tax financed bonds.  3) Providing a 5% property tax rebate to qualifying property owners (up to $300) based on state income tax returns, in addition to the 5% property tax deduction already available.
  
• Endow Illinois – NOT INCLUDED: This new tax credit would be equal to 50% of contributions made to a permanent endowment at a qualified community foundation, bolstering resources available to nonprofits in Illinois statewide in perpetuity. There is a similar program in Iowa (Endow Iowa). Endow Illinois is a Forefront legislative priority and has been supported by the Alliance of Illinois Community Foundations for many years; see related data in “Transfer of Wealth Opportunity” (2021) and refer to HB1761 / SB2052. Forefront is working with legislators in an attempt to insert Endow Illinois in the final budget.
  
• Rural Internet Expansion Tax Credit – STATUS UNCLEAR:  SB2247, which Forefront is watching and supports, would establish a tax credit for broadband expansion in small townships and counties. The Governor’s budget makes some investment in broadband expansion but does not specifically cite this new tax credit. We will continue tracking this issue, as this measure may eventually be included in the final budget.

Allowing Nonprofits to Meet Community Needs

Nonprofit organizations throughout Illinois contract with the state to provide a myriad of services across the lifespan that support well-being in every community. Just as companies that build roads for the state want their contracts that cover the cost of their work, nonprofit businesses that build well-being need contracts that cover their costs. In many cases, the state still pays nonprofit contractors on a fee-for-service basis. Thus, the rate that the state pays for one hour of service should cover the full cost of delivering that hour of service. However, the nonprofit sector has suffered tremendous under-payment for nearly two decades. There has been some progress recently, and the Governor’s budget offers more incremental progress. More broadly, the nonprofit sector continues to call for the creation of a rational, system-level rate-setting methodology. Some of the increases in rates and programs impacting the nonprofit sector recommended by the Governor for FY23 include:

• $62.8 million to implement community-integrated living arrangements (CILA) rate calculator on 1/1/23
• $32 million for direct service providers (DSP) for $1 wage increase on 1/1/23 
• $250 million for the second year of funding for the Reimagine Public Safety Act to address firearm violence (of this, $235 million is ARPA)
• $96.4 million increase for the Home Services Program for persons with disability including wage increases
• $140 million to fund Behavioral Health provider rate enhancements
• $100 million for enhancements to Low Income Home Energy Assistance Program (LIHEAP)
• $87.1 million for staffing shortages of social service workers at DCFS contracted providers
• $29.7 million for caseload growth in the foster homes program 
• $10.3 million for adoption and guardianship services
• $25 million for Level of Care Support Services so youth receive placement services in the most clinically appropriate setting, including more residential capacity and workforce stabilization
• +3.5% raise to child care providers under Child Care Assistance Program (CCAP) on July 1, 2022, and another +4.5% on December 1, 2022
• $14 million for a $0.70/hour rate increase for the Community Care Program, which cares for elderly residents, on 1/1/23
• $4 million for a new state-funded program to support caregivers

One of the state’s biggest spending obligations, of course, is health care (Medicaid) – and many nonprofit businesses deliver Medicaid services all over the state. Since March 2020, due to COVID, the federal government has provided an enhanced Medicaid match (+6.2%). The Governor’s budget assumes that this enhanced match will end at the end of September 2022, while also projecting increased enrollment over the next few months.

Supporting Nonprofit Jobs, Benefits, and Economic Capacity

Supporting the sector’s workforce is a Forefront priority, and we work closely with other stakeholders to coordinate on related issues. The workforce crisis has escalated in recent years and is driven primarily by low pay in the sector due to inadequate public investment as explained above; a full pipeline of solutions is warranted. The Governor’s budget does offer some significant measures to bolster the health and human services workforce, particularly in response to the impact of COVID on health professionals. In addition to the items below, Forefront is watching and will support related bills, such as the Rebuild Illinois Mental Health Workforce Act (HB4238 / SB3935) which has relevant appropriations and so may appear in the final budget, as well as HB5325 / SB3958, which would provide flexible funding for employers to improve benefits.

• License fees for frontline healthcare workers.  The proposal offers a waiver of regulatory licensing fees for one year to offer savings to workers. This change would impact many nonprofit employees, or their employers, if the employer normally reimburses the fee.
• Healthcare Workforce Initiatives. The Governor recommended $180 million to preserve and grow the healthcare workforce, with a focus on Medicaid providers and providers in underserved areas of the State, including rural areas. The funding would pay for staff bonuses, continuing education training, and investments in retention and recruitment for a broad range of healthcare providers, including hospitals, clinics, behavioral health providers, home health workers, etc. Additionally, the Department of Healthcare and Family Services (HFS) is requesting federal approval of a plan to address shortages in the behavioral health workforce and service quality and innovation. Additional proposals are included to support the Nursing workforce through community college-based programs and scholarships, which will support the many nonprofit institutions that employ nurses.
• Child Care Workforce. The budget includes full funding for the Early Childhood Access Consortium for Equity (ECACE) to address the shortage of qualified early childhood educators by encouraging the pursuit of credentials and advanced degrees in early childhood education.

Protecting Communities and Human Potential

As COVID laid bare, Illinois communities continue to be wracked by deep inequities. Our sector is at the forefront (pun intended) of dismantling inequity and ensuring all Illinoisans may reach their potential and live long, healthy, and full lives. The Governor’s budget includes the following provisions that may make progress in this direction. 

• Reimagine Public Safety Act. In November 2021, the Governor declared gun violence a public health crisis and launched a comprehensive plan to tackle the problem. The administration pledged a $250 million State investment to be appropriated over the next three years to implement the plan in partnership with community-based organizations. The Reimagine Public Safety Act builds upon this initiative by requiring the State to pursue a data-driven approach to high-risk youth intervention programs and technical assistance and training. Programs implemented under the Act will be administered by the Department of Health Services (DHS), in partnership with the Illinois Criminal Justice Information Authority (ICJIA) and the Firearm Violence Research Group.
• Strengthening the Department of Children and Family Services (DCFS).  Overall, the DCFS budget increases by over 16%, which Includes $15.5 million to hire an additional 360 state agency staff focusing on child protection, family preservation, and permanency positions in addition to day care licensing, call center, legal and clinical positions. Also includes $4.8 million in increased funding to support simulation training labs for child welfare workers.
• Early Childhood Education and Child Care.  Provides an additional $54.4 million for the Early Childhood Block Grant including Downstate Prevention Initiative grants and Preschool for All, and $300 million for stabilization payments to child care providers.
• K-12.  The Governor proposed increasing the evidence-based funding for public schools by $350.2 million.
• Higher Education.  The Governor proposed a $68 million FY22 supplemental appropriation for higher education and the proposed fiscal year 2023 budget includes an increase of $122 million to the Monetary Award Program (MAP) to support 24,000 more students and increase the maximum grant award from $6,468 to $8,508. Also recommends a $68 million (5%) general funds increase for public universities and community colleges.