“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
It is hard to believe that we’re already through the month of January. Good news was delivered earlier in the day that the Ruby Street bridge is back to fully functioning.
A potential government shutdown is only days away and recent events have jammed up what was thought to be a deal done this week. More on that below.
Finally, I’ll take this opportunity to ask all of you on behalf of our Government Affairs Committee to please share topics of interest, concerns, or any questions that can be reviewed and brought to the attention of our elected officials on the local, state, or federal levels.
*Government Affairs Roundup brought to you by CITGO*
Illinois Sets Aside Nearly $500 Million as Federal Uncertainty Looms
Illinois has identified nearly half a billion dollars in spending it will hold back this year, creating a fiscal cushion ahead of what state officials warn could be a difficult budget cycle shaped by federal cuts and economic uncertainty.
The Governor’s Office of Management and Budget (GOMB) last Thursday detailed $481.6 million in reserves and spending reductions across state agencies for the second half of the current fiscal year, which ends June 30. The move follows an executive order issued by Gov. JB Pritzker last September directing agencies to identify up to 4% in potential savings.
The largest share of the holdback — about $200 million — comes from the Healthcare Provider Relief Fund, which supports Medicaid. Illinois spends roughly $17 billion annually on Medicaid, with about 70% of that funding coming from the federal government.
Additional savings include $119 million identified by the Department of Human Services through delayed hiring, reduced overtime, and fewer grants tied to declining caseloads. Another $50 million comes from the state employee health insurance program, which began the year with a higher-than-expected balance and saw increased prescription drug rebates.
Education spending will come in about $31 million below budget, largely due to a 2% reserve set aside for public universities. Public safety agencies account for another $22 million in reserves. State officials say the spending reductions will not affect service delivery.
Overall, the reserves for fiscal year 2026 break down as follows:
- $361.5 million in health care and human services
- $57.2 million in government services
- $30.5 million in higher education
- $22.1 million in public safety
- $10.3 million in economic development, environment, and culture
Despite the initial directive to reserve up to 4% of general fund appropriations, the actual holdback amounts to less than 1%. Administration officials note that while agencies cannot unilaterally cut legislatively appropriated spending, they can keep funds in reserve to mitigate risk.
The belt-tightening comes less than a month before Governor Pritzker is expected to present his proposed budget for fiscal year 2027. In a memo outlining the savings, GOMB Director Alexis Sturm warned that “most agencies will not see their funding requests fulfilled,” adding that the outlook for the coming fiscal year has not changed significantly since last fall.
State budgets have grown steadily in recent years, reaching roughly $55 billion this year. Whether the governor will propose reduced spending as he seeks a third term remains an open question.
Budget analysts say the reserves signal a more cautious approach. Ralph Martire, executive director of the Center for Tax and Budget Accountability, said the message to lawmakers is clear: “We have a tough revenue year ahead, the federal government is making it tougher, and the General Assembly should be prepared for difficult budget negotiations.”
Martire pointed to potential disruptions tied to federal policy under the Trump administration, including proposed — and in some cases withdrawn or court-blocked — cuts to programs supporting mental health, childcare, and food assistance. He also warned that federal tax changes passed last year could significantly reduce Illinois’ revenue.
Because Illinois uses the federal tax return as a starting point for its own income tax system, changes to federal tax law can ripple directly into state finances. Martire estimates Illinois could lose roughly $700 million this year due to federal tax changes, while proposed reductions to the Supplemental Nutrition Assistance Program (SNAP) could cost the state another $600 million in the year ahead.
The nearly $482 million identified so far, he said, “doesn’t come anywhere near offsetting these other challenges.”
While state revenues through the first half of the fiscal year are nearly 5% higher than last year, the Commission on Government Forecasting and Accountability cautions that final results will depend heavily on income tax payments due this spring.
Pritzker’s office says the reserves are intended to provide stability as the state navigates economic uncertainty and prepares for the next budget cycle. The governor is scheduled to deliver his fiscal year 2027 budget address at the Illinois Capitol in Springfield on February 18.
U.S. House Clears Final 4 Government Funding Bills
The U.S. House last Thursday completed its work on fiscal year 2026 government funding, passing the final four appropriations bills and sending them to the Senate ahead of a looming deadline.
Together, the measures provide roughly $1.2 trillion in funding for the Departments of Defense; Labor, Health and Human Services, and Education; Transportation and Housing and Urban Development; and Homeland Security. The Senate has until January 30 to approve the bills and avoid further disruptions.
House Speaker Mike Johnson, R-La., praised the effort as a rare legislative achievement in a narrowly divided chamber. “Despite the noise, despite our slim margins… this team got it done,” Johnson said after the vote. “The House has now passed all 12 appropriations bills. Many people said that could never be done.”
Three of the four bills — Defense, Labor–HHS–Education, and Transportation–HUD — were combined into a single “minibus” package and passed with broad bipartisan support.
The Defense appropriations bill allocates $839 billion for military operations, personnel, research, and equipment. It includes $13 billion for President Donald Trump’s proposed “Golden Dome” missile defense initiative, establishes a network of commercial factories capable of rapidly shifting to military production, and provides a 3.8% pay raise for servicemembers.
The $221 billion Labor–HHS–Education bill funds a wide range of domestic programs, including early childhood education assistance, Pell Grants, rural health initiatives, workforce training, and biomedical research.
Funding for transportation and housing programs is set at $102 billion under the Transportation–HUD bill. Of that amount, $25 billion is directed toward transportation infrastructure and border security, with the remainder supporting rental assistance, housing programs, and mortgage insurance.
The Homeland Security appropriations bill, totaling $64 billion, was considered separately and drew sharp Democratic opposition amid concerns over Immigration and Customs Enforcement operations. The measure received support from only seven Democrats.
The bill keeps funding for ICE flat at $10 billion and includes $20 million for body cameras for federal immigration officers. Critics argued it fails to impose meaningful limits or oversight on ICE authority.
“My ‘no’ vote today is because I do not think the Congress should authorize public money to a department that is being run without proper oversight, accountability, or regard for the rule of law,” Rep. Chris Deluzio, D-Pa., said.
The Senate is in the process of taking on the four newly passed bills, along with two other House-approved appropriations measures already awaiting action. Three additional spending bills have already become law, while three more are currently on the president’s desk awaiting signature.
No Clear Off-ramp as DHS Fight Pushes Washington Toward Shutdown
The federal government is barreling toward a partial government shutdown as a standoff over President Donald Trump’s immigration enforcement agenda derails a major government funding package, even as Senate leaders and the White House search for a way out.
Both parties and the administration say they want to avoid another costly lapse in government funding. But the fatal shooting of a 37-year-old Minnesota man by federal agents on Saturday has sharply complicated Senate plans to pass a sweeping six-bill appropriations package this week.
In response to the shooting, Democrats are demanding that funding for the Department of Homeland Security be stripped from the package. Any changes, however, would require further action by the House, which is not scheduled to return until Monday — after a shutdown would begin at 12:01 a.m. Saturday.
Republicans have floated alternatives that would avoid reopening the massive bill, including possible executive actions or a commitment to pass separate legislation addressing Democrats’ concerns. Democrats, however, argue they now have leverage as public backlash grows over Trump’s aggressive immigration enforcement tactics in Minnesota and elsewhere.
Senate Minority Leader Chuck Schumer said Monday that responsibility for preventing a shutdown rests with Senate Majority Leader John Thune and his Republican colleagues. He urged them to remove the DHS funding and renegotiate it separately while allowing the remainder of the package — which covers nearly three-quarters of annual federal agency spending — to move forward.
As recently as Friday, the six-bill package appeared to have enough bipartisan support to pass. The legislation was negotiated over months by bipartisan appropriators. Since then, Democrats have begun to “coalesce” around a set of proposed changes to the DHS bill, according to a person familiar with private discussions.
The DHS measure passed the House with only seven Democratic votes. Democratic demands now include requiring judicial warrants for immigration arrests, overriding a recently disclosed ICE memo asserting such warrants are unnecessary, mandating that federal agents identify themselves, requiring cooperation with state and local investigations, and limiting what they describe as mission creep by federal law enforcement agencies.
Despite unease among some Republicans following Saturday’s shooting, GOP leaders are pressing ahead with the package as written. The Senate took its first procedural step Monday to bring the bill to the floor, with an initial vote expected Thursday. At least eight Democratic votes will be needed to clear the 60-vote threshold and avert a shutdown.
Update: GOP Senators Signal Openness to Separating DHS Funding to Avert Shutdown
Several Republican senators say they are open to breaking apart a six-bill government funding package by setting aside the Homeland Security appropriations measure, a move that could allow Congress to pass the remaining bills before a Friday deadline and avoid a partial government shutdown.
The six-bill package must clear the Senate by the end of the week to keep funding flowing for major federal departments, including the Pentagon. Failure to act would trigger a shutdown affecting defense and other agencies.
Sen. John Kennedy, R-La., a member of the Senate Appropriations Committee, said “a bunch” of Republicans would be willing to move forward without the Homeland Security bill if that is what it takes to pass the other five measures. Those remaining bills would fund the departments of Defense; Health and Human Services; Labor; Education; Transportation; State; and several financial services–related agencies.
A senior Republican senator, speaking on condition of anonymity to discuss ongoing negotiations, said GOP leaders would prefer to keep the six bills together but are prepared to split them if Democrats block the full package.
“If that was all that was left, we’d probably do it,” the senator said, adding that Senate Majority Leader John Thune, R-S.D., has not ruled out advancing the other five bills without Homeland Security funding.
The House is on recess this week, complicating any changes to the House-passed legislation. Still, Thune indicated the Senate could consider pairing the five-bill package with a short-term continuing resolution to keep the Department of Homeland Security funded if Democrats prevent the six-bill package from advancing.
“All of those are potential options,” Thune said. “These are hypothetical at this point, and I want to reserve optionality to consider them.”
Even so, Thune emphasized that his preference remains passing the full six-bill package intact to minimize the risk of a partial shutdown triggered by delays in reworking House-approved legislation. “I think the best path forward is to keep the package intact,” Thune said. “If there are things the Democrats want that the administration can agree with them about, then let’s do that.”
Thune also warned that making significant changes could create further obstacles once the bill returns to the House. “If the bill goes back to the House of Representatives and it changes much from what the House already passed, then you’ve got another steep hill to climb over there,” he said.
Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
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