“Your Timely Roundup of Local, State, and Federal Updates”
Chamber members:
With less than two weeks left in the spring legislative session, members of the Illinois General Assembly are pushing to pass legislation on topics such as AI, data centers, insurance regulation, and more as final budget numbers remain in question. It seems once again that things will come down to the last days and possibly hours.
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Illinois Budget Outlook Softens as Economic Uncertainty Grows
Budget analysts for both Governor JB Pritzker’s administration and the Illinois General Assembly are slightly lowering revenue expectations as lawmakers approach the final weeks of budget negotiations, reflecting growing concern about the global economy.
While the revisions are modest—each under 1%—they signal weakening confidence in economic conditions just ahead of the May 31 deadline to approve a new state budget.
Deputy Gov. Andy Manar, who oversees budgeting, said the updated figures show Illinois’ overall fiscal position has “substantially remained the same” since February. However, he cautioned that the outlook reinforces the need for restraint. “The revised revenue estimates underscore the state’s need to remain focused on fiscal discipline,” Manar said, pointing to ongoing economic and geopolitical uncertainty nationwide.
The updated forecasts leave little flexibility for lawmakers seeking to expand spending beyond the governor’s proposal.
Governor Pritzker’s budget office reduced its fiscal year 2027 revenue estimate by $173 million, bringing the total to $55.9 billion. That projection falls $149 million short of the governor’s proposed spending plan, assuming lawmakers approve $728 million in new revenue measures introduced in February. Those include a tax on social media companies based on in-state users, along with changes to operating loss deductions and gambling-related revenues.
Similarly, the legislature’s Commission on Government Forecasting and Accountability (COGFA) lowered its FY27 estimate by $190 million to $55.3 billion. Because COGFA’s projection excludes the governor’s proposed revenue changes, it is effectively about $180 million more optimistic than the administration’s forecast.
Even so, the relatively small downward adjustments highlight how narrow the margin has become in crafting a balanced budget set to take effect July 1.
The revised outlook is largely driven by a weaker national forecast from S&P Global. The firm now expects U.S. GDP to grow 2.1% in 2026, down from a 2.3% projection earlier this year.
S&P also raised the likelihood of a downside scenario tied to global instability, including the ongoing conflict in Iran, which could push energy prices higher and dampen consumer demand.
At the state level, several indicators are contributing to concern:
- Sales tax growth is slowing. COGFA reduced expectations by $67 million after recent collections softened.
- Consumer behavior is shifting. Higher prices are generating more tax revenue per purchase, but overall purchasing volume is declining.
- Unemployment is rising. Illinois’ jobless rate reached 5.1% in March.
“I’m hearing from the retail industry… sales are down,” said Sen. Mark Walker, D-Arlington Heights. “Prices remain high, but actual volumes are down.”
COGFA Revenue Manager Eric Noggle noted the mixed effect of inflation: “As prices rise, you’re going to bring in more sales tax revenue—but if fewer products are being purchased, that starts to offset.”
Inflation itself remains elevated, with the U.S. Department of Labor reporting a 3.8% year-over-year increase in April—the highest in three years.
Beyond economic trends, policy and structural factors are also weighing on projections. A law passed last year to support public transit requires more sales tax revenue from motor fuel purchases to be diverted away from the state’s General Fund. At the same time, the state expects to pay out more in income tax refunds, reducing net revenue.
COGFA also anticipates lower federal funding and fewer transfers into the General Fund—together representing the largest source of the downward revision.
Additionally, one-time revenues that helped balance the current year’s budget will not carry forward. A tax amnesty program generated about $250 million in FY26, according to Department of Revenue Director David Harris, but that source will not be available in FY27.
There is one partial offset: with interest rates expected to remain higher for longer, Illinois is projected to bring in an additional $133 million in interest-related income. Still, lawmakers expressed caution about relying too heavily on a single bright spot. “When I see a bunch of shifting, weakening numbers, and only one holding up the fort, I don’t like to put all my eggs in one basket,” said Sen. Rachel Ventura, D-Joliet.
Despite the more cautious outlook ahead, revenues for the current fiscal year have exceeded expectations. The FY26 budget originally anticipated $55.1 billion in revenue. Updated estimates now put that figure at $55.7 billion from the governor’s office and $55.9 billion from COGFA.
Much of that growth has been driven by stronger-than-expected personal income tax receipts, which are up 4.2% through April. Sales tax revenues have also increased 4% overall this year, though growth has slowed to just 2.1% since January—a trend both forecasting groups now expect to continue.
Officials emphasize that significant uncertainty still clouds the outlook, including volatile energy prices and shifting consumer behavior. “There’s a lot of uncertainty and we can’t pretend otherwise,” said Department of Revenue Chief Economist Rubina Hafeez. “We’re just going to have to take it day by day.”
With budget negotiations entering their final stretch, the updated forecasts suggest lawmakers will need to balance caution with competing demands for new spending in an increasingly unpredictable economic environment.
Illinois Senate Advances Auto Insurance Rate Regulation Bill
The Illinois Senate has approved legislation aimed at increasing oversight of auto insurance rates, setting up a debate over whether the changes will protect consumers or drive up costs.
Senate Bill 714, sponsored by Ram Villivalam, would prohibit auto insurance rates from being excessive or unfairly discriminatory. The measure was amended before passing the chamber Wednesday on a 42–14 vote and now heads to the Illinois House.
Supporters argue the bill responds to growing concerns about affordability and fairness in the insurance market. A representative from the Illinois Secretary of State’s Office testified that more than 630,000 drivers in Illinois operate vehicles without the legally required insurance each year.
“Drivers in Illinois are facing hardships due to increasing automobile insurance rates, and they want oversight to ensure that their rates are not excessive or unfairly discriminatory,” said Amy Williams, a senior legal advisor in the office.
The push for reform follows a broader effort by Alexi Giannoulias, who launched a campaign last year to limit insurers’ use of factors such as age, credit score, and ZIP code when setting rates, while expanding state regulatory authority.
Insurance industry representatives, however, warned the proposal could have the opposite effect.
Jennifer Hammer, speaking on behalf of the National Association of Mutual Insurance Companies, said expanding the authority of the Illinois Department of Insurance historically leads to higher premiums.
“What we’ve seen is that when you increase the regulatory authority of a state department, you actually see an increase in premiums to those consumers,” said Hammer, a former director of the department.
Similar concerns were raised by Eric Madiar of the American Property Casualty Insurance Association, who noted that Illinois’ auto insurance rates are currently about 18% below the national average.
“In this sense, it’s been good to be below average,” Madiar said. “We’re not going to head in that direction any longer. We’re going to have higher costs, less affordability.”
Republican lawmakers also questioned the need for the legislation. Steve McClure said Illinois already ranks among the states with the lowest auto insurance costs. “Why would we want to do anything to spoil that?” McClure said during floor debate.
Villivalam countered that the bill is intended to improve transparency and fairness in the rate-setting process without undermining the market. “This makes the process a little better for Illinois residents,” he said.
The legislation now moves to the House for further consideration.
Illinois Proposal to Tax Global Corporate Profits Draws “Double Taxation” Concerns
A proposal in the Illinois legislature to increase taxes on multinational corporations is drawing sharp debate, with supporters arguing it would boost education funding and critics warning it could lead to double taxation without generating new revenue.
The measure, Senate Bill 3486, is a sweeping 207-page overhaul of the state’s income tax law. Sponsored by Robert Martwick, the bill would require large multinational companies to pay taxes on their global profits—not just the income they report within the United States.
Martwick said the goal is to generate more funding for public education at a time when the state faces ongoing financial pressure, including large pension obligations. “Businesses should be contributing just like families do,” Martwick told lawmakers. “Can’t you invest in my children’s education?”
What the bill would do
At the center of the proposal is a policy known as “worldwide combined reporting.” Under current Illinois law, corporations generally pay taxes only on income tied to their U.S. operations.
Supporters say that system allows companies to shift profits overseas to avoid taxes. Greg Will, research director for Health Care Illinois and Indiana, told lawmakers that corporations often move earnings to low-tax jurisdictions like the Cayman Islands or Luxembourg. “These profits made here in Illinois are shifted abroad and not properly taxed,” Will said.
By requiring companies to report and pay taxes on global income, advocates estimate the state could generate up to $1.2 billion in new annual revenue.
Critics question impact
Opponents argue the proposal is based on a flawed premise and could create unintended consequences.
Alan Pasetsky, a tax advisor for the Global Business Alliance, said Illinois already has strict laws in place to prevent profit shifting, including a “related party add-back” rule adopted in 2004.
“All those examples about shifting profits to tax havens are not allowable under current Illinois law,” Pasetsky said. “You would get no revenue from shutting down a loophole that doesn’t even exist.”
He also warned that worldwide combined reporting was abandoned years ago for a reason. “Foreign countries complained that their companies were being taxed twice—once in their home country and again at the state level,” Pasetsky said. “That’s why Illinois eliminated it.”
Business groups argue reinstating the policy could once again expose companies to double taxation and make Illinois less competitive economically.
Uncertain path forward
Critics also emphasized that the bill does not guarantee additional revenue, despite projections from supporters.
Still, Martwick and other backers maintain that updating the tax system is necessary to ensure corporations are paying their fair share and to provide more stable funding for education.
The proposal remains under consideration in the legislature as lawmakers weigh its potential economic impact against the need for new revenue.
Data Center Regulation Push Stalls as Session Deadline Nears
Environmental advocates are urging Illinois lawmakers to act on data center regulations, but with less than three weeks left in the legislative session, the path forward remains uncertain.
The proposed POWER Act—the main vehicle for regulating data centers’ water and energy use—has not advanced beyond subject matter hearings since its introduction in February. It’s unclear whether lawmakers will reach agreement on the sweeping bill or whether Governor JB Pritzker will back a specific proposal.
Advocates say the lack of movement is frustrating. “We are confused and concerned by the Governor’s lack of engagement,” said Kady McFadden of the Illinois Clean Jobs Coalition.
Governor Pritzker has acknowledged the issue. In his State of the State address, he called for grid operator PJM Interconnection to require data centers to supply their own power, and he proposed a two-year pause on state tax incentives for new facilities. Illinois has offered those incentives since 2019, with at least 27 projects receiving nearly $1 billion in estimated tax benefits.
Still, the administration has largely remained noncommittal as negotiations continue.
Growing pressure as projects expand
The urgency stems from a surge in data center development across the state. In northern Illinois alone, Commonwealth Edison reports nearly 100 large-scale energy projects in the pipeline—enough to potentially double regional electricity demand by 2040. New facilities have recently been approved in Sangamon County, Joliet, and Yorkville.
Advocates argue the state needs consistent rules before more projects move forward. “This is a statewide issue, and it demands a statewide solution,” said Jen Walling of the Illinois Environmental Council.
What the POWER Act would do
The bill aims to increase transparency and reduce environmental impacts. Key provisions would:
- Require public reporting of water usage
- Mandate environmental impact assessments
- Ban nondisclosure agreements between developers and local governments
- Require community benefits agreements
- Force developers to build their own renewable energy to power facilities
Supporters say the measures are needed to address heavy water consumption and strain on the electric grid.
Lawmakers, however, say the proposal is still evolving. Some members of the House Energy and Environment Committee said they were only beginning to understand the bill’s details during recent hearings.
Bipartisan interest, but divisions remain
Concerns about data centers span both parties, particularly around water use, energy prices, and limited transparency. But agreement on solutions remains elusive.
Rep. Jed Davis, a Republican from Yorkville, introduced a separate bill that would require public hearings and allow local referendums on data center projects. He said the idea came from constituents who felt shut out of recent approvals. “I’m really hearing the voice of my constituents… who feel silenced,” Davis said.
Davis said he is undecided on the POWER Act, reflecting broader Republican hesitation. While many support some regulations, they oppose requirements—such as mandatory renewable energy—that could undermine the industry’s economic benefits.
Industry and labor weigh in
The data center industry has signaled a willingness to negotiate but wants more flexibility. Representatives have pushed to make requirements like renewable energy generation and water reporting voluntary—an idea environmental groups reject.
Labor groups also support the bill’s goals but want assurances that any required energy projects will include union labor. At the same time, they oppose pausing tax incentives, arguing the credits help ensure projects benefit Illinois workers.
Despite ongoing discussions among environmental and labor groups, advocates say they have yet to begin formal negotiations with industry representatives.
With time running short, lawmakers face increasing pressure to find common ground—or risk leaving the issue unresolved as data center development accelerates across Illinois.
Illinois Lawmakers Advance AI Regulation Package
With about two weeks left in the legislative session, Illinois lawmakers are considering an eight-bill package aimed at regulating artificial intelligence, citing limited federal action on the issue.
The proposals, led by Bill Cunningham, draw from laws enacted or proposed in states like California and New York. Supporters say the goal is to establish consistent standards around transparency, consumer protection and the use of AI in sensitive settings.
“Not much is happening in Washington, so we felt it was necessary to act,” Cunningham said.
Industry groups have raised concerns that state-level regulations could create a patchwork of rules that complicate compliance and have urged lawmakers to wait for federal guidance. Still, sponsors say they intend to move forward before the legislature adjourns May 31.
Several bills focus on transparency and accountability for AI systems. Senate Bill 315, sponsored by Mary Edly-Allen, would require large AI developers to publish safety frameworks, evaluate risks and undergo annual third-party audits. It also includes provisions addressing whistleblower protections and misleading claims.
Another measure, Senate Bill 316 from Laura Ellman, targets AI chatbots designed for social interaction. It would require those systems to provide mental health resources when users express suicidal thoughts and to clearly disclose when users are interacting with AI.
A related proposal from Rachel Ventura would require customer service chatbots to identify themselves at the start of interactions. Other bills address the impact of AI and automation on consumers.
Senate Bill 318, sponsored by Steve Stadelman, would prohibit the use of bots to purchase event tickets in bulk for resale.
Senate Bill 340 from Laura Murphy would allow consumers to opt out of certain data collection practices and limit the use of personal data in decisions such as lending, hiring or insurance.
Another bill, Senate Bill 343 from Graciela Guzmán, would restrict the use of AI-driven platforms to coordinate residential rental pricing.
Two measures focus on how AI is used in schools. Senate Bill 415, sponsored by Karina Villa, would limit the use of facial recognition technology in schools.
Senate Bill 416 from Robert Martwick would prohibit the use of AI for grading student work and require school districts to adopt policies governing AI use.
Some lawmakers have raised concerns about balancing student privacy with school safety, particularly regarding restrictions on emerging technologies.
Most of the bills have advanced out of committee, with several receiving bipartisan support, though some passed along party-line votes. Additional amendments are expected before potential floor votes. The package follows extensive hearings earlier this spring on AI-related issues and reflects growing attention to both the opportunities and risks associated with the technology.
Lawmakers say further changes are likely as AI continues to evolve, regardless of whether all proposals pass before the end of the session.
Stay well,
Mike Paone
Executive Vice President
Joliet Region Chamber of Commerce & Industry
mpaone@jolietchamber.com
815.727.5371 main
815.727.5373 direct